Debt, Elitism, and Alexander Hamilton

This post is by Christian Vazquez.

 

As I write this blog post, the United States National Debt is 19,529,882,290,867 dollars. I encourage you to check http://www.usdebtclock.org/ before you read the rest of this post because the Debt will probably have risen quite a bit higher. Why does our government have no desire for a balanced budget? Although the outrageous spending during the Bush and Obama administrations has a lot to do with our current debt, the root problem goes all the way back to the federalist Alexander Hamilton.

 

This mess all began with Alexander Hamilton’s agenda as first Secretary of the Treasury. One of the biggest disagreements between the Federalist and the Anti-Federalists regarded Article One, section 8, clause 18, of the Constitution. The Necessary and Proper Clause, also known as the Elastic Clause, gave Congress the right to make any law they deemed necessary and proper, and thus gave the federal government boundless power. With the Necessary and Proper Clause at his side, Hamilton convinced Washington a privately owned National Bank was Constitutional and established The First Bank of The United States.

 

Here’s where things get interesting, in addition to the First Bank of The United States, Hamilton convinced congress to nationalize states war time debt, and thus giving way to the first national debt. Under Hamilton’s Treasury the government then issued this debt as bonds. When you buy a government bond, you are essentially buying government debt and expecting to receive interest. These bonds were not purchased by common Americans; instead, they were quickly purchased northern elites, including many close friends of Alexander Hamilton. Who paid the interest on these bonds to these Elites? The American taxpayers of course. In essence, Hamilton sold states debts to his friends, and then placed the burden of interest on the American people.

 

Who owns most of America’s debt now you may be wondering; it’s not china, although they do own 7.9%. The largest holder of American debt today is still U.S. individuals and institutions. Unfortunately, it doesn’t look like this debt is going to do anything but continue rise, further burdening the American economy. The higher the debt, the more interest to those who own it. As long as elites line pockets of congress, a balanced budget is simply out of the picture. Neither presidential candidate has offered any serious solutions to solving the National Debt and deficit. Hillary Clinton had stated the debt as an issue, but offers no cuts in federal spending. Instead, she plans to increase spending, and increase taxes not only on the upper class, but the middle as well. Donald Trump probably will not increase spending, but will decrease taxes. Neither of these strategies will balance the budget, instead, American tax payers will continue to pay interest.

 

The Anti-Federalists argued that if left unchecked, our government would never stop growing. They also argued that individuals would always work in their self-interest if given the power to do so. As our government continues to expand exponentially, the little guy will always be the one footing the bill.

Hamilton’s Curse by Thomas DiLorenzo

http://www.thegoldstandardnow.org/the-first-bank-of-the-united-states

http://www.mygovcost.org/2015/05/19/spring-2015-to-whom-does-the-u-s-government-owe-money/

http://www.usdebtclock.org/

https://www.lewrockwell.com/2016/05/thomas-dilorenzo/establishment-love-affair/

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7 Responses to Debt, Elitism, and Alexander Hamilton

  1. Great post! I agree that not enough, if considerably anything, has been seriously done to combat U.S. debt. Sure, we hear people arguing all the time saying “Debt is good! Debt is good!” But debt is not good when it has reached the number you stated above. We are drowning in it; it’s just that not everyone is feeling its presence. Today, Candidates are in constant talk about what their “initiatives” are to produce economic growth and reduce national debt. However, no matter what policy changes they plan to implement, odds are they will be shut down before they take off. To sum up some of the discussion James Morone presents in his “Elusive Community: Democratic Wishes for the 21st Century”, most of the policy agendas candidates have in order work against the federal government. Morone specifically states “Politicians respond by running against the government.” However, the structure of the government, favoring the elite class, does not allow for these types of policy alterations to take place. As you discussed, U.S. debt greatly favors the actors in control of feeding on the interest of the working classes. In other words, the question we ought to be asking is when will this cycle stop? Well, the way in which the government runs today, which is organized to benefit the ruling classes, will only continue unless the structure itself is uprooted. Policy implementations, seeing as they actually amount to anything, only provide short-term solutions to problems, and not before long will another problem arise that our ancient system will try to fix, but fail nonetheless.

    • Satchel Wells says:

      While I definitely see the idea of us overspending as an issue that we’ve been facing for awhile as a nation with the various conflicts and wars we’ve recently been apart of as well as some of our social safety net programs have been having increasing costs, I feel that most of the debt and overspending comes from impractical uses of the budget.

      By assuming state debts, the United States went from just being a colony fully of rebels to a nation willing to pay their dues. To quote James Madison in the song Who Lives, Who Dies, Who Tells Your Story from the musical Hamilton, “He doesn’t get enough credit for all the credit he gave us.” While this action may have started our large national debt, we may not have been able to come as far as we have as a nation without the financial stability that came from assuming state debts.

      19 Trillion dollars is an intimidating amount of debt for an individual but for a nation that currently has a GDP sitting at 17.914 trillion dollar dollars, the debt isn’t as overbearing and I feel can be seen more as improper use of taxpayer dollars. Currently, almost half of our budget goes to paying healthcare and social security as a nation. If we could find more practical solutions to these problems, we’d be in a better position with our national debt. Another solution to overspending would be increasing the income to the government. Whether that’s through new taxes like marijuana or making various corporations pay taxes rather than allowing them the ability to jump through multiple tax loopholes, we could also increase our taxation to pay for this ever increasing debt.

  2. I would humbly comment that debt is a function of growth and success. It is natural to any nation. Additionally, debt as a share of our total economy has begun to stabilize and is on track to reduce. It is important to remember that a nominally immense national debt means nothing if the rate of growth of the country is faster than the growth of the debt,

    These a fundamentally important things to keep in mind when discussing the debt.

    http://www.tradingeconomics.com/united-states/government-debt-to-gdp
    http://www.tradingeconomics.com/united-states/government-debt-to-gdp/forecast

  3. reneucros says:

    Excellent post! I did not know a lot of the background on bonds. However, it seems that we have always been in debt as a country. I am not entirely sure what the implications, negative or positive, are of being in debt and this debt growing when it comes to a country. As far as I can tell the debt is a position for candidates to run on and try to whip up votes. There is absolutely no individual or corporation that can have that much debt and keep running negative in profit and no file for bankruptcy but it seems that when it is a nation, that debt just keeps growing. According to the clock that you posted, we also keep printing money to put into circulation. Using the evidence that I have found and my limited knowledge of the implications all I can say is that the government just does not give a damn how much debt they are in. I am also not sure who this debt is owed to other than those who have bought bonds and China’s 7.9%. If it is no one but the world economy then there is no one to enforce a bankruptcy or a “you’re cut off” type of deal, we have raised the debt ceiling twice in the last 6 years which makes me believe that they really don’t care or need to read 0. If we ever were in the positive, where would the overage of money go? What would we do with it?

  4. kassandracarol says:

    The National debt has always been discussed in major presidential elections, and usually the focal point. You’re right it really isn’t this election like we’ve seen previously. I would agree with Tanner that we will always have debt but more growth than debt is what matters. Another point I would like to make is that we could cut spending but the question is always where would we do that. In other words how do we cut spending without hurting the livelihoods of citizens. I think the answer is we can’t, we cut military spending and our military loses jobs, we cut social security and our elderly can’t live, any type of budget cut is going to hurt someone. So who are we willing to spare? In comparison to the two presidential nominees it would seem they have very different ideas. When discussing better social economic programs Hillary plans on raising taxes on elites while Trump has no plan except for cutting taxes on elites. Whatever the decision may be I hope that as Tanner put, we keep growing more than our debt does that way we are able to keep a strong economy and government.

  5. Debt is necessary to create national interest in said country, but only to a certain degree. For instance, if, in our current state (all things considered equal), our debt was, say, 300 trillion instead of 19+, foreign interest would be irrelevant, because our financial situation would be beyond repairable. While curtailing the debt would be a good idea as to curtail the economic mindset of the average American, ol’ Yankee Yellen over at The Fed “claims” that we are paying off our debt on par with the rate of inflation, meaning that it’s not actually getting better. Who knows, The Fed has lied before. All I can speculate to is, as long as the American Institutions keep creating, building, innovating, and buying into the “monopoly” money system which is backed by…well, that’s another debate, then we should continue to prosper. As for Alexander Hamilton, I’d take his financial recommendation(s) into consideration; Stock up on Gold stock and leave the debt issue to the U.S. government. They’ve never failed us in the past.

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