We are now come to your Twelfth Head of Inquiry, which is. What Countenance have the Finances? How much does the Expence exceed the Yearly Income? Does the annual Revenue, deriving from the Taxes, increase or diminish? in the whole, or in any Particulars? and what are the Reasons to be given for it?

Here I am apprehensive, I shall find a Difficulty to make my self under Stood, as the American Finances, and Mode of Taxation, differ so materially from any, that I know of in Europe.

In the Month of May, 1775, when the Congress came together, for the first Time, after the Battles of Lexington and Concord, they found it necessary, to raise an Army, or rather to adopt an Army already raised, at Cambridge, in order to oppose the British Troops and shut them up, in the Prison of Boston. But they found, that the Colonies, were but just got out of Debt, had just paid off the Debts contracted in the last French War. In the Several Treasuries of the Colonies, they found only a few Thousand Pounds. They had before them a Prospect of a Stagnation, or Interruption of their Trade, pretty universally, by the British Men of War. They had a thousand Perplexities before them, in the Prospect of passing through thirteen Revolutions of Government, from the Royal Authority to that under the People. They had Armies and Navies to form, they had new Constitutions of 234Government to attend to. They had, twenty Tribes of Indians to negotiate with. They had vast Numbers of Negroes to take care of. They had all sorts of Arms, Ammunition, Artillery, to procure, as well as Blanketts and Cloathing, and subsistance for the Army, they had Negotiations to think of in Europe and Treaties to form of Alliance and Commerce, and they had even Salt to procure for the Subsistance of the Inhabitants and even of their Cattle as well as their Armies.

In this situation, with so many Wants and demands, and no Money, or Revenues to recur to, they had recourse to an Expedient, which had been often practiced in America, but no where else. They determined to emit, Paper Money.

The American Paper Money, is nothing but Bills of Credit, by which the Publick, the Community, promises to pay the Possessor, a certain Sum in a limited Time. In a Country where there is no Coin, or not enough in circulation, these Bills may be emitted to a certain Amount, and they will pass at Par, but as Soon as the Quantity exceeds, the Value of the ordinary Business of the People, it, will depreciate, and continue to fall in its Value in Proportion to the Augmentation of the Quantity.

The Congress on the 18 of March last, Stated this Depreciation at forty for one. This may be nearly the Average, but it often passes much lower. By this Resolution All the Bills in Circulation, on that day, and none have been emitted Since, amount to about one Million and a Quarter sterling. To this if you add the Money borrowed upon Loan Certificates, and the debt contracted abroad in France and Spain, the whole does not amount to but little more than five Millions.

Yearly Income, We have none, properly Speaking. We have no Imposts or Duties laid upon any Articles of Importation Exportation, or Consumption. The Revenue consists entirely in Grants annually made by the Legislatures, of Sums of Money for the current service of the Year and appropriated to certain Uses. These Grants are proportioned upon all the Polls and Estates, real and personal in the community, and they are levied and paid into the publick Treasury with great Punctuality, from whence they are issued in Payments of the demands upon the Public.

You see then that it is in the Power of the Legislatures, to raise what sums are wanted, at least as much as the People can bear, and they are usually proportioned to the publick Wants and the Peoples Abilities. They are now constantly laying on and paying very heavy 235Taxes, altho for the three or four first Years of the War, the Obstructions of Trade &c. made it difficult to raise any Taxes at all. The yearly Taxes, annually laid on have increased every Year, for these three Years past, and will continue to be increased in Proportion To the abilities of the People. This ability no doubt increases in Proportion as Population increases, as new Lands are cultivated, and as Property is in any Way added to the common stock. It will also increase as our Commerce increases, and as the Success in Privateering Increases.

But by the Method of Taxing you see that it is in the Power of the Legislature to increase the Taxes every Year, as the publick Exigences may require, and they have no other Restraint or Limit than the Peoples Ability.

I have the Honour to be, with great Esteem &c.

Your thirteenth Letter Inquiry is, “Of what Resources might America hereafter Still make Use of?”

There are many Resources, yet untried, which would certainly be explored, if America Should be driven to the Necessity of them.

1. Luxury prevails in that young Country, not withstanding all the confident assertions of the English concerning their Distress, to a degree, that retrenching this alone would enable them to carry on the War. There are Expences in Wheelcarriages, Horses, Equipage, Furniture, Dress, and the Table, which might be Spared and would amount to enough to carry on the War.

2. The Americans might, and rather than the English should prevail against them they would be brought to impose Duties upon Articles of Luxury, and Convenience and even of Necessity, as has been done by all the Nations of Europe. I am not able at present, and upon Memory to entertain you with accurate Calculations, but in general it may be said with Certainty that if as heavy Duties were laid, upon Articles of Consumption, Exportation and Importation as are laid in England, or even in Holland, it would produce a Revenue Sufficient to carry on this War, without borrowing at all. I hope 236however they will never come to this. I am clear they need not. Such Systematical and established Revenues are dangerous to Liberty, which is Safe, while the Revenue depends upon annual Grants of the People, because this secures publick Oeconomy.

3. If there should be hereafter any Accession to the Population of America, by Migrations from Europe, this will be a fresh Resource, because in that Country of Agriculture, the Ability to raise a Revenue will bear a constant Proportion to the Numbers of People.

4. There are immense Tracts of uncultivated Lands. These Lands are all claimed by particular States. But if these States Should cede these Claims to the Congress, which they would do in case of Necessity, the Congress might Sell these Lands, and they would become, a great Resource. No Man can Say, how great or how lasting.

5. There is a great deal of Plate in America, and if she were driven to Extremities, the Ladies I assure you have Patriotism enough, to give up their Plate to the Publick, rather than loose their Liberties or run any great hazard of it.

6. There is another Resource Still. The War may be carried on, by means of a fluctuating Medium of Paper Money. The War has been carried on in this manner hitherto, and I firmly believe, if the People could not find a better Way—they would agree, to call in all the Paper, and let it lie as a demand upon the Public, to be hereafter equitably paid, according to its fluctuating Value in silver—and emit new Bills, to depreciate and carry on the War in the Same Way. This however would occasion many Perplexities, and much Unhappiness. It would do Injustice to many Individuals, and will and ought to be avoided, if possible.

7. A Loan in Europe, however, would be the best Resource, as it would necessarily extend our Trade, and relieve the People from too great a present Burden. Very heavy Taxes, are hurtfull, because they lessen the Increase of Population by making the means of subsistence, more difficult.

8. There are Resources of Agriculture, Manufactures and Labour, that would produce much, if explored and attempted.

I have the Honour to be with very great Esteem &c. John Adams

9. The Resources of Trade and Privateering, ought to be mentioned again. The real Cause of our doing So little hitherto is this. The Congress in 1774, agreed upon a Non Exportation to begin in September 1775.1 This induced the Merchants in every Part of America, 237to Send their ships and Sailors to England, from whence the most of them never returned.

The Consequence of which was that the Americans have been distressed for want of ships and Seamen ever since. But the Number of both has increased every Year, in Spite of all that English have taken and destroyed. The vast Number of ships and seamen taken this Year, will repair those Losses, and no man can say to what an Extent Trade and Privateering will be carried, the next and the succeeding Years.

I have the Honour to be &c.