Debts, Colonial and Continental
DEBTS, COLONIAL AND CONTINENTAL
DEBTS, COLONIAL AND CONTINENTAL.
American colonies raised public funds through lotteries and by issuing paper currency rather than by borrowing, so colonial debts, in the modern sense, were not heavy. Massachusetts first issued paper currency in 1690 to meet the expenses of King William's War; subsequent struggles with the French and Indians forced other colonies to follow suit and to resort to additional methods, which, by 1756, included borrowing funds for public purposes. In 1775 these and other debts totaled more than £2.5 million. Business depression, absence of capital, and lack of foreign credit notwithstanding, the states incurred further heavy debts during the Revolution. States floated domestic and foreign loans, gave "certificates" for war supplies, and incurred debts totaling, according to Alexander Hamilton's estimate, more than $21 million. The federal government funded and assumed a total of $18,271,786 in state debts in 1790, to which more than $3 million was subsequently added.
Meanwhile, the Second Continental Congress and the Congress of the Confederation incurred heavy debts. The Continental Congress authorized its first domestic loan of $5 million on 3 October 1776, and by 1790—according to Hamilton's estimate—the total domestic debt had ballooned to $40,423,085. Moreover, the congresses had gained credit abroad. Foreign loans negotiated between 1777 and 1783 totaled $7,830,517, of which $6,352,500 were French, $174,017 Spanish, and $1,304,000 Dutch. After the war the Confederation sank further into foreign debt. Dutch loans continued, totaling $2,296,000 (1784–1789), and, as Congress was unable to pay all interest and installments on foreign loans, the foreign debt rose to $11,763,110 by 1 January 1790.
Perkins, Edwin J. American Public Finance and Financial Services, 1700–1815. Columbus: Ohio State University Press, 1994.
Stabile, Donald. The Origins of American Public Finance: Debates Over Money, Debt, and Taxes in the Constitutional Era, 1776–1836. Westport, Conn.: Greenwood Press, 1998.
Raymond P.Stearns/c. w.