Alarmed by the threat of economic meltdown, the states and Congress made desperate efforts from 1780 onward to reduce the amount of paper in circulation. In the space of just five years, wild inflation turned to deep deflation as the supply of money was choked off. New U.S. bills with guaranteed interest payments of 6 percent were offered in exchange for forty old ones, and similar deals were made by the states. To ensure that the interest was paid, taxes were raised to a level where receipts were up to 300 percent higher than in the colonial era. Pennsylvania, for example, took in an average of $205,000 annually in the late 1780s compared with less than $70,000 before the war.
So great was the interest burden, however, it is estimated that up to three quarters of the revenue that states raised went to pay the bondholders. If taxpayers lacked money to pay, county courts would issue orders for the seizure and sale of their goods, which the sheriffs were expected to execute without delay. Shylock-like, the holders of the new bonds insisted upon their interest. “Issue the Executions,” demanded one bondholder when a state treasurer was slow to pay the interest he was due. Since $1,000 worth of bonds, purchased for as little as $200, produced an annual income of $60, they were an excellent investment.
Devalued bills could, however, be put to still more profitable use. In every state, land offices were created to sell vacant territory, and they were authorized to accept, in partial payment at least, paper money at face value. Instead of an annual but belatedly paid 6 percent return, a speculator could make an immediate profit of up to 80 percent by exchanging devalued bills for land.
Boundaries were essential to the operation. Apart from confiscated Loyalist properties, the bulk of the vacant land was situated at the extremities of the states far from the populated coast. Hence the pressing urgency to define their landward borders. And what Ellicott and Rittenhouse did for Virginia and Pennsylvania was replicated by other boundary-makers—Simeon de Witt for New York and New Hampshire, Thomas Hutchins and Rittenhouse again for Massachusetts and New York, Richard Henderson and Thomas Walker for North Carolina and Virginia, William Houstoun and John Habersham for Georgia and South Carolina.
The states could not afford to delay. Even in the midst of the war, Virginia decided it was worth trying to run the state’s southern border with North Carolina because, as its commissioner explained, “a number of people were settling to westward who imagined they were in North Carolina while we thought they were on the lands reserved for our officers and soldiers.” The new Virginia–North Carolina border was supposed to run due west to the Cumberland River along the parallel 36 degrees 30 minutes north, a line that would also divide Kentucky and Tennessee fifteen years later. In their haste, the commissioners failed to solve the problems of running a parallel, and two wavering lines several miles apart were drawn, causing Cresap-like confusion for generations to come. But once the division was in place, Virginia went on a land-selling binge, disposing of three million acres in the west before Ellicott and Rittenhouse had finished establishing its northern border.
North Carolina acted in the same way. “These lands might enable us to pay off a great part of the State debt,” her delegates told Congress, “or such debts as have been contracted for Militia service in the State.” In 1783, the state sold four million acres of its western land in just seven months, most of it in exchange for military warrants. Altogether more than half the land involved in these two sales, most of it in what would be Kentucky and Tennessee, ended in the hands of big-city speculators or other forms of absentee landowners.
Nevertheless, it was in Pennsylvania that the connection between the boundary-making and the sale of land was most obvious. Even before Ellicott and Porter had completed the western border to Lake Erie, the Pennsylvania Assembly authorized its northwestern territory to be surveyed from “the point where the western boundary of the State crosses the Ohio river.” Half of it, termed Donation Lands, was to be allocated to holders of military warrants, and the rest, Depreciation Lands, to holders of the state’s devalued currency. In similar fashion, once the northern border reached the Tioga River in 1786, the state’s land in Luzerne County was put on sale, bringing the total sold in two years to more than one and a half million acres.
“All I am now worth was gained by speculations in land,” Timothy Pickering told his sister in 1796. “In 1785 I purchased about twelve thousand acres in Pennsylvania which cost me about one shilling [about 75 cents] in lawful money an acre… The lowest value of the worst tract is now not below two dollars an acre.”
Once Philadelphia’s moneyed élite began transferring their paper money assets into land, Pickering’s investment appeared modest. According to its prospectus, Robert Morris’s North American Land Company purchased one million acres in Pennsylvania out of a portfolio that was said to total six million acres. William Bingham acquired another million acres. James Wilson and George Clymer joined Pickering in buying tens of thousands of acres. But all these were dwarfed by the activities of the state’s comptroller general, John Nicholson, who eventually owned, through a variety of different companies, some 3.7 million acres.
The injustice of it infuriated Pennsylvanians of all kinds, but especially western farmers. Dozens of petitions were lodged with the legislature denouncing the corruption of a system that promoted gross inequalities “in-compatible with the nature of our government.” The very heart of the revolution, claimed another petition, was betrayed by the policy of “selling Back Lands in great quantities to companies… [a policy] destructive of an essential principle in every republican government: the equal division of landed property.”
Their anger and sense of betrayal was shared by frontier farmers throughout the northern states, all of whom suffered from the lack of ready currency. As supplies of both paper and coin slowed and then dried, it produced such a sharp deflationary effect that by 1785 the index of wholesale prices tumbled from above 10,500 in 1780 to close to the 1775 baseline figure of 100. Prices plummeted for all goods but especially farm produce.
In Hampshire County in western Massachusetts, the local newspaper, the Hampshire Herald, commented in 1784 that tax collectors had “taken and exposed to sale cattle, and other property, belonging not merely to the poorer people, but to substantial farmers,” and reflecting the growing fury among farmers, it warned, “Is there not danger that the powers of Government, stretch’d beyond a certain tone, will burst asunder?”
The crisis was less severe in the southern states where export crops such as tobacco, indigo, and rice brought in cash, and an aggressive policy of selling public lands succeeded in reducing state debts and the amount owed to bondholders. In 1786, taxation in Virginia and Maryland could even be cut. North of the boundary drawn by Mason and Dixon and Ellicott, however, the realization was spreading that the money of the poor was fattening the purses of the rich and thereby creating what one furious writer in Massachusetts called “a self-created nobility.”
Seen from the drawing rooms of Philadelphia, however, the states had proved remarkably efficient at squeezing revenue from their citizens without provoking outright revolt. In 1790, figures issued by Alexander Hamilton, secretary of the treasury, indicated that, even in the midst of the recession, with harvests hit by two bad summers, the states had managed to pay off up to half of what they owed in just six years. In addition, the three richest states, Virginia, Pennsylvania, and New York, had bought around $9 million of Continental bills, effectively taking on that amount of U.S. debt.
Clearly defined, ruthless to their citizens, and increasingly powerful, the states pursued their own independent interests with growing disregard for the Union. In 1786, Pennsylvania simply ignored a ruling by Congress that tried to overturn a judgment by the state’s courts on the distribution of prize money from the capture of a British vessel. New Hampshire attacked Massachusetts for charging duty on goods imported through Boston, while Massachusetts accused Connecticut of betrayal when it welcomed to its ports British ships that Massachusetts had wanted to keep
out. In each case, Congress proved powerless to act. A low point was reached in early 1787 when New Jersey complained that New York was charging harbor fees on vessels from the state, and Congress could do nothing more than advise New Jersey to retaliate. Compared to the vigorous progress of the states, the government of the United States was regressing from ineffectiveness to irrelevance.
Dissatisfaction with the Continental Congress had been apparent from the first days of peace. It had always been difficult to secure a quorum of representatives to conduct business—New Hampshire’s delegates arrived late and left early, Georgia’s and North Carolina’s appeared sporadically, and many simply absented themselves. In 1783, the Treaty of Paris could not be ratified for weeks because the necessary minimum of nine states were not represented, and between October 1785 and January 1786 Congress had a quorum for just ten days.
Its constitutional frailty quickly created a financial problem. The Articles of Confederation prevented Congress from raising money directly and enabled the smallest state, Rhode Island, to veto a proposal supported by a majority of the others to give Congress the right to raise revenue from customs dues. Forced to rely on requisitions from the states, Congress was helpless to prevent its financial demands from being placed a long way behind their domestic concerns. Although part of its requisitions on the states could be paid in paper money, some had to be paid in coin so that international creditors could be paid interest on the loans that they had made to the United States. In 1783, less than 12 percent of the cash requested was paid, and the situation deteriorated as the decade wore on.
In its despairing report of 1786, the Board of Treasury declared that “almost the whole of the Specie required by the Requisition of the 27 September [1785] which amounted to One Million of Dollars is still unpaid.” Only seven states even bothered to pass legislation authorizing the taxes needed to raise the money. New Jersey, Delaware, and North Carolina followed Connecticut’s example in ignoring the requisition completely, and from South Carolina, which had defaulted completely the year before, the Treasury sadly concluded “no payment can be expected.”
Without some other form of income, the United States appeared doomed to default on its payments. And so like the states themselves, it looked to make up the shortfall from land sales. In May 1785, Congress passed a Land Ordinance putting into effect Jefferson’s proposal for surveying the western territory beyond the Ohio in squares, and selling it off to the American public. The U.S. Public Land Survey, as it was known, was to begin at the point where the Ellicott and Rittenhouse line cut across the Ohio River, and their former colleague Thomas Hutchins was selected to be in charge of the task.
Signifying that the land strictly belonged to all the states, Hutchins had nominal charge of thirteen surveyors, one from each state in the Union, and an uncounted number of chainmen and axmen to clear a path through the steep, wooded hills beyond the Ohio River. Compared to running a straight boundary across a curved globe, the task could not have been simpler—“grunt survey work” in the words of a modern land surveyor. Hutchins’s team was to measure out squares, six miles by six, and subdivide them into thirty-six smaller squares, each covering one square mile or 640 acres in area. There was no need for spherical trigonometry. Because the distances were so small—six miles rather than the hundreds of miles covered by a boundary—they could assume the earth was flat, and so only the most basic instruments were needed, a sextant and a compass for measuring direction, and the surveyor’s standby, a twenty-two-yard-long, Gunter’s chain, for measuring distance.
The procedure too was straightforward. Two teams of surveyors found due west and due north by compass and by sextant sightings on the Pole Star, then, once the directions were known, took bearings on distant marks, then ordered the axmen to clear paths toward them. When the way had been opened up, the chainmen went to work, measuring the distances to create a grid of squares, each identified in the north/south column as a township and as a range in the east/west row. To avoid the distortions of magnetic north, the surveyors were supposed to take sightings from the Pole Star, but a compass bearing was good enough to establish due west.
With thirteen teams each covering a mile a day, they might have laid out more than six townships in a week. But less than a month after starting, rumors of an Indian attack sent Hutchins and his teams scurrying back to the shelter of Pittsburgh, having covered just four miles. They did not return until the following year, when their rate of work was hardly quicker. In 1787, after two seasons, the land they had measured out was put up for sale. At a time when each state was used to selling more than a million acres of land each year, the United States sold fewer than one hundred thousand acres and raised just $117,108. The consequences of such a failure had been spelled out clearly enough by the Board of Treasury in 1786.
“Nothing occurs as a probable mode of relief, but a Sale in Europe of part of the Western Territory, which has been ceded to the United States,” the Board warned. “The more our Reflections are employed on this Subject, the more we are impressed with a Conviction, that nothing [else] can rescue us from Bankruptcy, or preserve the Union of the several States from Dissolution.”
In the opinion of many New Englanders, such as Rufus King of Massachusetts, the dissolution of the United States would not have been such a disaster. If the seven northern states separated from the others, he argued, they “would not only remedy all their Difficulties, but raise them to a degree of power and Opulence which would surprize and astonish.” Theodore Sedgwick of Connecticut went further, declaring in 1786, “Even the appearance of a union cannot long be preserved.” By February 1787, the supreme defender of the United States, James Madison himself, was ready to acknowledge that talk of “a partition of the Union into three more practicable and energetic Governments” had become common enough to be discussed in newspapers.
For at least two years Madison had immersed himself in the study of other forms of government—Poland’s elected monarchy, the Swiss republican confederation, the United Kingdom’s constitutional monarchy, among others— with the specific intention of reforming the Articles of Confederation. From an initial agreement in 1785 between Virginia and Maryland on common borders and trade in the Potomac River and Chesapeake Bay, he had brought about a meeting of five states at Annapolis in September 1786 to arrange more commercial cooperation at a state level, and better supervision by the central government. This had ended with a decision to discuss reform of the Articles in May 1787 at a convention in Philadelphia, but with no further aim than trying to reform the existing confederation to keep it in existence.
Not all the states were neglectful of the needs of the United States. When Congress requisitioned $3 million from the states in September 1785, most of the middle and southern states, including the Carolinas, Pennsylvania, New York, and New Jersey, let it be known that they did not intend to pay the whole of the cash demand. But the New England states initially budgeted for higher taxes to meet their obligations. For the region’s hard-pressed taxpayers, this was the last straw. It was not simply the payment that made them desperate, but the prospect of the cash going directly to foreigners and fat-cat bondholders.
In Rhode Island, the popular revolt brought about the election of a new assembly with a mandate to issue paper money for payment of taxes. Connecticut’s legislature voted to ignore Congress’s requisition altogether, while violent resistance led to the tax being postponed in New Hampshire. Only Governor James Bowdoin of Massachusetts insisted on exacting the full amount in coin.
Behaving as they had in the Revolution, Captain Job Shattuck of Groton, Massachusetts, and other veterans set up committees to become part of a network of resistance. But the name they adopted, the Regulators, and their demands for easier taxation, a more responsive legislature, and reform of the system of fee-taking county officials—“Deputy Sheriffs [be] totally set aside, as a useless set of officers in the community”—harked back to a still older struggle. “We fought for liberty but despots to
ok it, whose little finger is thicker than George’s loins,” declared Ely Samuel in northern Massachusetts. “O that George held the claim still! For, before the war, it was better with us than now.”
When Captain Daniel Shays, a much decorated war veteran, took command and marched on the federal arms depot in Springfield in the winter of 1786, there seemed a real possibility of a popular uprising. But the Regulators, as their name implied, were never revolutionaries. They wanted government to be reformed, not overthrown, and when a force of militia, paid for by Boston’s moneyed elite, confronted Shays’s force at Springfield, they scattered.
1787 Massachusetts broadside proclamation following Shays’s Rebellion
Nevertheless, they got what they wanted. On a small scale, the shock of their revolt was the main reason that Bowdoin was replaced as governor by popular John Hancock, who promptly reduced the tax—a decision made possible by money raised from the sale of state property—but what they could never have imagined was the large-scale impact on state government.
From New England, General Henry Knox, secretary of war, wrote in alarm to George Washington in November 1786 that up to fifteen thousand men were ready to rebel, and “they are determined to annihilate all debts public and private and have agrarian Laws [sympathetic to farmers], which are easily effected by means of un-funded paper money which shall be a tender in all cases whatever… This dreadful situation has alarmed every man of principle and property in New England. They start as from a dream, and ask what has been the cause of our—delusion? what is to afford us security against the violence of lawless men?” Knox’s answer was unequivocal. “Our government must be braced, changed, or altered to secure our lives and property.”
The Fabric of America Page 8