Part 6

The above is a general outline of the financial operations of the period. The indebtedness of the colony at any particular date is difficult to determine. A committee in 1762 estimated that there were outstanding bills to the amount of about £53231 sterling. According to a report of a like committee in 1762 the amount was about £43000. In addition, however, the colony was considerably in debt for money hired. Whatever debt there was, however, seems to have been, for the most part, extinguished in the early years of the Revolution.

Financial History of the Revolution.

With the opening of the Revolution a new debt began to roll up. £60,000 in bills of credit (lawful money) were emitted in 1775 and £80,000 in the following year. A meeting of commissioners from the New England states, in Providence, December 1776, recommended that Rhode Island issue no more bills of credit, except of fractional denominations, but depend upon loans and taxes. The State complied with the suggestion and the only other issue of bills, before 1780, was in May 1777, when £4,500 in fractional currency was emitted. These bills of credit, as well as the continental bills, were declared a legal tender. They seem to have kept their value fairly well until the beginning of the year 1777, when a rapid depreciation set in. In accordance with the recommendation of Congress they were called in by Act of May 1778, and their circulation forbidden after July first of that year. After this date continental money, probably, formed the main circulating medium, until depreciation had gone so far that in 1780 the tender laws were repealed and a return made to a gold and silver basis. Up to June, 1779, the colony seems to have borrowed £162,756. In addition there were, all through the war, issues of certificates in payment of various obligations. It is impossible even to approximate to their amount. They were in many cases made receivable for taxes and were redeemed in this way. Taxation was resumed in March 1777, and vigorously applied, but so heavy were the burdens which fell upon the State in its weakened condition that in the summer of 1780 the treasury was empty.

This led to the issue of £20,000 more in bills of credit. This was the last issue of paper money by the State during the War. A considerable portion of the debt had been redeemed by taxation. That part of the debt incurred during the paper money period, which still remained outstanding, was called in by several Acts of 1782 and scaled down to the basis of the special value at the time the obligation was incurred, for which amount the treasurer issued his notes, payable in lawful money (silver), in from three to six years, bearing interest at six per cent. The want of accurate accounts leaves us in doubt as to just what was the effect of this consolidation and reduction. A committee reporting in October 1783 places the state debt at £123,892-15-11, in addition to £19,922-2-0 of the state's proportion of the new continental emission (March 1780) outstanding.

The greater part of this latter sum, however, had never left the treasury. A report of a committee in March 1787 placed the debt at £153,047-15-7. In the mean time steps had already been taken for its extinguishment.

In the years succeeding the war the colony was in a wretched economic condition. It was exhausted by the heavy financial and other burdens, the disturbance to industry, and the loss that had resulted from a long continued and destructive occupation of the commercial centres or the state by the British, as well as by the presence of the American army which had to be clothed and fed. Trade was interrupted, a large portion of the able bodied men had entered the army, and even those who remained at home were liable to be called upon at any moment for temporary service, or to have their property taken at an appraised valuation. Services rendered to the state were paid for only by promises of constantly decreasing value. As a result of all these causes economic society was disorganized. In the midst of such conditions the state was called upon to face a heavy debt. The treasury was completely exhausted and the people seemed unwilling to submit to further taxation. The legislature again turned to paper money for relief, and in May 1786 ordered the issue of the tenth bank. The amount was £100,000 and it was to be loaned, as were the others, on double mortgage security. The rate of interest was four per cent., and repayment to be completed within fourteen years. Depreciation was immediate and rapid, but the paper money party was firmly seated in power and the legislature passed acts of the most extreme character to enforce the circulation of the bills. The ordinary legal procedure, including trial by jury, was suspended in the case of offenders against the paper money laws. These "forcing acts", as they were called, came to naught, however, as the supreme court refused to exercise jurisdiction. Balked in their effort to force the circulation of the bills, the legislature turned to the easier task of paying off the state debt in the depreciated currency. By a series of acts, ranging from December 1786 to March 1789, the holders of the state debt were ordered to bring in their claims and receive payment in the paper bills, under penalty of forfeiture of the whole amount. As a result of this threat about one half of the debt seems to have been presented and paid, the smaller holders as a rule yielding to necessity, the larger holders standing out in the hope of a more profitable adjustment. The paper money party was now nearing the end of its power. An act of October 1789 made the bills of 1786 receivable at fifteen to one for coin, and authorized those to whom the money had been loaned by the state to make repayment upon the same basis.

In May 1790 the state entered the Union, and the possibility of such schemes in the future ceased. Those who had been able to resist the attempt of the state to pay their claims in a depreciated currency now reaped the benefit of their foresight. By act of August 4, 1790 Congress provided for the assumption of $21,500,000. of state debts, of which $200,000. was allowed to Rhode Island. Seeing the injustice which would accrue to those who had been compelled to accept their payment in paper money, the assembly in June 1791 passed an act repealing the various acts which had declared null and void the securities which had not been brought in in accordance with the acts of 1786-1789. Where payments had been made on securities in paper money the treasurer was authorized to reduce the amount so paid to specie value and deduct it from the face value of the security, the remainder to be presented with other securities for subscription to the United States loan. The United States commissioner, however, refused to receive these certificates, as the law under which the assumption took place provided that only those notes and certificates which had been issued prior to January 1, 1790 would be received. Thus the whole of this assumption enured to the benefit of those who had not brought in their securities for payment, as ordered by the state. On the day following the assumption of the state debts, just referred to, Congress provided for a settlement of accounts between the United States and the individual states. The latter were to be debited with all advances made by the general government and credited with all disbursements made for "the general or particular defence during the war, and on the evidence thereof according to the principles of general equity (although such claims may not be sanctioned by the resolves of Congress, or supported by regular vouchers)." The settlement of these accounts showed Rhode Island to be a creditor of the United States to the amount of $299,611. The final settlement between the state and its creditors is shown in the report of the general treasurer in Feb. 1797. The whole amount of the debt recognized by the state was $503,594.76. $419,662.30 of this was paid by the transfer of United States stock in the possession of the state and $83,932.46 by the issue of 4% state certificates. This last formed what was known as the registered state debt. It was added to, from time to time, by the recognition of new claims for Revolutionary service and was diminished by occasional purchases by the state at a rate below the par value, but the state was always loth to recognize its full responsibility for the debt and ended by practical repudiation.

The above is an outline of the financial history of the state during the Revolution. We now turn back for a moment to obtain a more detailed idea of taxation. Perhaps this can best be done, as in the case of the French and Indian war, by means of a table. (The date given is that of the passage of the act assessing the tax. The first column contains the nominal amount of the tax as stated in said act. The second column contains the nominal amount of the tax actually assessed, certain deductions being necessary on account of the occupation of portions of the state by the enemy and for other reasons. The third column contains the same reduced to specie value, and the fourth column contains the same expressed in our present dollars. The taxes marked with a star are for continental purposes).

Date. Nominal Nominal Specie Value in value in value value dollars. pounds. assessed. assessed.

March, 16,000 12,658 11,613 42,387. 1777.

Aug. 1777. 32,000 25,316 16,877 61,601.

Dec. 1777. 48,000 37,115 11,973 43,701.

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147,689.

Feb. 1778. 32,000 24,365 6,962 25,411.

June 1778. 32,000 24,289 6,072 22,163.

Oct. 1778. 32,000 After 6,000 21,900.

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69,474.

Feb. 1779. 60,000 June, 6,912 25,229.

x Feb. 90,000 1778, 10,369 37,847. 1779.

June 1779. 60,000 the 4,471 16,319.

x June 225,000 first 16,766 61,196. 1779.

x Dec. 120,000 and 4,628 16,892 1779.

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157,483.

x Feb. 180,000 second 5,418 19,776. 1780.

x May 1780. 180,000 columns 3,913 14,282