The Founders: Death and Taxes

by on Aug.01, 2011, under Current, History

The impetus to form a new government to replace the Confederacy was born, majorly, from the fact that the Continental Congress had no power to levy taxes. There were, no doubt, other reasons that are easily demonstrated, but the one that reverberated with those who served through the Revolutionary War both in arms and in Congress was that of direct revenue. The situation near the end of the war echoes eerily today as the states engaged in a war that The Congress was in want of tax revenue to pay for and the debts incurred to do so, both foreign and domestic, threatened to destroy that which so much blood was spilled to gain.

It wasn’t only the money owed in loans, but also that owned in salary to the very soldiers who fought so gallantly and with such self-sacrifice that some worried they would be thrown into debtor’s prison upon their discharge. The salaries weren’t even the worst of it. The soldiers were often starved and froze with no blankets which many of them had to cut up to make clothes. During the winter, their marches could be followed by the bloody footprints in the snow since they often went without even shoes.

Many images of Valley Forge depict a desolate place were the rank and file starved in the dark of winter. However, in reality, the area of Pennsylvania where they were in camp was some of the most fertile soil in the states. The problem wasn’t the availability of food; it was the lack of funds. The farmers sold their goods to the British who were occupying Philadelphia since they paid in Pound Sterling while Washington’s army had only worthless script and I.O.U.s to offer. At one point Washington had to order Alexander Hamilton to take men out to take horses and supplies from the residents in the surrounding area. This was done with tact and records were kept of what was commandeered, however, it was a fretful action in the midst of a war for liberty.

For a time Congress was permitted to print currency but as faith in that currency fell, inflation ran to the extreme and it was rendered effectually worthless. In March 1780, Madison wrote to Jefferson that “Our army, threatened with an immediate alternative of disbanding or living on free quarter; the public treasury empty; public credit exhausted,…”. Once this point was reached, without the ability to directly raise revenue, the Congress could no longer fund the war, though perhaps they never actually had that ability at all.

With soldiers going months without pay even at the end of hostilities with French gold flowing in and loans from other nations secured. Tensions rose and with them fears as Congress’ promises of pensions and empty rhetoric was falling on deaf ears. In 1783, in Newburgh, NY, officers of the Continental Army gathered to discuss a mutiny against Congress. It even seems evident that Hamilton himself played a part in its organization.

When Washington learned of the conspiracy, he addressed the officers in an effort to put an end to it, but his words seemed to have little effect at least until the very end of his speech. In a scene that demonstrates well Washington’s amazing abilities, he paused to find his glasses saying “Gentlemen, you will permit me to put on my spectacles, for I have not only grown gray but almost blind in the service of my country.”

This stopped the conspiracy, though it wasn’t the end of the story as the rank and file near Philadelphia took to arms and actually marched on Congress in the summer of the same year. At the 11th hour, Congress was forced to flee with temporary homes found in New Jersey, Maryland, and finally New York.

These and other events drove the Founding Parents to build “a more perfect union”, and the power to levy taxes was at the forefront of the reasons for its construction. As to the tax schemes, flat or otherwise, I turn to America’s First Citizen, Benjamin Franklin. In his Autobiography he wrote “…, but insisting more particularly on the inequality of this six-shilling tax of the constables, respecting the circumstances of those who paid it, since a poor widow housekeeper, all whose property to be guarded by the watch did not perhaps exceed the value of fifty pounds, paid as much as the wealthiest merchant, who had thousands of pounds worth of goods in his stores…. a more equitable way of supporting the charge the levying a tax that should be proportion’d to the property”

“…These public quarrels were all at bottom owing to the proprietaries, our hereditary governors, who, when any expense was to be incurred for the defense of their province, with incredible meanness instructed their deputies to pass no act for levying the necessary taxes, unless their vast estates were in the same act expressly excused…”

And on the preparations for defense in the French-English war…

“But the governor refusing his assent to their bill (which included this with other sums granted for the use of the crown), unless a clause were inserted exempting the proprietary estate from bearing any part of the tax that would be necessary, the Assembly, tho’ very desirous of making their grant to New England effectual, were at a loss how to accomplish it. ”

The most amazing result of their efforts, to my mind, is that, in the end, 13 sovereign states essentially capitulated to a newly formed government with the only battles being those of words, logic, and reason. In a time when greed and corruption was as rampant in the legislature as it is today, Hamilton, who is regarded as the father of the United States economy, wrote to Robert Morris that government should regulate trade “so that ‘injurious branches of commerce might be discouraged, favourable branches encouraged, [and] useful products and manufactures promoted.”

What I think is to often quoted without a full understanding is that The Constitution endows the only real power within the people. At that time, the public was largely uneducated and interstate communication was primitive so the delegates to the Constitutional Convention could be forgiven for falling to the notion that only the “landowners” were capable of holding office. Some were even prescient like Elbridge Gerry who said “The people do not want virtue; but are the dupes of pretended patriots. In Massts. it has been fully confirmed by experience that they are daily misled into the most baneful measures and opinions by the false reports circulated by designing men, and which no one on the spot can refute…” Though he was speaking against Democracy, his words served to illustrate a risk that the delegates failed to successfully mitigate.

It was a meritocracy that let a son of a shoe maker and an poor orphan from the St. Croix to join the ranks of the builders of a great nation. Although the framers worked to defeat the notion of monarchy and aristocracy, they failed to firmly set the meritocracy. Through campaign law reform, perhaps we can continue their work in forming a government which will ensure a more perfect union and keep the people as the only true sovereign.

*A Note on Sources: I have not provided sources here as I have come across the events retold again and again in the many volumes I’ve read on the founding of the nation. This reading includes multiple biographies and autobiographies on all of the founders as well as some of their correspondence, general histories, and even both volumes of James Madison’s Journal from the Federal Convention in their entirety.

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Hamilton’s Paradox, an error for the ages

by on Dec.12, 2010, under History


This essay is not an indictment of the wealthy or any other group for that matter.  It is my view that no condemnation should be levied indiscriminately against any group of people.  In my experience, one can find those who care for others and those who care only for themselves across the sociological and geopolitical spectrums.  However, the effect of narcissism is often greatly amplified when it encounters money which has been intertwined with political power.

Now to Hamilton

There are many stories about Hamilton’s early life.  I have encountered a few, but I have no doubt that Ron Chernow, Hamilton’s biographer, has read more than I have so I concede to his conclusions.  In general, the early life of a founder may not be seen as relevant, however in this case, it has bearing on a paradox that influenced his vision, and wove  what I see as a critical error into the very fabric that would become the United States.  It is my conjecture that Hamilton retained a child-like reverence for the wealthy, stemming from the recognition of his potential and his subsequent “rescue from poverty” by the merchants operating in his hometown.

Hamilton, was born in the West Indies and grew up on the Danish Island of St. Croix.  His parents were not married and a series of personal tragedies left the boy without parents and in poverty.  During his childhood, according to Chenow, he would have been exposed to the savage violence of the port city as well as the sub-human practice of slavery.  He would have also had glimpses into the lives of the wealthy.  Though his father had left them and his mother died shortly thereafter, the brilliant Hamilton soon found himself clerking for Beekman and Cruger; New York traders who recognized his potential.  The boy was a veracious reader and highly intelligent so, as  Chernow notes he was probably the target of ridicule, much as he probably would have been in U.S. schools today; plus ça change, I suppose.

Then another tragic event would occur that would change Hamilton’s fortunes forever, and quite possibly, the fate of a nation yet to exist.  Chernow explains that a hurricane had hit the island causing a great deal of damage, and Hamilton, also an aspiring writer, wrote a piece on the storm which was published locally to much acclaim.  The businessmen of the town were encouraged to take up a collection and to send the young boy to North America to be educated.  The rich see, the rich realize, the rich rescued Hamilton from a squalid and painful life and delivered into the arms of America.

Once in the colonies, his mind opened many doors for the young man as did the financing he received for his education and board.  And then, of course, there was the brewing revolution that included a requisite element for Hamilton’s path to immortality; a meritocracy. 

Actually, it is my opinion that the meritocracy existing during the binding of the colonies for war was requisite for the emergence of so many great minds of the cause.  The closed doors of an aristocracy and the great societal divides in the rest of world could not have produced the “fertile ground”; a phrase some historians use to describe the time of the founding, which produced the likes of Adams, Franklin, Jefferson, and yes, Alexander Hamilton.

The great paradox I see in what was Hamilton’s past and what would become his policies is that his central tenant was greatness was to be found only among the wealthy, not the common.  If this were true , then he himself should not have been given the opportunities he had.  Further, he, even with contrary events occurring all around him, maintained that among the rich alone one could find freedom from avarice and disinterest in power. Therefore, he felt it was proper to tie the interest of the moneyed class to the fate of the young nation and the government thereof to the benefit of the same.   Chernow quotes Hamilton; “That valuable class of citizens forms too important an organ of the general weal not to claim every practicable and reasonable exemption and indulgence.”

Neither the rampant greed that led to the very first bubble and crash in the new United States, a direct result of Hamilton’s plans, nor the skullduggery of his close friend Duer which doomed his plan for the nation’s first major foray into manufacture, would shake Hamilton from his conclusions.  The adages that money leads to power, and that power almost invariably leads to corruption seemed to have escaped him.  A central tenant to my personal philosophy is that net worth is not equal to self worth, and the relation between the two often grows with inverse proportionality; it seems Hamilton would not agree, at least not in practice.

From what little he said during the Federal Convention of 1787 which produced The Constitution, to his writings and speeches, he felt, it seems clear to me, that an aristocracy, with a prominent slant towards monarchy was the proper form for the federal government.  Even in this later stage, in my opinion, you can see the paradox within Hamilton’s mind.  When discussing political parties, Hamilton, as well as the others was clear in his disdain.  Chernow quotes Hamilton as calling political parties “the most fatal disease”.  He also quotes James Kent, one of the first Supreme Court justices, saying “Hamilton said in The Federalist Papers, in his speeches, and a hundred times to me that factions [political parities] would ruin us and our government had not sufficient energy and balance to resist the propensity to them and to control their tyranny and the profligacy.”  Hamilton, believed party politics to be “parochial” and the practice of lesser government officials; surely .  A testament to the extent of the contradiction, he led The Federalist Party; the precursor to the modern day Republican party.

So, was the effect of Hamilton’s admiration of the wealthy strong enough and his resultant plans impactful enough to change the course of history for the young nation?  Chernow, wrote :The financial turmoil on Wall Street and the William Duer debacle pointed up a glaring defect in Hamilton’s political theory; the rich could put their own interests above the national interest.  Suppose I substituted the name William Duer for Bernie Madoff and changed “Hamilton’s” to “some in the GOP’s”, Ron could be writing about the present day.

Further, perhaps we could look at some of the criticisms and predicted consequences, offered by his contemporaries ,of Hamilton’s vision and see if we would be tempted to claim prescience on their part.   First, and of particular interest to the recent crash, in a letter to Thomas Cooper, Jefferson wrote; “The crisis of the abuses of banking has arrived.  The banks have pronounced their own sentence of death”.  And Jefferson in a letter to Richard Rush wrote; “The banks themselves were doing business on capitals, three-fourths of which were fictitious: and, to extend their profits they furnished fictitious capital to every man…”.

In summation of his feelings on high finance, to John Taylor, Jefferson wrote “Banking establishments are more dangerous than standing armies…”  Even Hamilton himself wrote; “These extravagant sallies of speculation do injury to the government and to the whole system of public credit,”.

Chernow claims that Hamilton was never a hireling of moneyed interests, as he is often accused by historians.  Rather, Hamilton wanted to attach them to the new country’s interests.  Like many thinkers of his day, he thought that property conferred independent judgment on people and hoped that creditors would bring an enlightened, disinterest point of view to government.  But what if they succumbed to speculation and disrupted the system they were supposed to stabilize?  What if they engaged in destructive short-term behavior instead of being long-term custodians of the nation’s interest?  If that happened, it might undermine his whole political program.  Well, they did, and they still do today, and we are still doing little to nothing about it.

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