On November 21, 1789, North Carolina ratified the Constitution, leaving Rhode Island to a position of hazardous isolation. Congress was considering a bill to cut off the commercial privileges of the State, by putting her on the footing of a foreign nation, when news came that a convention at Newport had ratified the Constitution by the narrow margin of two votes. In the following year the number of States was increased by the admission of Vermont. The admission of Kentucky followed in 1792; and Congress paved the way for the entrance of other States into the Union by organizing the Southwest Territory out of Western lands ceded by the three southernmost States. The expansion of the United States had begun, bringing with it unforeseen problems. The severest labors of Congress began in the second session, when the new Secretary of the Treasury presented his first report on public credit. Shortly after the Convention of 1787, Hamilton had expressed his belief that one of the great dangers which threatened American society was "the depredations which the democratic spirit is apt to make on property." Distrusting the political capacity of the people, whom in private he called "a great beast," he believed that the new Government would succeed or fail in just the proportion that it enlisted the support of the influential and wealthy classes. He set himself deliberately to the task of identifying the interests of the propertied classes with those of the Government. It was a sorry state in which Hamilton found the national finances. The foreign debt, including principal and arrears of interest, amounted to $11,710,000. The domestic debt, much more difficult to determine, was not less than $42,414,000, about one third of which was made up of arrears of interest. The debts of the individual States, principal and interest, were estimated at about $25,000,000. These were heavy burdens for the shoulders of a young Government whose fiscal powers were as yet untested. But the shoulders had to be fitted to the burden, if public credit was to be restored. In this first report on public credit, January 9, 1790, Hamilton analyzed the financial situation with masterly clearness and set forth his plans for the adjustment of the national debt. The determination of Congress to make adequate provision for the support of the public credit was justified in his mind by every consideration. A country like the United States, possessed of little active wealth, must borrow in emergencies; to borrow on good terms, it must establish its credit; and to maintain its credit, it must faithfully observe its contracts. But over and above these considerations, dictated by expediency, were "immutable principles of moral obligation." Moreover, the national debt was no ordinary obligation: it was "the price of liberty." On all sides, it was agreed that the debt contracted abroad should be provided for in the precise terms of the contracts.