Wednesday, July 13, 2011

What Would Hamilton Say about Congress's Debt Limit Debate?

I am reading Ron Chernow's excellent biography Alexander Hamilton. On page 300 he discusses Hamilton's first Report on Public Credit which he wrote as the first Secretary of the Treasury:

In the report's final section, Hamilton reiterated that a well-funded debt would be a 'national blessing' that would protect American prosperity.  He feared this statement would be misconstrued as a call for a perpetual public debt--and that is exactly what happened.  For the rest of his life, he was to express dismay at what he saw as a deliberate distortion of his views.  His opponents, he claimed, neglected a critical passage of his report in which he wrote that he 'ardently wishes to see it incorporated as a fundamental maxim in the system of public credit of the United States that the creation of debt should always be accompanied with the means of extinguishment.' The secretary regarded this 'as the true secret for rendering public credit immortal.'  Three years later Hamilton testily reminded the public that he had advocated extinguishing the debt 'in the very first communication' which he 'ever made on the subject of the public debt, in that very report which contains the expressions [now] tortured into an advocation [sic] of the doctrine that public debts are public blessings.'  Indeed, in Hamilton's writings his warnings about oppressive debt vastly outnumber his pens to public debt as a source of liquid capital. Five years after his fist report, still fuming, he warned that progressive accumulation of debt 'is perhaps the NATURAL DISEASE of all Governments.  And it is not easy to conceive anything more likely than this to lead to great and convulsive revolutions of Empire.'

And, of course, Robert Rubin and Timothy Geithner are no Alexander Hamiltons.  They are more Madoff and Ponzi than Hamilton.

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