Quote of the moment: Hamilton, on taxes and the Constitution, Federalist #30


They claim to be constitutionalists, and they claim to want to uphold the U.S. Constitution.  But here’s an excerpt from Federalist #30, in which Alexander Hamilton explains why it is necessary for a federal government to tax, and sometimes to tax heavily.

Alexander Hamilton

Alexander Hamilton: "Money is, with propriety, considered as the vital principle of the body politic; as that which sustains its life and motion, and enables it to perform its most essential functions."

This is the U.S. Constitution and the “Founding Fathers” the Tea Partiers hope you will never see, and this is the Constitution and Founders they work hard to hide (some highlights added):

IT HAS been already observed that the federal government ought to possess the power of providing for the support of the national forces; in which proposition was intended to be included the expense of raising troops, of building and equipping fleets, and all other expenses in any wise connected with military arrangements and operations. But these are not the only objects to which the jurisdiction of the Union, in respect to revenue, must necessarily be empowered to extend. It must embrace a provision for the support of the national civil list; for the payment of the national debts contracted, or that may be contracted; and, in general, for all those matters which will call for disbursements out of the national treasury. The conclusion is, that there must be interwoven, in the frame of the government, a general power of taxation, in one shape or another.

Money is, with propriety, considered as the vital principle of the body politic; as that which sustains its life and motion, and enables it to perform its most essential functions. A complete power, therefore, to procure a regular and adequate supply of it, as far as the resources of the community will permit, may be regarded as an indispensable ingredient in every constitution. From a deficiency in this particular, one of two evils must ensue; either the people must be subjected to continual plunder, as a substitute for a more eligible mode of supplying the public wants, or the government must sink into a fatal atrophy, and, in a short course of time, perish.

In the Ottoman or Turkish empire, the sovereign, though in other respects absolute master of the lives and fortunes of his subjects, has no right to impose a new tax. The consequence is that he permits the bashaws or governors of provinces to pillage the people without mercy; and, in turn, squeezes out of them the sums of which he stands in need, to satisfy his own exigencies and those of the state. In America, from a like cause, the government of the Union has gradually dwindled into a state of decay, approaching nearly to annihilation. Who can doubt, that the happiness of the people in both countries would be promoted by competent authorities in the proper hands, to provide the revenues which the necessities of the public might require?

The present Confederation, feeble as it is intended to repose in the United States, an unlimited power of providing for the pecuniary wants of the Union. But proceeding upon an erroneous principle, it has been done in such a manner as entirely to have frustrated the intention. Congress, by the articles which compose that compact (as has already been stated), are authorized to ascertain and call for any sums of money necessary, in their judgment, to the service of the United States; and their requisitions, if conformable to the rule of apportionment, are in every constitutional sense obligatory upon the States. These have no right to question the propriety of the demand; no discretion beyond that of devising the ways and means of furnishing the sums demanded. But though this be strictly and truly the case; though the assumption of such a right would be an infringement of the articles of Union; though it may seldom or never have been avowedly claimed, yet in practice it has been constantly exercised, and would continue to be so, as long as the revenues of the Confederacy should remain dependent on the intermediate agency of its members. What the consequences of this system have been, is within the knowledge of every man the least conversant in our public affairs, and has been amply unfolded in different parts of these inquiries. It is this which has chiefly contributed to reduce us to a situation, which affords ample cause both of mortification to ourselves, and of triumph to our enemies.

What remedy can there be for this situation, but in a change of the system which has produced it in a change of the fallacious and delusive system of quotas and requisitions? What substitute can there be imagined for this ignis fatuus in finance, but that of permitting the national government to raise its own revenues by the ordinary methods of taxation authorized in every well-ordered constitution of civil government? Ingenious men may declaim with plausibility on any subject; but no human ingenuity can point out any other expedient to rescue us from the inconveniences and embarrassments naturally resulting from defective supplies of the public treasury.

More

IT HAS been already observed that the federal government ought to possess the power of providing for the support of the national forces; in which proposition was intended to be included the expense of raising troops, of building and equipping fleets, and all other expenses in any wise connected with military arrangements and operations. But these are not the only objects to which the jurisdiction of the Union, in respect to revenue, must necessarily be empowered to extend. It must embrace a provision for the support of the national civil list; for the payment of the national debts contracted, or that may be contracted; and, in general, for all those matters which will call for disbursements out of the national treasury. The conclusion is, that there must be interwoven, in the frame of the government, a general power of taxation, in one shape or another.Money is, with propriety, considered as the vital principle of the body politic; as that which sustains its life and motion, and enables it to perform its most essential functions. A complete power, therefore, to procure a regular and adequate supply of it, as far as the resources of the community will permit, may be regarded as an indispensable ingredient in every constitution. From a deficiency in this particular, one of two evils must ensue; either the people must be subjected to continual plunder, as a substitute for a more eligible mode of supplying the public wants, or the government must sink into a fatal atrophy, and, in a short course of time, perish.

In the Ottoman or Turkish empire, the sovereign, though in other respects absolute master of the lives and fortunes of his subjects, has no right to impose a new tax. The consequence is that he permits the bashaws or governors of provinces to pillage the people without mercy; and, in turn, squeezes out of them the sums of which he stands in need, to satisfy his own exigencies and those of the state. In America, from a like cause, the government of the Union has gradually dwindled into a state of decay, approaching nearly to annihilation. Who can doubt, that the happiness of the people in both countries would be promoted by competent authorities in the proper hands, to provide the revenues which the necessities of the public might require?

The present Confederation, feeble as it is intended to repose in the United States, an unlimited power of providing for the pecuniary wants of the Union. But proceeding upon an erroneous principle, it has been done in such a manner as entirely to have frustrated the intention. Congress, by the articles which compose that compact (as has already been stated), are authorized to ascertain and call for any sums of money necessary, in their judgment, to the service of the United States; and their requisitions, if conformable to the rule of apportionment, are in every constitutional sense obligatory upon the States. These have no right to question the propriety of the demand; no discretion beyond that of devising the ways and means of furnishing the sums demanded. But though this be strictly and truly the case; though the assumption of such a right would be an infringement of the articles of Union; though it may seldom or never have been avowedly claimed, yet in practice it has been constantly exercised, and would continue to be so, as long as the revenues of the Confederacy should remain dependent on the intermediate agency of its members. What the consequences of this system have been, is within the knowledge of every man the least conversant in our public affairs, and has been amply unfolded in different parts of these inquiries. It is this which has chiefly contributed to reduce us to a situation, which affords ample cause both of mortification to ourselves, and of triumph to our enemies.

What remedy can there be for this situation, but in a change of the system which has produced it in a change of the fallacious and delusive system of quotas and requisitions? What substitute can there be imagined for this ignis fatuus in finance, but that of permitting the national government to raise its own revenues by the ordinary methods of taxation authorized in every well-ordered constitution of civil government? Ingenious men may declaim with plausibility on any subject; but no human ingenuity can point out any other expedient to rescue us from the inconveniences and embarrassments naturally resulting from defective supplies of the public treasury.

14 Responses to Quote of the moment: Hamilton, on taxes and the Constitution, Federalist #30

  1. James Hanley says:

    Ed,

    Our differences are in economic issues. I think Krugman is wrong on that (although I’m not a Krugman basher–his columns are frequently shallow, but his real research is excellent and his Nobel well-deserved), and that the monetarists and public choice theorists are right.

    The key critique of Keynesianism, made by Friedman, is that stimulus spending simply displaces consumer/business spending, so it can’t actually stimulate. Keynesianism relies on the assumption that people have money, but don’t spend it, so the government needs to take up the slack. Monetarism holds that people do spend, but actually have less to spend because there’s not enough money in the economy, so more needs to be pumped in. So monetarists trace the 1937 recession to the Fed’s tightening the money supply.

    Of course what Krugman and the Keynesians point to also happened–so both sides get to point to actual data points. The unresolved question is which one is inadvertently making a post-hoc ergo procter hoc claim. I think the monetarist theory is stronger, so I lean in favor of supporting their argument, but I won’t go so far as to claim that it can be proven evidentiarily against the Keynesian’s evidentiary claims.

    But also, as a public choice proponent, I put a lot of emphasis on the regulatory environment, and the sudden switch by the Court to uphold New Deal regulation it had previously struck down is argued to have scared the bejeezus out of those who actually had money to invest, causing them to withhold on investment until they could figure out what the regulatory environment would be.

    All three stories have logic, which is why intelligent people can reasonably disagree. There’s certainly no clear consensus among economists yet in explaining the entirety of the Great Depression, but the Keynesian thesis has been on the wane among economists (although certainly not among people in my field–political science, and not among historians).

    But since Friedman won the Nobel before Krugman, he must be right. (Just kidding!)

    Like

  2. Ed Darrell says:

    What do you mean by the 1937 Recession being caused by Republicans gaining power?

    You’re right, mostly. It might be more accurate to call it a Republican scare. FDR ran for re-election in 1936. Republicans slammed him for spending too much. Despite a majority in Congress for Democrats, Republicans were able to stop any new stimulus spending.

    As Krugman and others have pointed out, you can chart the ’37 recession from those actions, and the lack of adequate stimulus money.

    It was a short while later (as I recall) that Keynes visited with FDR. Keynes complained later that FDR didn’t get it, that he wasn’t aboard with Keynes’s key claim, that governments should not sit idly by and watch economic ruin.

    I think Keynes was right. The Great Depression lingered on because we didn’t dose it heavily enough quickly enough. Only WWII pulled us out.

    Like

  3. James Hanley says:

    Re: Hamilton,

    Hamilton probably would be shocked by the type of spending we do. After all, he was a product of his time. But more than any other founder, he would quickly adapt and appreciate the size and power of our current government.

    As a libertarian, I’m uncomfortable with Hamilton. He was clearly the most pro-government founder, which I don’t like. But he was also by far the most forward-looking, and understood what the future would hold much better than did any of the others. He was absolutely the only one of the major founders that understood banking and finance at all.

    I’ve heard, although I can’t source it right now, that part of Hamilton’s idea for a permanent debt was to have the public so invested in the stability of the government that they would resist revolution–a new revolutionary government might not pay back what the former government had borrowed, leaving the members of the public who had loaned money to the former government with a big loss. A brilliant idea, if somewhat nefarious.

    Of course there are reasonable debt loads and unreasonable ones, and the Republicans under Bush put us into unreasonable territory with their borrowing to finance two wars (one of them wholly unnecessary, and their dreadfully ill-conceived prescription drug plan. Obama’s borrowing has pushed us further into unreasonable territory, but it was more justifiable than the Republicans’ borrowing,* and we would be able to afford it if the Republicans hadn’t made things so bad previously.

    ______________________________
    *Following 9/11, with “fiscally conservative” Republicans in control of the presidency and both chambers of Congress, non-defense discretionary spending tripled, while they simultaneously cut taxes that would have helped pay for their spending binge. They were undoubtedly the most fiscally irresponsible Congress in U.S. history.

    Like

  4. James Hanley says:

    Ed Darrell,

    What do you mean by the 1937 Recession being caused by Republicans gaining power? The Democrats controlled both houses of Congress in the 75th Congress. In fact they had a supermajority in each house.

    Economists disagree on the cause of that recession. Some claim it was caused by the Court suddenly upholding New Deal legislation, causing a reduction in investment. Others point to efforts to balance the budget, including reducing the WPA rolls, and others argue that the Fed over-tightened the money supply as the economy began to grow again.

    Like

  5. Jim Stanley says:

    Nic asks, >>>”Or are you somehow pretending that Reagan and the two Bushes were Democrats?”<<<

    I can't speak for anyone else on this site, but based on the rhetoric I am hearing from Anarcho-Libertarians who call themselves Republicans, Reagan and at least Poppa Bush are definitely NOT Democrats. They are Socialists and Appeasers. Consider…

    Reagan talked tough, but negotiated with potential enemies who actually possessed (and pointed at us) weapons of mass destruction. As opposed to simply invading and then landing on the deck of an aircraft carrier, codpiece and all. I know in the 90's there was some pushback from the Limbaugh crowd over what most Democrats and some Republicans wanted to do — expand the EITC. Ford invented it and Reagan signed it. It actually cut taxes for working people. That doesn't fly with the Anarcho-Libertarians, who seem to prefer tax cuts for inheritors and others among the fabulously rich. Yeah, Reagan was no friend of ours but compared to the Beck-Palin-Bachmann crowd…he was downright sane.

    And Poppa Bush? What do they say in Brooklyn? Fuggedaboutit! The guy was a Marxist — he signed the Americans with Disabilities Act…a piece of legislation a number of Tea Partiers are hoping to repeal. And don't even get them started about Eisenhower, Nixon and Ford.

    The problem Nic, is not that today's Republicans (Anarcho-Libertarians) think their forebears were Democrats. They think they were Communists.

    Like

  6. Nick K says:

    My apologies, I got that motto wrong.

    The motto actually is “In the end, only the fittest survive in this world. If you’re strong (rich) you live. If you’re weak (middle class/poor) you die.”

    Like

  7. Nick K says:

    Speaking of California, lets see how Ms. Fiorina would pay for those tax cuts she keeps touting:

    WALLACE: So Ms. Fiorina let me ask you a specific question, because I still haven’t gotten many specifics from you….as a non-career politician, as the anti-Barbara Boxer, you tell me specifically what are you going to do to cut the billions, the trillions, of dollars in entitlements?”

    FIORINA: See, Chris, I have to — you know, Chris, I have to say, with all due respect, you’re asking a typical political question.

    Oopss…apparently she doesn’t know how she would pay for them and seems to think that she doesn’t have to figure out how to pay for them.

    And in case you didn’t realize, Morgan, the country’s economy was doing perfectly fine until 2001. Then when 2001 hit it all went to crap and stayed there. You don’t think the Republicans coming to power there and ******* everything up from that point on had nothing to do with it? Wow…in your world the Republicans must be a bunch of incompetent morons who can’t do anything and have no power. And yet you want them back in power? What? They haven’t screwed the country up enough for you?

    Like

  8. Nick K says:

    Morgan writes:

    and our highly questionable custom of birthing babies into debt.

    Oh you mean the custom that Republicans began and remain the strongest backers of? Or are you somehow pretending that Reagan and the two Bushes were Democrats?

    Do you know how much all those Republican tax cuts will add to the debt, Morgan? Four trillion dollars…on top of the 8 trillion dollars the Republicans have added in the last ten years. Not to mention the hundreds of billions of not trillions of dollars Reagan added by nearly bankrupting us with his tax cuts and his military spending.

    Sorry, Morgan, when you talk about this country’s finanical troubles the party the most to blame is your own.

    After all..the Republican motto is “The rich survive and the middle class dies.”

    Like

  9. Ed Darrell says:

    As a Californian, I would have to add if you want to see what the U.S. credit would look like with a strong, authoritarian progressive government-spending structure, in bed with the unions for generations at a time…with those other factors on the credit question working in our country’s favor…look over here. It is not good.

    California Republicans campaigned for, got, and supported, Proposition 13. That has hamstrung necessary spending in California for road development, education, and other programs that would have kept California in the vanguard of economic growth.

    It’s within your power to end the madness any time.

    But excuse me: Why is it you think it would be a good idea to shackle our nation, when you’ve seen the damage it can do to the nation’s most vital state economy?

    Santayana’s Ghost is rolling his eyes, and laughing — at you.

    Like

  10. Ed Darrell says:

    Alexander Hamilton would be interested in seeing these results. I doubt his composure would remain stoic after he learned about things they didn’t have in 1787, like personal income taxes, the IRS, Ted-Kennedy-style progressive rates, and our highly questionable custom of birthing babies into debt. Yeah, how vibrant can the economy be, when as your name goes onto your birth certificate you owe thirty-five grand.

    Hamilton favored a strong central, federal government, with strong central planning and a powerful national bank. Hamilton saw the future, with a poverty-struck collection of loosely confederated states prone to attack from any nation that chose to attack one but not another, unable to make public improvements because the central government was starved for money; and he saw the vast difference between that and a nation able to assume and pay the debts of the states, raise massive amounts of money with modest taxes on all the people.

    Hamilton may have been put off by the progressive nature of the income tax — I wouldn’t bet on it, though — but he would have loved the money-raising features. If you’re put off by the anti-monarchical progressive nature of income tax, you’re free to move to Canada or England and accept the monarchical version, although that will not decrease your taxes in any way.

    A key question is, should the national government in a republic such as ours be able to pay its debts. I think the responsible way to go is to say, yes, the government should pay its debts, must pay its debts. As Hamilton observed, preventing the federal government from having any means of raising taxes which would be open to the states, would condemn the federal government to second-class status, and eventual doom.

    I suspect Hamilton had no problem with “birthing babies into debt,” since that is exactly what he proposed. Remember that one of the key functions of the federal government on the finance end, under Hamilton’s watch, was to assume the unpaid war debts of the states, and pay them off. Consequently, any child born after 1789 was “born into debt,” by Hamilton’s design.

    Hamilton’s plan worked wonderfully. The U.S. was able to pay off much of the debt to France, and that opened trade to France, which helped make New England and the South rich.

    How vibrant was the U.S. economy with the new, in-debt federal government, in 1789, as opposed to the economy under the deadbeat government of 1784 through 1788? Shays’ Rebellion wasn’t because the government could pay its debts, nor because the dollar was too strong.

    Have you ever studied the history of our nation? The post-American Revolution recession was a direct result of our government’s inability to pay war debts, especially money promised to soldiers in the Continental Army, or raise money for other purposes.

    You might do well to read up on the Recession of 1937, which was caused when the Republicans gained power, claimed that the stiumlus package had been too big an ineffective, and started flapping about balancing the budget instead of fighting joblessness. That’s what John Boehner and the Republicans promise is in 2011 if they do well in November. It will be the first time in history that a party has won by promising economic disaster — of course, that’s not what they advertise, but so much for truth in advertising.

    Like

  11. This is distinctly what is not happening. The credit of the U.S. of A. is just fine.

    There are many factors that make up our overall credit worthiness as a country. Things like payments being made on time, length of credit history, and other things that were built up prior to our left-wing spending binge have worked out very well in our favor. The “What we’re spending and how much we owe” parts of the credit application look very, very, very bad.

    Alexander Hamilton would be interested in seeing these results. I doubt his composure would remain stoic after he learned about things they didn’t have in 1787, like personal income taxes, the IRS, Ted-Kennedy-style progressive rates, and our highly questionable custom of birthing babies into debt. Yeah, how vibrant can the economy be, when as your name goes onto your birth certificate you owe thirty-five grand.

    As a Californian, I would have to add if you want to see what the U.S. credit would look like with a strong, authoritarian progressive government-spending structure, in bed with the unions for generations at a time…with those other factors on the credit question working in our country’s favor…look over here. It is not good.

    Our nation does not have a tax revenue generating problem. It has a spending problem.

    Like

  12. Murfyn says:

    From the freeper link:
    “A government whose policies had led its creditors to conclude that it was unlikely to pay off will find itself short of lenders (50, 52), its credit shot, its bonds worthless and incapable of raising the revenue vital to meet the emergency, or if so capable, only at a ruinous rate.”
    This is distinctly what is not happening. The credit of the U.S. of A. is just fine. That the borrowed money is spent on counter-productive wars instead of investing in infrastructure is an issue that gets remarkably little attention. “Spend money for some worthwhile purpose” isn’t as slogany as “Taxed Enough Already”.

    Like

  13. Joel says:

    Thanks for the link!

    Like

  14. Also don’t forget this one, which includes a good overview of the historical background and why the Confederation Congress’ taxation powers were inadequate.

    In the ensuing years, Hamilton’s Federalists became a dominant force in American politics…and then one in sharp decline, much like the tax-and-spend liberals now. The notion of a strong, authoritative centralized federal government was a particularly great source of contention, even among the founders; especially among those. This, in part, is what led to the chaos of the Election of 1800.

    You could make a very compelling argument that American history is a rather repetitive story of learning the hard way that local sovereignty is the right way to go. And then trying out the alternative again and again…then learning the lesson one more time. And again. It’s happening right now.

    Like

Please play nice in the Bathtub -- splash no soap in anyone's eyes. While your e-mail will not show with comments, note that it is our policy not to allow false e-mail addresses. Comments with non-working e-mail addresses may be deleted.

This site uses Akismet to reduce spam. Learn how your comment data is processed.