Fellow citizens: I have been requested by many persons, for whose wish and opinion I have great respect, to publish, in a form suitable for general circulation, several articles I wrote under the above caption for one of our county papers.
There is no subject in which Virginians feel deeper interest, or to which they are giving more attention, than that which pertains to the obligations and the resources of Virginia. Desire for information upon this subject is almost universal. No political speaker complies with the wishes or fulfills the expectations of his hearers without saying something upon it. The political press, it is true, strives most earnestly to silence and to quiet this spirit of inquiry, but, like Banquo's ghost, "it will not down at their bidding." Yet, strange as it may seem, though the political papers, with but few exceptions, earnestly oppose investigation and discussion of the subject, they rarely fail to publish all that can be said on one side of it.
The deep and general interest felt upon this subject is not surprising. It is a subject of real and practical importance, in which all are interested. It should, therefore, be fully, yet fairly and calmly, discussed. It should be considered and dealt with as practical business men consider and deal with their private and individual interests.
The Debt of Virginia of 1861
was, according to official report, $31,187,999.32. It is claimed that the payment of this debt, with its accumulated interest, devolves upon the present State of Virginia.
Is This Claim Valid?
From and after the 17th of April, 1861, the Federal Government neither treated nor
regarded Virginia as a State. Section 3 of Article 4 of the Constitution of the
United States says: "No new State shall be formed or erected within the
jurisdiction of any other State." Yet, on the 31st of December, 1862, the Federal
Government provided for the admission of West Virginia into the Union as a new
State, entirely separate from, and independent of, the jurisdiction of Virginia.
This would have been a palpable violation of the Section I have quoted if the
Federal Government regarded Virginia as a State.
On the 9th of April, 1865, the Confederate forces under General Lee surrendered to the forces of the Federal Government. From that time until January 26, 1870, all that remained of the old State, after the formation of West Virginia, was held and treated as a conquered province. It was constituted into "Military District No. 1," and held and governed as such until the time last stated. Whatever of civil government there was during this period was merely provisional. Governors Pierpont and Wells were military appointees, and held their appointments and performed the function of their office under and control of, and subject to the dictation of, military commanders. It was expressly declared that "any civil government which may exist therein shall be deemed provisional only, and in all respects subject to the paramount authority of the United States at any time, to abolish, modify, contrive, or supercede the same."
When it pleased the Federal Government to permit "Military District No. 1" to become a State, it not only prescribed the plan of procedure by which it was to be done, but dictated the main features of the Constitution to be framed, and prescribed the conditions upon which the newly formed State would be admitted into the Union. Among other conditions imposed, we were required to emancipate all our slaves, which constituted more than one-half of our available property; and to "repudiate" the whole of the Confederate debt, and all the debt of Virginia that was contracted after the 17th of April, 1861. This carried with it not only her entire currency, but all her "Treasury notes," all the stocks her citizens held in her banks, and every evidence of indebtedness issued after the time above stated. Many of Virginia's best citizens—those that consecrated their all to the preservation of her rights and the maintenance of her honor—had invested nearly everything they possessed in these securities, and were not only impoverished, but totally ruined by this arbitrary exercise of power.
When Virginia was admitted into the Union on the 26th of January, 1870, she entered it as an entirely new State. She was not the same in her territorial limits, her citizenship, nor her organic law as Virginia of 1861. Under these circumstances I cannot believe she was under any legal or moral obligation to pay the debt of the old State, or ought ever to have assumed it.
This claim is not based upon the simple fact that Virginia was conquered by the Federal Government, or that her territory was divided, or that her organic law has been changed.
It is based upon the facts that the Federal Government completely destroyed the entity or being of the State; so that there was no State against which the creditors could proceed, or from which they could collect their debt,—that the Federal Government not only destroyed the State, but the property of her citizens upon the faith of which the debt had been contracted, and without which it could not be paid. In other words, the Federal Government having gone between the State and its creditors, and having destroyed both the State and its assets, or means of paying its debts, thereby became responsible to its creditors.
I do not refer to the expenses of the war, or the losses resulting legitimately from it, but to the total destruction of more than one-half of our property after the war (without any justifiable reason), and the consequent diminution of the residue. In consideration of these facts Virginia ought never to have assumed the debt of the old State; but it ought to have been assumed by the Federal Government.
The claim that the Virginia of to-day is bound to pay the debt of Virginia of 1861 is based upon the assumption that the debt followed the soil, and is a valid obligation upon its occupants. If it had followed the citizens or the personal property of the old State, or both of these combined, it could find but a small remnant of them in existence. Almost the entire personal property of the State has been destroyed, while her citizenship has been changed to a corresponding degree.
Her lands are almost the only thing that remains. How far the public debts of one generation bind the lands or other property of the succeeding generation, under any circumstances, is a question worthy of serious consideration.
Without attempting its discussion, I will give a few brief extracts from the writings of one whose wisdom, statesmanship, and patriotism are universally acknowledged, and whose opinion upon any question of State-policy is entitled to the greatest respect.
In a letter written by Mr. Jefferson to Mr. Madison, which may be found on the 27th to the 32d page of the third volume of "The Writings of Thomas Jefferson," he says:
"The question whether one generation of man has a right to bind another seems never to have been started either on this side of our side of the water, yet it is a question of such consequence as not only to merit decision, but place, also, among the fundamental principles of every government. The course of reflection in which we are immersed here (Paris) on the elementary principles of society, has presented this question to my mind; and that no such obligation can be transmitted I think very capable of proof.
'…I suppose that the received opinion, that the public debts of one generation devolve on the next, has been suggested by our seeing habitually in private life, that he who succeeds to lands is required to pay the debts of his predecessor; without considering that this requisition is municipal only, not moral, flowing from the will of the society, which has found it convenient to appropriate the lands of a descendant on condition of a payment of his debt; but that between society and society, or generation and generation, there is no municipal obligation, no umpire but the law of nature…
'The earth belongs always to the living generation.
'The conclusion, then, is, that neither the representatives of a nation, nor the whole nation itself assembled, can validly engage debts beyond what they may pay in their own time.
'…At first blush it may be laughed at as the dream of a theorist, but examination will prove it to be solid and salutary."
The claim that the public debt of the old State followed the soil, and is a valid charge upon its present occupants, under all the circumstances detailed, cannot be sustained upon any right principles.
But upon the assumption that such was the case, what would be an equitable settlement of it—First, between Virginia and West Virginia; and, secondly, between the States and the bond-holders?
If the debt followed the soil, when the soil was divided the debt ought to have been divided in the same proportions that the soil was. This is too self-evidently correct to need any argument to enforce it. Hence, assuming that the new State of Virginia contains two-thirds of the territory of the old State, it would devolve upon her to settle two-thirds of the debt. No principle of equity requires her to assume the settlement of a greater proportion of the debt than she holds of the territory.
Official report, as already stated, showed the debt of Virginia of 1861 to be $31,187,999.32. July 1, 1871, it was $46,914,208.25. This increase of $15,726,208.93 was interest that accrued from January 1, 1861, to July 1, 1871, and which, by an act passed in 1866, and the act of March 30, 1871, commonly known as the "Funding Bill," was converted into principal. Of this sum $1,973,074.08 was interest upon interest.
The advocates of the "Funding Bill" claim that by the passage of that Bill Virginia was relieved of one-third of her debt.
Hon. J. M. Hudgin, of Caroline, one of the original supporters of that measure, said in a speech delivered in the House of Delegates of Virginia on February 9, 1875, and for which he was warmly congratulated by its friends:
"It does seem to me harsh and unreasonable in those who denounce the Funding Bill and claim superior wisdom and experience in public matters, and who are in fact more responsible for this debt, to ask or expect the abandonment of a contract that has virtually lifted $15,000,000 of debt from the shoulders of the tax-paying people of this State. I invite the anti-funders to deny this statement."
"By this bill each creditor is required to surrender his bonds or certificates of debt to be cancelled, and in place thereof is to receive a new bond bearing six per cent. for two-thirds of his debt. For the other third the State is responsible only for so much as she may receive from West Virginia.
…The consideration on the part of the creditor is the release of one-third of his debt. For this consideration the State contracts to pay him two-thirds of his original debt, with six per cent. interest (that being the original interest) on the entire two-thirds."
The Charlottesville Chronicle, another zealous advocate of the Funding Bill, reiterates the same sentiments. In its issue of June 25, 1875, speaking of the one-third for which certificates of indebtedness have been given, it said:
"It means that the State, in its distinctly stated position of trustee, contemplated nothing more than the payment of such sum as she might obtain from West Virginia on a settlement, and the creditors so understood the arrangement. The adjustment was deemed a practical settlement of the question so far as Virginia is concerned, and nobody (we venture to say not even Mr. Massey) believes for a moment that the creditors will ever attempt to hold Virginia responsible for it further than West Virginia may agree to pay. Nobody recognizes it as a part of our debt, or expects it to give any further trouble."
This claim (that the Funding Bill reduced the debt of Virginia) is generally, if not universally, urged by its supporters and advocates. Thus the political press has taught, and thus the people have been made to believe.
How Far do Facts Sustain This Claim?
The debt of Virginia, as before stated, in January, 1861 was $31,187,999.32. No one denies that the whole State, as it then existed, was bound for this debt with its accruing interest. One-third of the territory of Virginia, with its taxable property, was taken from her. Now, suppose it to be true (I am sorry it is not) that the remaining two-thirds of the State were fully released by the Funding Bill from every obligation to pay any part of the third for which certificates of indebtedness are given, how would that reduce the debt?
If the whole of the State were bound for the whole of the debt, how does dividing the State and the debt in equal proportions reduce the amount that either part has to pay? If three rows of corn are to be hoed by three men, I suppose each man will be expected to hoe one row. Now, who would attempt to convince two of these men that their labor would be reduced by discharging one man and abandoning one row? I fear that in the case we are now considering we shall find that while one-third of the laborers have been discharged the amount of labor has been increased—that while the whole debt is saddled upon two-thirds of the State, the debt has been increased fully fifty per cent.
The decision of the Court of Appeals, in the case of Higginbotham against the Commonwealth, settled the principle that if Virginia, as she now exists, is bound for any part of the debt of Virginia as she existed in 1861, she is bound for the whole of it.
But, as before stated, the advocates of the Funding Bill claim that the passage of that bill by the legislature of Virginia and the acceptance of its terms by bondholders reduced the debt of Virginia by releasing her from one-third of her indebtedness. Two things are necessary to the establishment of this claim. It must first be shown that Virginia of 1871 was bound for the whole debt of Virginia of 1861.
She surely could not be released from anything for which she was not bound. It must be shown, secondly, that the Funding Bill released the State of Virginia from one-third of the debt that they contend she was bound for before its passage. Can either of these propositions be sustained?
I think it has been shown that Virginia cannot be equitably charged with more than two-thirds of the debt of the old State, even upon the assumption that this debt followed from the soil and became a valid charge upon its occupants.
Does the Funding Bill release Virginia from all obligations for one-third of the debt of the old State, except so much as she may receive from West Virginia?
If it were the purpose of the framers of that bill to make a contract with the holders of Virginia bonds by which the present State of Virginia would be released from the payment of one-third of the amount of their bonds, in consideration of her dismemberment, and of the advantages they would secure by the exchange of their old ante-bellum bonds for new ones with tax-receivable coupons, they ought to have done so in language so plain and unambiguous that none could misunderstand its meaning.
Did They Do This?
The third section of the Funding Bill reads: "Upon the surrender of the old and the acceptance of the new bonds for two-thirds the amount due as provided in the last preceding section, there shall be issued to the owner or owners, for the other one-third of the amount due upon the old bonds, stock, or certificate bearing the same date as the new bond, setting forth the amount of the bond which is not funded as provided in the last preceding section, and that payment of said amount with interest thereon, at the rate prescribed in the bond surrendered, will be provided for in accordance with such settlement as shall hereafter be had between the States of Virginia and West Virginia in regard to the public debt of the State of Virginia existing at the time of the dismemberment, and that the State of Virginia holds said bonds, so far as unfunded, in trust for the holder or his assignees."
This means nothing more than that the holders of these certificates are to defer their collection until Virginia has reasonable time to ascertain how much (if any) of the debt West Virginia will agree to pay. It does not release Virginia from the payment of one dollar, but leaves her bound for every dollar of it, both principal and interest.
Whatever portion of the debt of the old State West Virginia pays will be applied to the payment of this third. Whatever she fails to pay will, according to the provisions of the Funding Bill, be demanded of Virginia. In this way, and this way only, "payment of said amount with interest thereon at the rate prescribed in the bond surrendered, will be provided for in accordance with such settlement as shall hereafter be had between the States of Virginia and West Virginia in regard to the public debt of Virginia existing at the time of the dismemberment." If West Virginia pays the whole amount of this one-third, Virginia will be relieved of it all. If West Virginia pays but one-half of it, Virginia will be called upon for the other half. If West Virginia pays none of it, Virginia will be called upon for the whole amount.
The Funding Bill does not provide for the payment of so much of this third as West Virginia agrees to pay, but for the payment of the whole of it in accordance with such settlement as the two States may make—settling the portion of the debt proper to be borne by each State, respectively.
That this is the proper construction of the Funding Bill is, I think, susceptible of clear proof.
Governor Walker, "the father of the Funding Act," said, in his message urging its passage:
"It was never intended or contemplated that there should be a division between the two States of the original indebtedness in its original form. Such a transaction would be impracticable, if not impossible. The obvious intent and meaning of all the legislation upon this subject, by each State, is, that whatever amount the State of West Virginia ought to assume should be paid into the treasury of the State of Virginia, to be by her used in the extinguishment of the original debt. The bonds are the bonds of the State of Virginia, not West Virginia; and to the treasury of Virginia does the creditor look for the payment of his debt. This view was incorporated into the legislation of 1866, and resanctioned by the people of this State in the adoption of our present Constitution, the 19th Section of the 10th Article of which declares: "The General Assembly shall provide by law for adjusting with the State of West Virginia the proportion of the public debt of Virginia proper to be borne by the State of Virginia and West Virginia, and shall provide that such sum as shall be received by West Virginia shall be applied to the payment of the public debt of the State.
'Again, in advance of any settlement, how can it be arbitrarily assumed that one-third of the debt is the proper proportion to be paid by West Virginia? What is the basis of this assumption? …Until, however, a final adjustment of this matter is reached, it can only be regarded in the light of a claim or asset of uncertain value, not in any wise affecting our liability for the whole debt. Whatever sum may be eventually realized from this claim, must be paid into the treasury of our State and applied to the liquidation of the debt of Virginia the same as other funds appropriated for that purpose. But thus far there have been no satisfactory indications that the State of West Virginia intended to acknowledge herself liable to us for any portion of the public debt."
The Richmond Enquirer of February 7, 1872, contains this editorial note: "Read the letter from Sligo from our intelligent correspondent V. That's the way it strikes an outsider. Oh, that the legislature would pause!"
What does this "intelligent correspondent" from Sligo say?
He says: "The opponents of the Funding Bill say that it contains not only the germ of repudiation, but the full-grown plant itself. None on this side of the Atlantic thus accept it. The State of Virginia agreed by that bill to pay interest on two-thirds of its debt, but it did not repudiate the remaining third. It issued on that third a certificate of indebtedness, bearing interest at six per cent., and to be paid in accordance with such settlement as shall hereafter be had between the States of Virginia and West Virginia, and the State holds such bonds so far as unfunded, for the holder or his assigns. There is no germ of repudiation there. Whatever West Virginia pays the holder will get, and if it be found on a settlement that West Virginia owes nothing, the State of Virginia will be liable for the whole sum. We do not doubt that West Virginia is liable for some portion of the old debt. Whatever it shall pay, the holders of the certificates of indebtedness shall receive, and the State of Virginia (East) is accountable for the balance. That is my reading of this certificate, and I believe the true meaning of it. I do not consider it a sham, but a reality; and if Virginia be the State I thought when I purchased, I believe the certificate of indebtedness to be as good a security as any bond in the world."
Here we see that the "father of the Funding Act" and English bondholders agree perfectly in their construction of it.
Examination of the "Journal of the House of Delegates of 1871" must satisfy any fair man that the framers of the Funding Bill never intended to require the holders of the old State bonds to relieve Virginia from the payment of the third for which they gave their certificates of indebtedness. When the bill was under consideration Mr. Turner, of Rappahannock, moved to strike from the section I have quoted the words "that the State of Virginia holds said bonds, so far as unfunded, in trust for the holder or his assignee," and to insert in their stead the following: "Setting forth also, in the body of said certificate, a proviso in the following words: But the State of Virginia is not, and will not be bound, in any manner or form, for the payment now or at any future time, of this certificate, or any part thereof; but this is without any prejudice to the rights of the holder thereof to demand payment of the same of State of West Virginia." This was a plain and definite proposition, in unmistakable language. If it had been adopted it would have settled beyond doubt, that those who surrendered their old bonds and accepted new ones for two-thirds of their amount thereby relinquished all claim against Virginia for the remaining third. Who can doubt that this proposition would have been agreed to by the framers of the Funding Bill if it had been their purpose to release Virginia from one-third of the then existing debt. This amendment was rejected, and its rejection shows that it was not the purpose of those that rejected it to require the bondholder to relinquish any claim he had, or supposed he had, against Virginia for a single dollar.
Mr. Daniel moved to add to the third section the following: "And it is provided that the funding of two-thirds of the bonds, stocks, and certificates aforesaid, is authorized and granted only upon the condition that the owners of such bonds, stocks, and certificates do release and discharge the State of Virginia from all liability (if any exists) to pay the remaining one-third thereof, until there shall have been a final settlement between the States of Virginia and West Virginia, in regard to the public debt of the State of Virginia existing at the time of its dismemberment." This amendment did not, like the former, propose to release the State of Virginia from the unfunded third forever, but only to exempt her from its payment until she had a final settlement with West Virginia. But even this proposition was rejected.
Mr. Daniel then moved to amend the bill by inserting after the word assignees, near the middle of the third section, the following: "And it is hereby provided that the certificates authorized by this Section to be issued are intended to be mere certificates of fact, and shall not be construed to be certificates of debt, and shall not be received or receivable by the State of Virginia in discharge of any debt or obligation to said State for which certificates of debt are receivable." This proposition was likewise rejected.
Here were positive and repeated refusals to engraft on the Funding Bill any provision that would discharge the State of Virginia from payment of the unfunded third. How any one, with all the facts before him, can believe the Funding Bill reduced the public debt, or that by its acceptance the bondholder relinquished any claim for any part of his bond, is wholly incomprehensible. Here were three clear and definite propositions made with a view of settling this very question:
First. That Virginia should not be responsible in any manner or form, or at any time, for the certificates of indebtedness issued for the unfunded third. Yet this was not to prejudice the right of the holder to recover it from West Virginia.
Secondly. That Virginia should be released "from all liability, if any exist," to pay these certificates until she should have a final settlement with West Virginia.
Thirdly. That these certificates should "not be construed to be certificates of debt." That is, against Virginia.
Each and all of these propositions were rejected by the Funders. Their rejection was proof, positive, that it was their purpose not to do the very thing that it is now claimed they did do. Yet there are men who, either from ignorance or design, persist in declaring: "The adjustment was deemed a practical settlement of the question so far as Virginia is concerned, and nobody believes for a moment that the creditors will ever attempt to hold Virginia responsible for it, further than West Virginia may agree to pay. Nobody regards it as part of our debt, or expects it to give any further trouble."—Charlottesville Chronicle of June 25th, 1875. The facts already stated sufficiently show the fallacy and absurdity of such declarations; yet I will give them one incident more, which conclusively refutes them.
Hon. J. H. Dooley, one of the members of the last House of Delegates, from the city of Richmond, is a Virginia bondholder, and was secretary of the "meeting of the Virginia bondholders," which was held in the Senate Chamber on the 10th of November, 1874. It is fair, therefore, to presume that he is well informed as to the expectations and purposes of Virginia bondholders. During the last session of the legislature he offered a bill, which was referred to the Finance Committee, and reported favorably from it, authorizing and instructing the commissioners of the sinking fund "to sell the State's interest in the Richmond, Fredericksburg, and Potomac Railroad Company," and to receive in payment for it "the principal of the unfunded bonds of the State issued prior to 1871."
No provision was made for leaving one-third of the old bonds for West Virginia. That was bad enough, but not the worst.
The bill goes on: "But the purchaser or purchasers may, at his or their option, pay for the said stock in new funded bonds of the equivalent of the aforementioned unfunded bonds; that is to say, two-thirds in the funded bonds and one-third in West Virginia certificates."
What better evidence can be given of the purpose and expectations of the advocates of the Funding Bill? While Virginia is unable to pay four per cent. upon the two-thirds of the debt for which she has given new bonds, a proposition is made by a leading bondholder, and endorsed by the Finance Committee of the Virginia legislature, to pay off these "West Virginia certificates" to the extent of one-third of Virginia's interest in the Richmond, Fredericksburg, and Potomac Railroad. This was but an entering wedge. Had it proved successful, it would soon have been followed by others of similar character. I confidently believe that if the bondholders ever again get control of the Virginia legislature, every dollar of the debt of the old State, with all its accumulated and compounded interest, will be converted into new bonds, with tax-receivable coupons. Then, your legislature, no matter what may be its character, will be compelled to increase taxation sufficiently to pay full interest upon the whole debt of the old State, and to defray expenses of government and public schools. This will amount to virtual confiscation.
The inexorable logic of facts enforces the conclusion that, whatever may have been the case before the passage of the Funding Bill, Virginia, by its passage, was made responsible for the whole debt of the old State, with all its accumulated and compounded interest. Before we can decide upon the necessary steps for the proper settlement of a debt we must ascertain its amount.
How was the Funding Bill passed? And how was it received by the people? I will answer this by an extract from Governor Kemper's address before the "bondholders' meeting." Governor Kemper said: "They allege that the Act was not only a surprise to the people and passed in contravention of their will, not only that it tied up the hands of the State without the fair consent of the State, but that the circumstances attending its passage were such as ought to avoid it. They allege, not only that many holders of Virginia bonds, including numbers of our own citizens, have been compelled to part with them at a ruinous depreciation, not only that the bonds thus sold are doubtless held by speculators, who obtained them at half or less than half their value, but they allege that the bonds were thus brought up by stock brokers, having peculiar facilities to guide them, as a speculation of which the Funding Bill was the crowning act. They allege that corrupt means were directed by every approachable avenue to effect the passage of the bill, and did effect its passage; that a short time before its passage, and on votes testing its merits in the House of Delegates, the political party of the minority voted, with one exception, against it, and that, an adjournment being had, and the bill coming up soon thereafter on its passage, the same party, with perhaps one exception, voted for it, and by their vote effected its passage."
What, then, is the present amount of the public debt?
As already stated, it was on January 1, 1861, $31,187,999.32. On July 1, 1871, it has increased, by the conversion of interest into principal, to $46,914,208.25. The Funding Bill authorized the issuing of new bonds for two-thirds of this sum, and certificates of indebtedness for the remaining one-third. But as both of these are evidences of debt, and both bear interest, they will be considered jointly as constituting the "public debt."
Interest on $46,914,208.25 from July 1, 1871, to July 1, 1875, at six per cent. per annum, is $11,259,409.98. About $4,500,000 of this sum has been paid, leaving about $6,759,409.98 of unpaid interest that has accrued in four years, making the debt, principal and interest, on July 1, 1875, $53,673,618.23. During the four years above given the commissioners of the sinking fund purchased bonds to the amount of $499,630.74, which reduced the principal of the debt by that amount.
Not knowing the precise time when the various purchases were made, I am not prepared to say when they ceased to be a part of the public debt, and have, therefore, calculated interest on the whole amount to July 1, 1875. This is a matter of but little moment, as the bonds held by the commissioners of the sinking fund still bear interest, though they are no longer "outstanding obligations, or a part of the debt proper of the State." If, therefore, we desire to know how much revenue would have to be raised to pay the annual interest on the State bonds and certificates of indebtedness, we must add the residue of the sinking fund, which is about $5,500,000 to the $46,914,208.25. The whole of this bears interest. So that while the principal of the "outstanding debt" is a little over $46,400,000, the amount which is bearing interest is $52,414,208.25. The annual interest on this sum at six per cent. is $3,144,852.49. According to the estimate of the Auditor of Public Accounts, the sum of $1,287,747.50 is necessary to meet the annual current expenses of the State. This added to the amount needed to pay full interest on the public debt and the sinking fund, makes $4,434,599.99, that must be raised annually for State purposes alone. The whole amount of State taxes now collected is $2,421,945.41. So that, counting for the cost of collecting, we must double the present rate of taxation, or the debt will continue to increase by the accumulation of interest.
What are Virginia's resources for meeting this obligation?
In 1861, when the debt was $31,187,999.32, the taxable property of Virginia was assessed at $585,099,322.77. This did not include any slaves under twelve years old. The Constitution exempted all slaves under that age from taxation, and fixed the taxable value of all over that age at $300 each. This was not more than one-half of their average cash value. As every kind of property is now taxed, we cannot understand the resources of Virginia in 1860, as compared with what they are now, unless we take into consideration slaves as well as other property.
The official record shows that the value of the slaves in Virginia under twelve years old was $163,556,000. The value of those over that age was, doubtless, greater than the value of those under it. But estimating it to be just the same, we find the value of slaves alone was $327,112,000. About one-twenty-fifth of this was in West Virginia, leaving the value of slaves in that part of the old State which is now included in Virginia $314,027,520. Other personal property within the same part of the State was assessed at $101,636,721.09, and the real estate at $294,134,470.56—making a total of values in 1860 at $709,807,711.65.
The Auditor's report shows that the entire property, in 1873, was assessed at $336,686,433.23. That is, $18,217,422.59, less than half as much as was owed in the same counties in 1860.
Thus when, in 1860, the value of property was $709,807,711.65, the public debt was $31,187,999.32. That is, there was more than $22 worth of property for each dollar of debt.
In 1873 the assessed value of property was $336,684,433.23, and the debt, exclusive of unsettled interest, was $46,914,208.25. That is, about seven dollars [sic] worth of property for each dollar of debt.
It should be borne in mind that many things are taxed now that were not taxed in 1860, and that property is taxed much higher in proportion to its value now than it was then. So that the difference between the real value of property in 1860 and in 1873 was still greater than these figures show it to have been.
If the Funding Bill had released Virginia from that portion of the debt for which certificates of indebtedness were issued and from one-third of the unfunded debt, as some claim it did, the debt would, of course, be one-third less than I have shown it to be. The Auditor's report is based upon that assumption. And in a speech made in the legislature last session, upon a subject which did not necessitate inquiry into the amount of debt, I used his figures, and spoke of the debt as being, in round numbers, about $30,000,000. Every intelligent reader will readily understand this. We now speak of the debt as it is; not as it is reported upon an unwarrantable assumption.
Official documents of the Federal Government show that property in Virginia is assessed about fifty per cent. higher, in proportion to its value, than it is in New York, Pennsylvania, and the six New England States, and thirty-five per cent. higher than it is in all the other States of the Union.
The destruction of more than half our property is not the only loss we have sustained. That which remains is far less valuable than it was. Thousands of acres of land which have been offered for sale, under judicial decrees, remain unsold because they will not bring three-fourths of their assessed value, though they are offered upon a credit of one, two, and three years, while their assessment is designed to fix their cash value.
It may be safely affirmed that the people of Virginia are less able to pay one dollar now than they were to pay three in 1860.
Can Virginia pay the whole of the debt of 1861, with its accumulated and compounded interest? or even two-thirds of it?
In the appendix to the last annual message of Governor Kemper we have this extract from official documents:
|State revenues derived from taxation||$2,421,945.41|
|Amount of reported county, township, road and local levies||$2,217,538.49|
|Amount of unreported county, township, road and local levies, as estimated by the Auditor of Public Accounts||$282,461.51|
|Cost of collection, retained by tax collectors, etc.||$172,318.09|
|Total of taxes paid, under State laws, for one year||$5,094,263.50|
|During the same year the U. S. Government collected in Virginia in the shape of internal revenue taxes||$7,318,015.56|
|And assuming, what is far short of the truth, that the money directly and indirectly drawn from the people of Virginia by U. S. tariff||$5,976,401.95|
|Total in one year||$18,388,681.01|
That is about five and a half per cent. upon the entire amount of taxable property of every description in the State. "And yet," says Governor Kemper, "these burthens are annually increasing, and the incomplete returns already received are enough to render it certain that the total of taxes paid by Virginia in the fiscal year just ended will turn out to be larger than for the preceding year."
Let it be borne in mind that only one-third of the lands of Virginia are productive, and have to bear not only their own taxes, but the taxes also of the other two-thirds, which are mainly unproductive. Yet the taxes now paid, either directly or indirectly under State and Federal laws, amount to nearly six per cent. upon the whole property, both productive and unproductive.
Can the people of Virginia bear an increase of taxation? I do not know what I an better answer this question than by quoting a paragraph from Governor Kemper's address before the bondholders' meeting held in the city of Richmond on the 10th of November, 1874. It is as follows:
"Let it be remembered, also, that our people are borne down with an enormous private indebtedness, exceeding, it is estimated, the amount of our large State indebtedness, all of which is being pressed for payment and much of which is due beyond the Commonwealth, and it will be seen that all our resources and energies are being strained to the utmost point of endurance. If these facts are borne in mind, it will be understood why it is that well-authenticated reports are not unfrequently made of farms whose annual production falls short of the amount of their annual taxes, of indispensable farm animals and implements, and lands also being sold for taxes—and all through no want of industry or economy on the part of the farmer. These facts, borne in mind, will teach others what the logic of experienced suffering has taught us, that any material increase of taxation on lands at this time would be virtual confiscation of lands."
Again, in a message addressed to the Legislature on the 27th of March, 1874, the Governor says: "The proposition is too obviously true to be argued that taxes on lands cannot now be increased. Such increase would be virtual confiscation of private property. If the State were subjected to such pressure as would enforce immediate compliance with all her undertakings it would result in public bankruptcy, and would prove alike disastrous to debtor and creditor."
I think it may be safely affirmed that, so far from the people of Virginia being able to bear an increase of taxation, they are now taxed higher than they ought to be, or than they are able to bear. The agricultural, the manufacturing, the mercantile, the mechanical, and the professional interests, each and all, are suffering and languishing under the almost insupportable burdens they are bearing.
Yet with the heavy taxes we are paying, so enormously disproportioned to our resources, the public debt is constantly increasing. "The increased rate of taxation has fallen short of enabling the government to pay full interest on two-thirds of the original debt, by an average annual deficiency of $1,062,578.05."
Hence the debt has been increasing at the annual rate of $1,062,578.05 by the accumulation of unpaid interest on only two-thirds of the debt. Virginia is bound, by the Funding Bill, for the remaining third, or so much thereof as West Virginia fails to pay. West Virginia refuses to pay any part of it. Hence, according to the theory of "the last dollar men," Virginia must pay the whole. The annual interest upon this third is $938,284.04. Add this to the $1,062,578.05, which Governor Kemper says is the "average annual deficiency" upon the interest upon the other two-thirds, and we have an average annual increase of the debt of $2,000,862,09. That is to say, the heavy taxes which the people of Virginia are now paying are not sufficient to pay the annual interest on the debt by $2,000,862.09, and the debt is, therefore, with the slight exception given below, becoming that much larger every year. It has been increasing at this rate for more than four years, except the small diminution which has been made by the purchase of bonds by the commissioners of the sinking fund. The whole amount of these purchases for four years, as reported to the last session of the General Assembly, was $499,630.74. That is, while the "outstanding obligations of the State" have been reduced at the average annual rate of only $124,907.68 by the purchase of State bonds for the use of the "sinking fund," the debt has been increased, during the same period, at the average annual rate of nearly two millions of dollars. How long will it require at this rate to pay the debt? No one can fail to see that a continuance of this state of things must result in disaster to both debtor and creditor. What are we to do?
Undeniable facts show that our taxes are not sufficient to pay the accruing interest on the whole debt by more than two millions of dollars! They also show that they are not sufficient to pay the annually accruing interest on two-thirds of the debt, which have been funded, by more than a million of dollars! The Funding Bill pledges the State to pay full interest upon these two-thirds semi-annually. Its friends declare its obligations to be "sacred"—that every infraction of it wounds the sacred honor of Virginia. They say to the bondholder, substantially: "You shall have every dollar of your bond according to the Funding Bill contract." They know this pledge cannot be redeemed without increasing taxes! Yet they say to taxpayers: "No man must be sent to the Legislature who does not pledge himself beforehand that he will not increase the taxes!" This is the consistency of those who prate of Virginia honor, as though they supposed only themselves to be its possessors! This is practical repudiation of what they declare to be a solemn obligation. It is repudiation in its worst form! Not open, frank and manly; but covert, deceptive and cowardly! It is carrying one face to the creditor and another to the debtor! I forewarn you, fellow-citizens, that there is a "masked battery" behind these pretences! These men know that unless they can make you believe they are opposed to increasing taxes, you will never put them where they can do it! Once give them the power and their tune will be changed, and you will pay for the music! I wish to see a manly course pursued. We should lay before the creditors a clear statement of our views as to what we ought to pay and what we are able to pay. Make an equitable settlement with them, and faithfully comply with its terms. But, it is asked, "Has there not been a final settlement?" There has been a partial settlement, but not a final one. No settlement can be final which satisfies nobody. There is no respectable number of any party, or of all parties combined, who are satisfied with the present status of the debt. This is shown by the overtures that have been made, the meetings that have been held, and the general anxiety for information upon the subject—an anxiety which will continue to manifest itself until it is gratified.
Is Virginia morally bound for the whole debt of the old State? or for two-thirds of it, without any abatement, even upon the assumption that the debt followed the soil? Before answering this question we must inquire into the cause of her losses, and endeavor to ascertain who is responsible for it.
But little need be said of the cause of our losses. They resulted either directly or indirectly from the war.
Who are responsible for the cause which produced these results?
I do not mean for these remote causes—Federal aggressions, Northern interferences, &c.—which led to it. But which of the two classes—bondholders and taxpayers—is responsible for the act of secession which made Virginia a battlefield? I think I may safely answer, both are responsible for it; and each one equally so. If secession were right, bondholders and taxpayers share equally the honor of having advocated it. If it were wrong, each was equally blameworthy. If we had succeeded, each class would have shared in the benefits of success in due proportion. If we lost by it, each should bear his due proportion of the loss. There may have been individual exceptions, but as a general rule bondholders are as fully responsible for our present condition as any other class. We know that some who are now the most zealous advocates of bondholders, and who insist upon paying the "last dollar," no matter who may be ruined by it, were the most blatant secessionists—not only ready to "wade in blood," but to "die in the last ditch"; and were resolved to leave Virginia if she did not secede. If these last-ditch men had entered the first ditch, instead of getting others in and then speculating upon their necessities and the necessities of their families, there would be fewer "last-dollar" men now. Yet I suppose bondholders and taxpayers were equally responsible for the losses sustained, and ought, therefore, to bear their equal proportions of them. Citizens of a State sustain similar relations to each other that members of a business firm do. If it be not positively expressed, there is, at least, a tacit understanding that each shall bear the responsibilities and expenses, share the profits, and sustain the losses of the firm in proportion to his interest in it. The same rule applies to the State. Each shares his due proportion of its benefits, and should bear his due proportion of its losses. This applies only to the transactions of the corporation. No member of it is responsible for, nor can claim any benefit arising from, any individual transaction of any other member of it. Hence, what may be said with regard to the public debt, has neither reference nor application to private debts.
As citizens of the State, we are joint partners, and each, in proportion to what he has, must contribute to its support, meet its obligations, and share it losses. It would not be equitable for some of the partners to be benefited and others damaged by their joint act. This would be the inevitable result if the "last-dollar men" prevail. It may be illustrated thus: A, B, C, D, and E are citizens of Virginia. A owns $10,000 worth of State bonds; B, C, D, and E each owns $5,000 worth of land and $5,000 worth of negroes. They all advocate secession, and are equally responsible for the results. These results are consequences of their joint act. The result is that B, C, D, and E loses all their negroes outright, and the value of their land is reduced to one-half of what it was before the war. Thus, by the joint act of all five—each one of them being equally responsible with the others—four have been totally ruined, while one is enabled to purchase twice as much property with his bonds as he could have done before the war. Is this just? Is it right? I have no prejudice against bondholders. I deplore the unfortunate circumstances which deprive them of any part of their bonds; but they must bear their part of the common misfortune. I do not wish them to fare worse than their fellow-citizens. They ought not to desire to fare better.
We made common cause, and jointly resolved upon secession. We entered the contest together, and bore ourselves through it nobly. Together we staked our all upon the result. That result proved disastrous. Neither class should charge this result upon the other, nor seek to evade its just proportion of responsibility, or loss, by placing an undue proportion of either on the other.
Our motto should be: Equal justice to all; special immunities to none.
What would be the practical workings of this principle?
First. It would exclude all interest upon the public debt during the war. It is generally conceded that no interest ought to be charged upon private debts during the war. Various reasons have been assigned for this. I suppose the main reason to be, that private rights were merged in the rights and authority of the State. Men did not belong to themselves. Neither their time, labor, nor property was at their disposal. As, therefore, all private rights and interests of debtors were suspended for four years, it has been thought equitable and right that interest upon indebtedness should be suspended during the same time. I can see no sufficient reason why this rule should not apply to public debts as well as to private. If this view of the subject be right, the taxpayers of Virginia ought not, and in justice, cannot, be required to pay any interest which accrued upon the public debt during the war, while no interest is allowed upon private debts during the same time.
Secondly. It would require the scaling of State bonds in just the same proportion that other property has been reduced. Bondholders and taxpayers would then fare alike. Each would lose in precisely the same proportion. This may be caviled at, but cannot be contemned. It rests upon the immutable properties of justice. It neither asks, nor concedes, more than is right. A settlement based upon these principles would reflect honor upon both debtor and creditor.
What I have said thus far upon this point has special reference to Virginia bondholders.
Nearly one-half the public debt is owned in those States which composed the "Federal Union" during the war. What would be an equitable settlement between these bondholders and Virginia taxpayers?
If a creditor should wantonly or wrongfully destroy property belonging to his debtor, I suppose no one would deny that the debtor ought to receive credit on his bond to the amount of damage he had wrongfully sustained at the hands of his creditor. What will be the effect of the application of this perfectly just principle to the present case? A simple statement of facts will suggest the answer. Our Northern creditors were not content with having destroyed the old State and divided her territory, but, without reason or justice, took from us largely more than one-half of our entire property without giving us any compensation whatever for it.
Are we not, therefore, justly entitled to have the bonds they hold against us credited in at least an equal proportion to the loss we have sustained at their hands?
I have no desire to awaken or revive sectional prejudices by anything I have said or might say. I wish to bury these in the sea of forgetfulness, and to cultivate feelings of friendship and amity between men of every portion of our common country. I am simply stating facts, which must be taken into consideration if we ever make an equitable settlement of this vexed and complicated question.
That these creditors should, in view of the well-known facts, raise the cry of dishonor against the taxpayers of Virginia because they are not willing, under these circumstances, to increase the burdens they are now unjustly bearing to pay the last dollar of their bonds, while refusing to give them any credit for the property wrongfully taken from them, is a most remarkable case of moral perversity! If there be anything more remarkable, it is that any man who claims to be a Virginian, and boasts and prates of Virginia honor, should join in this cry! Virginians must not only have fallen and degenerated, but have become truly craven if they can tamely submit to such ignominious injustice without raising a manly protest against it. If the very men who are raising and reiterating the cry of dishonor against those who defend the just rights of taxpayers were called on to arbitrate just such a case between other parties, and were perfectly free from interest or prejudice, I have no doubt but they would adopt the same view of the case that has been presented above. These are the only principles upon which a perfectly equitable settlement can be made. Any material departure from them must do injustice to one or the other party. If we ask more than is right, we do injustice to others. If we concede more than is right, we do injustice to ourselves. We should take no position that cannot be vindicated upon perfectly equitable principles.
There is yet another class of bondholders. A little more than one-fourth of the debt of Virginia of 1861 is owned in Europe. The holders of this part of the debt are not responsible for our losses. They are neither responsible for the war and its legitimate consequences on the one hand, nor for the wanton destruction of our property after the war on the other. I am not apprised, therefore, of any equitable ground upon which we can claim a settlement of that part of the debt which was owned in Europe, at the close of the war, at less than its face value. Arguing, therefore, upon the assumption that the debt of 1861 followed the soil of its old State, and is a valid obligation upon its present occupants, it devolves upon us to pay two-thirds of the debt due to European bondholders. We ought not, however, to be under the necessity of even considering the question. Beyond all reasonable doubt the Federal Government is "liable for at least so much of the debt as is due to non-resident creditors."
I have endeavored to consider this subject in its various parts upon strictly equitable principles, and to ascertain what adjustments of it would be just and right to all parties concerned.
The conclusions to which I have arrived, in view of all the facts which ought to be taken into consideration, are:
First. Virginia cannot be equitably required to settle more than two-thirds of the debt of Virginia of 1861.
Second. No interest ought to be allowed on these two-thirds during the four years of the war.
Thirdly. The bonds held both in Virginia and the Northern States ought to be scaled in full proportion to the destruction of the property of Virginia taxpayers.
Fourthly. The bonds held by Europeans ought to be paid at their face value by the Federal Government.
Virginia should in no event pay more than two-thirds of their amount. No interest should be paid on these two-thirds during the war; and the claimant should be required to establish the fact that his bond was owned in Europe at the close of the war.
I believe a settlement made in accordance with the views and upon the principles set forth would command the respect and approval of all impartial and unprejudiced men the world over.
The result of so equitable a settlement would be that the present debt of Virginia could not exceed $15,000,000, and might fall far below that sum.
It is said that "the wind is tempered to the shorn lamb." And here we see that the reduction of our ability to pay has been accompanied with a corresponding diminution of our moral obligation. The same cause which rendered us unable to pay the whole debt relieved us from all moral obligation to pay it all.
Such a settlement as I have suggested would be equitable to all parties. Neither the bondholder nor the taxpayer would be placed in either a better or worse condition relatively to the other than he occupied when the debt was created.
The bondholder would receive neither a greater nor less proportion of his bond than the taxpayer retained of his property.
Some are so weak-minded, or so blinded by prejudice, as to charge that these views savor of repudiation. It is a source of regret that there are any who either cannot or will not distinguish between an equitable settlement of a debt and its repudiation! I am sorry for such. They lack either common perspicacity or common honesty. In either case they are to be pitied.
Repudiation is wholly out of the question. It should not be thought of except as the dernier ressort. It is the imperative duty of both individuals and States to pay their just debts to the utmost of their ability. Both individuals and States may inquire into the justice of claims which may be brought against them; and they cannot be censured for refusing to pay them if they are not just. But when once their justice is established, the obligation to pay is imperative. Nothing short of her own preservation justifies a State in refusing to meet her just obligations. The obligation of self-preservation is paramount with States as well as with individuals. A State may not, for any cause, destroy her own existence. To preserve herself she must protect her citizens. If the individual members of society be properly protected, society will be safe. But if the rights of individuals be disregarded, the society will soon be destroyed. When, therefore, demands upon a State become so unreasonable or exorbitant that compliance with them would crush her citizens, and thus endanger her own life, then, and only then, may she repudiate her just obligations.
Many who fully concur with the views I have presented oppose agitation of the subject because they see no way of relief.
"I'll try" has accomplished wonders. "I cannot" never accomplished anything. None can deny that we are bearing an unjust weight of debt; and a weight much greater than we are able to bear. I have always believed that when the people of Virginia fully understand their rights and duties, they will promptly and firmly maintain the one and perform the other.
The case is by no means hopeless, though hedged about my difficulties. United and persistent will, beyond doubt, bring forth fruit.
The questions which address themselves to us are: What are we able to do? And what, under all the circumstances, ought we to do? Let us consider these subjects well, decide them wisely, and then firmly and perseveringly adhere to what we believe to be right, both to ourselves and to others. Very respectfully,
John E. Massey.
Ash Lawn, Albemarle Co., Va.,
September 23, 1875.
I had had many solicitations to publish my views in pamphlet form for general distribution over the State. I did this. When the first edition was exhausted I published a second edition.
I entered the political arena reluctantly, but, when I saw the condition of public affairs, I felt that I ought to try to remedy them so far as one man could, and I wished to be re-elected for that purpose. In the autumn of 1875 I was again elected to the House of Delegates.