Debt & democracy: Lessons from Washington and our Founders
This is the second installment of the “What Would George Do?” series — a joint project of ConSource and the National Constitution Center’s Constitution Daily.
Avoid occasions of expense by cultivating peace, but remember also that timely disbursements to prepare for danger frequently prevent much greater disbursements to repel it; avoid likewise the accumulation of debt, not only by shunning occasions of expense, but by vigorous exertions in time of peace to discharge the debts, which unavoidable wars may have occasioned, not ungenerously throwing upon posterity the burthen, which we ourselves ought to bear.
The United States’ staggering $16.2 trillion national debt has been a central issue in the 2012 presidential election. As the debate turns to matters of foreign policy, the candidates will parse the financial impact of diplomatic and military endeavors. From patrolling the Pacific to military aid to Africa to the war in Afghanistan and deepening engagement in Middle Eastern conflicts, defense and international security assistance accounts for 20% of federal government spending. And the debt keeps piling up.
This is not the first time the United States has faced such a crisis. Following the Revolutionary War, the fledgling United States was in dire economic straits. During the 1780′s, the fragile nation was not only deeply indebted to her French allies for their monetary wartime assistance but also owed past wages to her own American patriots who had sacrificed so much in service to the war effort. The national debt had been essential in keeping Washington and his army fighting. But after winning precious independence, the payments and interest threatened to crush the fledgling nation.
In a stark portrayal of the nation, Washington wrote in 1786, “the wheels of Government are clogged, and … from the high ground on which we stood, we are descending into the vale of confusion and darkness.” Washington implored the government to act to stop our descent into “anarchy and confusion.”
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Some wanted to simply repudiate the debt. While these individuals did not mind sticking it to the French, such a default would simultaneously harm those veterans to whom vast sums were owed. George Washington, in an attempt to set a powerful precedent with respect to the young nation’s financial responsibilities, made up his mind – the country had to pay down its wartime debt, and do so quickly.
Washington approached the issue as one of honor, urging the government to follow “the same good faith we suppose ourselves bound to perform our private engagements.” He implored, “No pecuniary consideration is more urgent, than the regular redemption and discharge of the public debt.”
With Hamilton at his side as treasury secretary, President Washington established U.S. credit by overseeing the passage of a tariff and the whiskey excise act in order to raise revenue. He saw the nation’s creditworthiness as “a very important source of strength and security” that should be “cherish[ed].” In his farewell address, he advised the nation,
[A]void … the accumulation of debt, not only by shunning occasions of expense, but by vigorous exertions in time of peace to discharge the debts, which unavoidable wars may have occasioned, not ungenerously throwing upon posterity the burthen, which we ourselves ought to bear.
And he was not alone in urging both careful spending and speedy repayment of accumulated debt.
Thomas Jefferson saw “public debt as the greatest of dangers to be feared.” He warned America, “We must not let our rulers load us with perpetual debt. We must make our selection between economy and liberty or profusion and servitude … .” Jefferson saw debt as the first step in an inevitable spiral followed by higher taxes and oppression.
This is the tendency of all human governments. A departure from principle becomes a precedent for a second; that second for a third; and so on, till the bulk of society is reduced to mere automatons of misery, to have no sensibilities left but for sinning and suffering … . And the fore horse of this frightful team is public debt. Taxation follows that, and in its train wretchedness and oppression.
James Madison championed “the principle that a Public Debt is a Public curse,” while Alexander Hamilton likewise declared, “Allow a government to decline paying its debts and you overthrow all public morality — you unhinge all the principles that preserve the limits of free constitutions.”
Replace the French with the Chinese, and we face a comparable crisis today. We currently owe almost $52,000 per man, woman, and child in the nation, and continue to add approximately $4 billion in debt per day. With defense and international security assistance accounting for a fifth of the budget, it will surely be eyed along with other areas such as Social Security, Medicare, and Medicaid.
Washington and our founding fathers set clear precedents that may help guide us as we grapple with both our foreign and fiscal policies. Our first secretary of treasury, Hamilton, has a message for our current leaders, “Nothing can more interest the national … prosperity than a constant and systematic attention to … extinguishing the present debt, and to avoid, as much as possible, the incurring any new debt.”
Logan Beirne is an Olin Searle Scholar at Yale Law School and the author of Blood of Tyrants: Washington’s War. He received his J.D. from Yale, was a Fulbright Scholar at Queen’s University, and practiced as an attorney at Sullivan & Cromwell LLP. Logan is directly descended from Revolutionary War patriots and his family tree includes the “Father of the Constitution,” James Madison. Some of Washington’s papers were discovered in his ancestor’s storage chest.