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Hamilton and the Fiscal Cliff

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On Friday, Scott Bomboy at Constitution Daily published an interesting piece on how Alexander Hamilton would view the debt ceiling.  He generally describes the financial crisis that Hamilton faced when he took over the Treasury Department and how he accomplished his almost impossible mission to pull the new republic out of financial oblivion, create a national debt, and ensure that the new nation develop good credit.

Bomboy describes the odds stacked against Hamilton and America’s economic success:

In 1789, when President Washington took office, the United States was broke; it had about $75 million to $80 million in public debt; and it wasn’t in a position to trade well in a global economy.

The United States’ economic problems after the Revolution were a direct impetus to call the Constitutional Convention of 1787, where delegates from 12 states met in Philadelphia to overhaul the Articles of Confederation and give the new nation a sound political and economic footing.

In addition, Hamilton single-handedly faced two powerful political opponents from Virginia who were opposed to his policies: future presidents Thomas Jefferson and James Madison.

So in comparison to the current financial situation in Washington, Hamilton seems to have been in a much tougher spot in 1789.

Hamilton’s approach to fixing these epic problems was that the government of the United States had to possess excellent credit, before anything else could happen. Getting there would be a monumental task, since the nation had virtually no credit in 1789, despite its abundant resources.

Simon Johnson and James Kwak published an interesting analysis of Hamilton’s success and how it compared to the debt ceiling debate in the Vanity Fair article Debt and Dumb

In just five years, Hamilton—with Washington’s support—had laid the foundation of American fiscal policy. The federal government would always honor its debt. After the War of 1812, the Civil War, World War I, and World War II, this principle remained unquestioned. By the late 19th century, the government could raise large amounts of money on short notice—which made possible, among other things, rapid mobilizations to fight two World Wars.

Government bonds also became a crucial part of the financial system—the paradigmatic global risk-free asset, the universally accepted collateral on which everything else depends. What makes those bonds as good as cash is that the federal government has the power to levy and collect taxes in order to pay them off.

Hamilton’s scheme has succeeded at a scale unimaginable in 1790. Elsewhere, we have questioned Hamilton’s affection for large, powerful banks, but his contribution to American fiscal policy is undisputed. The good credit of the federal government has allowed us to amass trillions of dollars of debt, run the largest peacetime deficits in history, and still borrow money at historically low interest rates. But that has not made everyone happy.

Several authors have recently written about Hamilton and the debt ceiling, including the New York Times

Here are some of Hamilton’s words in Federalist No. 30, about the need for a country to demonstrate that it could credibly return loans:

In the modern system of war, nations the most wealthy are obliged to have recourse to large loans. A country so little opulent as ours must feel this necessity in a much stronger degree. But who would lend to a government that prefaced its overtures for borrowing by an act which demonstrated that no reliance could be placed on the steadiness of its measures for paying? The loans it might be able to procure would be as limited in their extent as burdensome in their conditions. They would be made upon the same principles that usurers commonly lend to bankrupt and fraudulent debtors, with a sparing hand and at enormous premiums.

At the same time, Hamilton was a firm believer that we needed some form of a national debt in order to grow as a nation, as he stated in his April 30, 1781 letter to James Duane.

A national debt, if it is not excessive, will be to us a national blessing. It will be a powerful cement of our Union. It will also create a necessity for keeping up taxation to a degree which, without being oppressive, will be a spur to industry, remote as we are from Europe, and shall be from danger. It were otherwise to be feared our popular maxims would incline us to too great parsimony and indulgence. We labor less now than any civilized nation of Europe; and a habit of labor in the people is as essential to the health and vigor of their minds and bodies, as it is conducive to the welfare of the state. We ought not to suffer our self-love to deceive us in a comparison upon these points.

All Things Hamilton has a more comprehensive list of Hamilton’s quotes on the national debt.  I feel that the issue is a key one for our time, but is also one in which interpretation of Hamiltonian philosophy can take us in different directions.

Images of Hamilton: John Trumbull

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[Note: I am certainly no art historian, but I very much appreciate images of Hamilton as you can tell by my Facebook group: Alexander Hamilton: The Hotness Never Dies.  I’m going to use this series to focus on a few of the painters and sculptors who depicted Hamilton, and show some of the images of Hamilton I think do him the most justice.]

The Sierra Star recently published a piece on John Trumbull entitled “A Revolutionary Painter.”   Trumbull was an active participant in the revolution, and a military comrade of Hamilton.  He briefly served as an aide to Washington, and was involved in politics as he pursued his artistic career.  Trumbull produced some of the most iconic images of the Revolution and the Early Republic.  Trumbull painted several pictures of Hamilton, and featured him prominently in his group paintings of the Constitutional Convention and the Revolutionary War. 

Interestingly, Trumbull dined with both Hamilton and Burr on July 4, 1804.   In his autobiography, Trumbull recollected the event:

“On the 4th of July, I dined with the Society of the Cincinnati, my old military comrades, and then met, among others Gen. Hamilton and Col. Burr.  The singularity of their manner was observed by all, but few had any suspicion of the cause. Burr, contrary to his wont, was silent, gloomy, sour ; while Hamilton entered with glee into all the gaiety of a convivial party, and even sang an old military song.  A few days only passed, when the wonder was solved by that unhappy event which deprived the United States of two of their most distinguished citizens.”

Trumbull had planned to pursue his career in Boston, but found that the market for his services was too crowded by other artists.  He instead returned to New York, and was commissioned by the city government to paint whole length portraits of Jay and Hamilton.  Trumbull states that he created the portrait using the bust created by Ceracchi (and later bought by Jefferson to display in Monticello) as inspiration for those portraits.

This was painted in 1805, the year after Hamilton’s death, and Trumbull used various accumulated drawings as its basis.  This portrait is the basis for the design of the Ten Dollar bill. 

By John Trumbull, 1805. Courtesy National Portrait Gallery, Smithsonian Institute, Washington, DC 

(The best bill!  Image found here)

This 1792 portrait has Hamilton standing at his desk “an inkwell with quill at hand-the heroic pose of a writer and thinker at the pinnacle of his career.”

This 1832 portrait was copied from an original that Trumbull had painted in Washington in 1792. 

From the Yale University Art Gallery eCatalogue

Trumbull is an interesting historical figure in his own right.  If you’re interested in reading more about him, I suggest looking at his Autobiography or John Trumbull : a brief sketch of his life, to which is added a catalogue of his works (1901) by John Ferguson Weir.

Hamilton’s Views on Race and Slavery: Enlisting Black Soldiers in the Continental Army

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In a March 14, 1779 letter to John Jay, then-president of the Continental Congress, Hamilton advocated a proposal to raise three or four battalions of black soldiers.  This was a project that Hamilton and his friend and fellow abolitionist John Laurens came up with together, and John Laurens delivered the letter to Jay.  In the letter, Hamilton stated:

The contempt we have been taught to entertain for the blacks, makes us fancy many things that are founded neither in reason nor experience; and an unwillingness to part with property of so valuable a kind will furnish a thousand arguments to show the impracticability or pernicious tendency of a scheme which requires such a sacrifice. But it should be considered, that if we do not make use of them in this way, the enemy probably will; and that the best way to counteract the temptations they will hold out will be to offer them ourselves. An essential part of the plan is to give them their freedom with their muskets. This will secure their fidelity, animate their courage, and I believe will have a good influence upon those who remain, by opening a door to their emancipation. This circumstance, I confess, has no small weight in inducing me to wish the success of the project; for the dictates of humanity and true policy equally interest me in favour of this unfortunate class of men.

In the book Black Patriots and Loyalists, Alan Gilbert describes the role of black soldiers in both the Loyalist and patriot cause.  The British actively recruited black soldiers, with Lord Dunmore’s November 1775 proclamation.  The proclamation stated that all indentured servants and slaves “free” who were “able and willing to wear arms.”  While black soldiers had been part of the colonial militias, Washington had refused to accept them into the official Continental Army.  However, Lord Dunmore’s proclamation prompted Washington’s decision to finally accept black soldiers in the army on December 31, 1775.  In 1781, during the Battle of Yorktown, when Hamilton was commanding a battalion of troops under Lafayette, Lieutenant Colonel de Gimat’s battalion was composed of a majority of black soldiers.

According to the Freedom Trail Foundation:

By 1779, 15% of the Continental Army and colonial militias were made of men of African decent. They saw action in every single major battle including Ticonderoga, Monmouth, Valley Forge, Princeton, and Washington’s Delaware crossing.

Despite the opposition of his contemporaries, and Washington’s initial refusal, Hamilton and Laurens persisted in advocating for the acceptance of black soldiers into the Continental Army.  Hamilton’s responses to the racist views of his contemporaries foreshadowed his lifelong commitment to the cause of abolition.  In sharp contrast to the blatant racism of “Enlightenment” thinker Jefferson, Hamilton never wavered on his philosophical opposition to slavery.