“Constitutional Conservatives” and Public Debt

My New Deal 2.0 post on historical misreadings by “constitutional conservatives” regarding public debt was picked by by AlterNet and Salon and drew an especially vigorous commentary on Salon.  Here’s my response, cross-posted from Salon:

To me the most interesting issue in this commentary has to do with the relationship between Congress’s original power to tax in the way I have called “directly,” and the later creation of the federal income tax, an issue that has inspired one commenter to question my very sobriety (no, I’m not high — but reading some of these comments, I wish I were). In debates over federal taxes and the intent of the framers, it is all too common to conflate federal taxing power as a whole with the modern income tax in particular, and thus focus the historical discussion on income taxes — naturally enough, since today’s tax hikes and tax breaks affect people’s incomes.

But the issue for the American nationalists of the 1770’s and ’80’s, who wanted federal taxes to support a federal debt (hoping that a funded national debt would concentrate wealth and that concentrated wealth would foster a nation), had to do with giving the federal government power to tax the whole people, and enforce those taxes, across state lines and in that sense directly, instead of continuing to impose requisitions on member states and depend on the states to impose and enforce taxes, which had kept federal taxation of the whole people in that sense indirect. The Articles of Confederation are routinely referred to as “weak,” the Constitution as a “stronger” government, but that thoroughly misstates the case. The difference was not one of degree of force but of kind of force. The federal government under the Articles was just that: a federation of sovereign entities, with rules governing the entities’ behavior within the federation but acting directly on no individual citizen within those entities.

The national government created by the Constitution (wrongly known to this day, for ancient political reasons, as “federal”) acted directly on the entire U.S. citizenry, and in that sense on what I’ve called “all Americans,” including — especially significantly to the founding nationalists — in its power to tax. That the first federal taxes passed by the U.S. Congress did not literally tax every American in the way today’s income tax does would have been beside the point to the framers. To explore further how the first federal tax ever laid on an American product — an excise tax on distilled spirits — operated not as a luxury tax on consumption but as a deeply regressive tax on production and indeed on money (precisely as intended by its author Hamilton), I immodestly recommend my book The Whiskey Rebellion. A hint comes from the financier Robert Morris, Hamilton’s mentor: when hymning the value of the import and excise taxes that many readers today seem to think are irrelevant to modern tax-policy debates, Morris said they would “open the purses of the people,” taking money from non-bondholders in support of bondholders, whose interest income supported by taxes was indeed untaxed, as there was no tax on income.  That’s why 18th-century populists, unlike today’s, wanted an income tax, and a progressive one at that!

The upscale founders, regardless of party, did not want an income tax, although another kind of comment here insists that it was only Hamilton, or only the Federalists, who wanted to fund a federal debt. Jefferson, whose ideas on everything were mercurial, is never a good example of anything. There is a prevailing fantasy that Madison, for a more useful example, did not share Hamilton’s public-finance goals. But when it counted, he did: in the 1780’s, Hamilton had no closer ally than Madison in seeking federal power to impose a tax that was direct, in the sense I’m using it, in support of the bondholders’ income on the war debt (and not for soldiers’ pay, etc., as is often hopefully supposed). Far from being horrified by Hamilton’s expressed vision of a nation knit together by tax collectors, Madison worried only that Hamilton was giving the game away by expressing it. In an ignored part of the often-cited Federalist Ten, Madison himself expresses a revulsion for populist finance schemes undermining the bondholders’ income that would have done Robert Morris proud. Madison’s later opposition to forming a national bank, and then his deeply partisan opposition to everything his former ally Hamilton did, is often read back into his purposes in the framing, very wrongly in my view.

As for the Antifederalists before ratification: sure, they opposed many aspects of nationalism, including funding a public debt, but the “constitutional conservatives” whose reading of history my piece criticizes don’t cite the Antifederalists in seeking founding support for their anti-tax policies. It’s actually a point of my piece that intellectual honesty would dictate that they should! If they’d only call themselves “anti-constitutional conservatives,” we’d all know what we’re talking about.

Which brings me to my final point. Some commenters here just think it’s dumb and irrelevant to talk about the founders in this kind of context, or think I’m trying to score points against conservatives or promote modern liberal ideas by linking those ideas to the founders’ ideas. That misreading comes, I think, from reading the headline and not the piece. Editors headline articles to stop traffic — and I am always happy to collaborate. But my article is quite clearly a criticism of the “constitutional conservatives'” baseless efforts to invoke founding history to give a false sense of fundamental justification to a modern policy that really has nothing to do, say I, with the founders’ views. The Constitution limits government very specifically, and it can’t help us out with size of government, amounts of taxation, or limits to public debt, despite one commenter’s insistence that because government was smaller for a long time, there must be something constitutional — not just advisable, constitutional — about small government. But the piece says nothing about what I think the founders would have us do about the issues facing us, which is something neither I nor anybody else could possibly know, and that I don’t care about. I even concluded the piece with a plea for arguing this stuff on its merits, and giving the poor founders a rest!

One thought on ““Constitutional Conservatives” and Public Debt

  1. I tell my US History classes about Hamilton’s plan every year. Did I tell yours? It always surprises them but it’s a terrific introduction to macroeconomics and thinking about state finance in general. Here’s another fact that has become suddenly relevant, especially with talk about the 14th Amendment’s clause (1867?) forbidding questioning of the public debt. It’s a line from the joint platform of the Democratic and Liberal Republican Parties in the election of 1872:
“Seventh: The public credit must be sacredly maintained, and we denounce repudiation in every form and guise.”

    So no way out for the ex-Confederates returning to Congress.

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