Debt Debate: What Would Hamilton Do?

To get some perspective on current political and economic debates, I attempted to contact the spirit of Alexander Hamilton by resetting the roaming function on my phone near his tombstone at Trinity Church in lower Manhattan. The answers below are his words alone.

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FrumForum: In the 1790s, as the nation’s first treasury secretary, you consolidated state debts into a national debt and ensured the U.S. would pay its Revolution-era commitments. What do you think of S&P’s negative outlook on treasuries now?

Hamilton: When the credit of a country is in any degree questionable, it never fails to give an extravagant premium, in one shape or another, upon all the loans it has occasion to make. Nor does the evil end here; the same disadvantage must be sustained upon whatever is to be bought on terms of future payment.

FF: Your plan included imposition of new taxes. Isn’t that Big Government?

Hamilton: The creation of debt should always be accompanied with the means of extinguishment.

FF: Back in your day, though, there were no income taxes. The federal government raised money from tariffs and excise taxes. Should we shift toward consumption taxes now?

Hamilton: It is a signal advantage of taxes on articles of consumption that they contain in their own nature a security against excess. They prescribe their own limit; which cannot be exceeded without defeating the end proposed, that is, an extension of the revenue.

FF: Speaking of which, you created revenue cutters, what later became the Coast Guard, to collect fees from ships. What were your instructions to the officers?

Hamilton: They will always keep in mind that their countrymen are freemen, and, as such, are impatient of everything that bears the least mark of a domineering spirit.  They will, therefore, refrain, with the most guarded circumspection, from whatever has the semblance of haughtiness, rudeness, or insult.

FF: Sounds like good advice for the TSA, not to mention the IRS. But if you’re such a liberty-minded guy, how could you have created a central bank, a predecessor to the Fed, when many conservatives and libertarians these days want to end the Fed?

Hamilton: It is a fact, well understood, that public banks have found admission and patronage among the principal and most enlightened commercial nations. … And it is a circumstance which cannot but have considerable weight, in a candid estimate of their tendency, that after an experience of centuries, there exists not a question about their utility in the countries in which they have been so long established. Theorists and men of business unite in the acknowledgment of it.

FF: But central banking is not specifically mentioned in the Constitution, and neither are a lot of other things the federal government does. What do you — a framer of the Constitution — think about that?

Hamilton: If the end be clearly comprehended within any of the specified powers, and if the measure have an obvious relation to that end, and is not forbidden by any particular provision of the Constitution, it may safely be deemed to come within the compass of the national authority.

FF: Many Tea Partiers these days are opposed to compromise. What’s your view?

Hamilton: If mankind were to resolve to agree in no institution of government, until every part of it had been adjusted to the most exact standard of perfection, society would soon become a general scene of anarchy, and the world a desert.

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