Alexander Hamilton Fixed a Broken Nation

Due to the groundbreaking play, Alexander Hamilton has vaulted skyward to become an icon of popular cultural. It couldn’t happen to a better man. Hamilton was my favorite character when writing Tempest at Dawn. At the time of the Constitutional Convention he was only thirty years of age, yet he had already proved his physical courage and mental agility.

When writing my novel, I used the following excerpt to illustrate the economic conditions faced by the infant nation. Most of the states had not paid off the war bonds that financed the Revolution, foreclosures were rampant, inflation raged, there was no common money, and production, especially for ships and foodstuffs, had declined to the point of alarm. These were the dire circumstances inherited by Alexander Hamilton when he became our first Secretary of the Treasury. In a tour de force, he righted the country’s finances and economy by the end of Washington’s first term.

When Baldwin emerged from behind the building, he failed to notice his friends on the other side of the road, so he walked into the tavern. He spent only a few minutes inside and emerged with a wooden bowl and an oversized spoon. Looking around, he finally spotted Sherman and Hamilton on the log across the way.

As he took a seat next to Sherman, Baldwin asked, “What’s this?”

Hamilton leaned forward to look around Sherman. “Squirrel, I think.”

“God, I hate traveling.”

“Throw it away, and I’ll give you a pear.”

Baldwin dipped his spoon deep into the concoction and let the goo plop back into the bowl. “This looks like pig swill.” He ceremoniously turned the bowl over, and they all watched the pottage spill onto the ground in bumpy chunks.

“My money says that blob will still be there on my return trip,” Hamilton said.

Baldwin turned the pear a couple times and then took a huge bite. After a noisy chomp, he spoke with a mouth half full. “I’ll not take that bet; forest animals have more dignity.”

Our American Heritage

The colonists did not only revolt against taxes; they revolted to stop the British from taking away the self-governance they already had been exercising since the earliest colonization. The crown appointed governors for the colonies, but over three thousand miles of ocean in the day of wind-powered ships gave ordinary Americans more freedom than a minor noble living in Bristol, England. (Connecticut and Rhode Island even elected their own governors.) Americans bristled over dictates from Parliament because colonial legislatures had been exercising substantial power for well over a century.

Plymouth Plantation Today

Commentary—As California Goes, so Goes the Nation?

If the citizens neglect their duty and place unprincipled men in office, the government will soon be corrupted. — Noah Webster

My wife and I are vacationing in Southern California. The warm and sunny weather has made a perfect respite from the storms lashing our home in Nebraska. We both grew up in California, but moved out-of-state twenty-five years ago. We weren’t fed up with the place. A quarter century ago California was still livable. Actually, California is still livable, as long as you have piles of cash and a fondness for government.

Beltway elites like to fixate on a couple botched 2010 Senate races, but in truth that election was a rout for progressives. Republicans captured an additional 63 seats in the House of Representatives to win the majority, the largest midterm seat change in seventy years. Republicans gained 6 seats in the Senate, but not enough to gain control. Republicans won a record 680 additional seats in state legislatures. Five states saw both chambers switch from Democrat to Republican. In four additional states, Republicans flipped one of the chambers to give them control of both chambers. In three more states, Republicans increased their control in both houses, and in four states they picked up one chamber to split control of the legislature. Republicans also saw a net increase of six governorships to gain a national majority.

Commentary: How to Kill an Economy!

"I'm sure everyone feels sorry for the individual who has fallen by the wayside or who can't keep up in our competitive society, but my own compassion goes beyond that to the millions of unsung men and women who get up every morning, send the kids to school, go to work, try and keep up the payments on their house, pay exorbitant taxes to make possible compassion for the less fortunate, and as a result have to sacrifice many of their own desires and dreams and hopes. Government owes them something better than always finding a new way to make them share the fruit of their toils with others." --Ronald Reagan

When I was an economics major in college, I was taught that Franklin Roosevelt saved capitalism using Keynesian principles. The unchallenged assertion was that the sole reason the Great Depression lasted a decade was because New Dealers were too timid in spending borrowed money. In many economists’ minds, skyrocket spending to win World War II proved conclusively that huge deficits were the cure for slow growth. To a large extent, this is a rewriting of history. It didn’t happen this way.

Instead of spending our way back to wealth, two phenomena saved the American economy. Impending war forced Roosevelt to cease bashing business and the 80^th Congress elected in 1946 balanced the budget and undid the worst aspects of the New Deal.

Freedom’s Forge, How American Business Produced Victory in World War II by Arthur Herman does an excellent job of describing the shift from an anti-business bias to acquiescence of capitalism during Roosevelt’s third term. The new tolerance of a profit motive had a huge impact on the production of war materials. The United States manufactured two-thirds of all weapons and supplies used by the Allies, “yet the output of consumer goods was larger every war year than it had been in 1939, despite the restrictions and rationing. In 1945 Americans ate more meat, bought more shoes and gasoline, and used more electricity than they had before Hitler invaded France … total economic production in the United States had doubled; wages rose by 70 percent.”

The Founders on the Economy

Many think the Founding Fathers were a bunch of old-fogies who lived way before iProducts, and have little to contribute in handling modern economic issues. Those people would be wrong. The post-war economy under the Articles of Confederation was in a tailspin. Alexander Hamilton under the leadership of George Washington saved this nation from economic collapse. (See The Man who saved America from financial ruin.)

What would the Founders think about our current economic problems? Here is what they said in their own words.

In framing a system which we wish to last for ages, we should not lose sight of the changes which ages will produce. An increase of population will of necessity increase the proportion of those who will labor under all the hardships of life, and secretly sigh for a more equal distribution of its blessings. These may in time outnumber those who are placed above the feelings of indigence. According to the equal laws of suffrage, the power will slide into the hands of the former. No agrarian attempts have yet been made in this country, but symptoms of a leveling spirit, as we have understood, have sufficiently appeared in a certain quarters to give notice of the future danger. — James Madison, Federal Convention, June 26, 1787

Commentary—Debating Jobs is Wrongheaded

“The circulation of confidence is better than the circulation of money.” James Madison

There has been endless debate and angst over the government’s failure to create jobs. This is a dangerous and highly inappropriate debate.

Goals are important. They can mean the difference between success and failure. Improper goals destroy people, organizations, or even nations. The most common error is to set goals based on effect, rather than cause. This is why the jobs debate is dangerous. The government cannot create jobs. It’s true government can hire a person, but the process only shifts money from the private sector to the public sector. Nothing was created.

The public sector has no innate growth potential. It doesn’t invent, innovate or drive productivity. This is because there is no profit motive to drive entrepreneurship. In fact, the only way to gain personal wealth in government service is through corruption.

Commentary—A Truly Ugly Precedent

“It has long, however, been my opinion, and I have never shrunk from its expression...that the germ of dissolution of our federal government is in the constitution of the federal Judiciary;...working like gravity by night and by day, gaining a little today and a little tomorrow, and advancing its noiseless step like a thief, over the field of jurisdiction, until all shall be usurped.” Thomas Jefferson

It’s actually very seldom that a Constitutional issue is pure black and white. Home Building & Loan Association v. Blaisdell (1934), was one of those rare cases. In an attempt to stem home and farm foreclosures, Minnesota passed a law which allowed a mortgagor to pay court determined rent that was set well below the contractual mortgage amount. The mortgage holder could take no foreclosure action while the rent was being paid.

The Constitution reads, “No state shall pass any law impairing the obligation of contracts.” During the Constitutional Convention in 1787, foreclosures were rampant, and several states had passed laws that impaired contracts by forcing debtors to accept purposely inflated state-generated paper money as legal tender. The result of these laws put a stranglehold on credit markets, deepening difficult economic times. The Framers didn't want this to happen again. Their intent—and the wording could not be clearer—was to preclude the exact type of action that was taken by Minnesota.

The Founders on the Economy

Many think the Founding Fathers were a bunch of old-fogies that lived way before iProducts, and have little to contribute in handling modern economic issues. Those people would be wrong. Today’s biggest problem is a stumbling economy that is not generating jobs. This is only the second time that the American economy has not come roaring back after a downturn. The other time, of course, was the Great Depression, when we were following the same economic policies as we are today.

What would the Founders think about our current economic problems? Here is what they said in their own words.

“The pillars of our prosperity are the most thriving when left most free to individual enterprise.”—Thomas Jefferson 

“The circulation of confidence is better than the circulation of money.”—James Madison 

“A just security to property is not afforded by that government, under which unequal taxes oppress one species of property and reward another species.”—James Madison 

Commentary—Were The Framers Fears Justified?

"Wherever the real power in a Government lies, there is the danger of oppression." James Madison

An idea is powerful. It can change the world. A great leader may be able to alter the course of history, but without instilling new ideas, the world resumes its old course. When an idea or value is shared by the majority of a community, it becomes a cultural linchpin. That culture will not change until that idea is jerked out of the general consciousness and replace with a different idea.

Constitutionalists share an idea. At one time, most Americans subscribed to this idea, but no longer. What is this idea? Fear of overly powerful government. 

It sounds simple. But this fear was the overriding emotion that drove the Framers to design a republic with limited national powers. Inside the State House, which we now call Independence Hall, the delegates’ fear of government was strong and universal. Their entire focus was on constraining, checking, and decentralizing government power. This had never happened in world history.

Constitutional Speed Bumps

“The powers of government should be so divided and balanced among several bodies of magistracy, as that no one could transcend their legal limits, without being effectually checked and restrained by the others.” Thomas Jefferson

To a degree, each branch of the national government operates in slight fear that another branch will chastise or even overrule its actions. This was an intended consequence of the design. Madison wrote in Federalist 51, “the great security against a gradual concentration of the several powers in the same department consists in giving to those who administer each department the necessary constitutional means and personal motives to resist encroachments of the others. The provision for defense must in this, as in all other cases, be made commensurate to the danger of attack. Ambition must be made to counteract ambition.”

In Madison’s opinion, liberty can only be protected by power restraining power. The Constitution doesn’t contain any language preserving the boundaries of the three branches. It is up to the three branches to defend their independence with their assigned powers.

Let’s take a look at the checks between the three branches, starting with Congress.

Are the Founders Worthy of Our Admiration?

“Threading an idea into the slipstream of politics, then into government, then into history ... is a craft which I have since come to consider the most important in the world.”  Theodore White, In Search of History

The Founders of the United States lived over two hundred years ago in a completely different world. Some dismiss the Founders by saying that most were wealthy and many owned slaves. Let’s leave aside for a moment whether those are valid reasons to dismiss the Founders. These criticisms may be true for some of the more prominent Founders, but they are woefully misleading when applied to the great body of people who committed everything to the idea of self-government.

The Founding of this great nation was unique. Up until 1776, with a few brief exceptions, world history was about rulers and empires. The American experiment shook the world. Not only did we break away from the biggest and most powerful empire in history, we took the musings of the brightest thinkers of the Enlightenment and actually implemented them. Our Founding was simultaneously an armed rebellion against tyranny, and a revolution of ideas—ideas that changed the world.

For our purposes, let’s define the founding as extending from the Stamp Act through the first administration of George Washington. This would include the development of a revolutionary spirit, the revolution itself, a few non-war years under the Articles of Confederation, the adoption of the Constitution, and Washington’s first term, which set so many precedents. Who were the people involved in these events?

First off, it was a lot of people.

·         57   men committed treason by signing the Declaration of Independence

·         48   signed the Articles of Confederation

·         437 were members of Congress prior to the ratification of the Constitution

·         55   attended the Constitutional Convention

·         30   were members of the first Senate

·         67   were members of the first Congress

·         7     were Cabinet level or above in the First Executive

·         6     were members of the Supreme Court

Top Ten Reasons Government Can’t Cut Spending

“I have accepted a seat in the House of Representatives, and thereby have consented to my own ruin, to your ruin, and the ruin of our children. I give you this warning, that you may prepare your mind for your fate.” John Adams

Why is it so hard to cut government spending?

There are just so many reasons. Here're the top ten excuses carried on a 3x5 card by nearly every politician.

The Founders on Taxation and Debt

This has not been a particularly joyful season inside the beltway.  All we've seen is a lot of clamoring, to little effect. In the hinterlands, we hear the echoes of raucous debate about government spending, government borrowing, and government intrusion into our homes and business. One side yells that the only solution is to tax the rich until they squeal, while the other side of the aisle insists we must reform entitlements or go the way of Greece.

What would the Founders think about all this? Here is what they said in their own words.

“The people of the U.S. owe their independence and their liberty, to the wisdom of descrying in the minute tax of 3 pence on tea, the magnitude of the evil comprized in the precedent. Let them exert the same wisdom, in watching against every evil lurking under plausible disguises, and growing up from small beginnings.” —James Madison

“By any plain method of argument, as we are running the next generation into debt, we ought to do the work of it, otherwise we use them meanly and pitifully.”—Thomas Paine

Commentary: The Heavy Hand of Government Trumps Capitalism

“The Great Depression, like most other periods of severe unemployment, was produced by government mismanagement rather than by any inherent instability of the private economy.”—Milton Friedman 

If you read the financial press, you can almost hear the gurus scratching their heads. They study past business cycles and can’t understand why robust growth isn’t the order of the day. Since WWII, strong recoveries have always followed recessions. And the deeper the recession, the faster the climb back to prosperity. Considering the depth of our latest crash, we should be rip-roaring into the stratosphere. What’s going on?

All the supposed stimulants have failed. Since December of 2008, interest rates have been near zero. The Fed has pumped so much cash into the economy that all of our wallets ought to be bulging. Bail-outs have increased government control of whole industries. Congress rammed through a huge health care entitlement, and celebrated with the kind of fanfare befitting simultaneous victory over hunger, global warming, and the common cold. Despite horrific deficits, our dear Congress continues to throw money around like it was confetti. Yet underemployment stays embarrassing, productivity is anemic, everyone is husbanding resources, and foreigners lecture us on irresponsible spending.