"History teaches us that man learns nothing from history."
"There is nothing new under the sun."
When the War of Independence ended, King George III of England signed a peace treaty with each individual state, named one by one in the document, and not with some obtrusive, consolidated entity called "the United States government."
Each state had accumulated an amount of war debt. Some states, like Virginia, were more responsible and diligent than others in paying off their debt, but other states, like northern Massachusetts, dragged their feet in paying off their debt. The first secretary of the treasury, Alexander Hamilton, proposed socializing or nationalizing the debt, which would force the more responsible states to foot the bill for the less responsible states.
Thomas Jefferson and James Madison opposed Hamilton's radical socialist attempt to disrupt the sovereignty of the individual states. They and others led Congress to defeat Hamilton's assumption plan five times, beginning in April 1790. Hamilton then used one last big bargaining chip. He and his supporters wanted the nation's capital to remain in New York City; Jefferson and Madison, being Virginians themselves, wanted the capital to be located along the Potomac River in Virginia. Hamilton went to dinner with Jefferson and offered to eliminate the political opposition to moving the capital to Virginia if, in return, Jefferson and Madison would marshal the congressional votes needed to get the assumption bill passed.
The deal was struck; the central government assumed the state war debts, and our nation's capital is Washington, D.C. today and not New York City. To secure the support of Pennsylvania's politicians, the national capital was located in Philadelphia for ten years. That dinner proved to be one of the most costly meals in U.S. history.
The national debt soared to a total of over $80 million. To service this debt, almost 80% of the annual expenditures of the government were required. During the period of 1790-1800, payment of the interest alone of the national debt consumed over 40% of the national tax revenue.
The Party of Hamilton used its power to make it illegal to criticize the Federalist-controlled government. With the Federalist John Adams in the White House, Congress passed a very controversial and notorious Alien & Sedition Act, which was written so that it would expire the day Adams left office. Journalists, ordinary citizens, and even a member of Congress, Matthew Lyons of Vermont, were imprisoned for merely criticizing the government. Those who spoke out against the ever-growing national government were slandered as un-Americans. A Rev. John Ogden simply carried a petition to Philadelphia for the release of Congressman Lyon, and he himself was imprisoned for doing so. Soon the citizens became fearful of the Federalist "reign of terror."
Jefferson and Madison were so incensed about the direction the infant country was taking, that they became authors of the Virginia and Kentucky Resolves of 1798. Both these states declared they had not intention of allowing the Sedition Act to be enforced within their boundaries. States rights triumph over the unconstitutionality of the expanding national government.
Congressman Lyon enjoyed sweet revenge in 1801 when, after being released from prison and reelected to Congress (while still in prison), he cast the decisive vote that made Thomas Jefferson President of the United States in an election that had been thrown into the hands of Congress.
Hamilton's political legacy is that his policies led to the disintegration of the Federalist Party. Heavy taxation, out-0f-control debt, a menacing standing army of tax collectors pre-IRS days, and the Federalist Party's attack on free speech led to the election of President Jefferson in 1800, and the eventual demise of the Federalist Party by the 1820s. While the party died, the party's big government, statist, socialist ideas lived on. The ideology came back with a vengeance under Abraham Lincoln's administration and under the New Deal program under FDR. On the eve of the depression in 1929, the unemployment rate was 3.2%. Eleven years later it soared to 14.6%.
Jefferson by 1807 had abolished all of Hamilton's excise taxes and had cut the government debt by almost 30%. Jefferson had adhered to the idea that the government could borrow for such reasons as financing a defensive war, but only if the current generation was taxed to service the debt.
With the exception of the War between the States and the Spanish-American War periods, the Jeffersonian view of government debt, which was also Adam Smith's view, prevailed into the twentieth century. In the 1930s, a British economist John Maynard Keynes took center stage worldwide. Keynes and his followers, the Keynesians, argued that fiscal irresponsibility on the part of the government was not subject to the same principles as that of individuals and families. The government could simply finance spending with borrowing, thereby pushing the payment of the debt to future generations. After 1964, during the Kennedy administration, the United States embarked on a course of fiscal irresponsibility matched by no other period in its two-century history.
Should we celebrate today because we have certainly learned from the failures of the past, that the ideas of an ever-expansionist national government of Hamilton and his cronies have been laid to rest, and that the mistaken notion of the Sedition Act to silence and villify the voice of the ordinary citizens would never surface in our nation again?
Back to the future, forward to the past.
"When the wicked rise, men hide themselves:
but when they perish, the righteous increase."
Proverbs 28:28
