Friday, December 24, 2010

A Powerful Argument Against Drug Prohibition...

...by John McWhorter at the Cato Institute (Dec 3rd, 2010)

Friday, December 17, 2010

The Case Against Alexander Hamilton

There has always been much to criticize when it comes to the decisions of the federal government. The extent to which that government, particularly the legislative and executive branches, contravenes the rights of American citizens is reflected by the innumerable individual struggles that Americans seeking a reprieve wage against Washington: the struggle against Obamacare, against the bailouts, against the Fed's monetary policy, against "cap and trade," against the expiration of the Bush tax cuts, etc. I could scarcely argue that these battles are not worthy ones, but as Henry David Thoreau, in a moment of profundity among many, once said, "There are a thousand hacking at the branches of evil to one who is striking at the root."

I'm convinced there is a "prime mover," a catalyst behind much of what the government is doing wrong today, and while there is a list of candidates who fit the description of such a catalyst which includes Theodore Roosevelt, Franklin Delano Roosevelt, Woodrow Wilson, and others, I think that title of ignobility belongs ultimately to Mr. Alexander Hamilton. He is a darling among some conservatives and is even thought by many to be the foremost advocate of capitalism among the Founders, surprisingly enough. Nonetheless, when he was alive, before he was offed by Aaron Burr, Hamilton advocated on behalf of quite a few dangerous political ideas, some of which I will mention here. He:

1.) supported the distribution of "pecuniary bounties" to certain manufacturers, 18th century parlance for corporate welfare, and defended this decision in his 1791 Report on Manufactures by appealing to the General Welfare Clause in which he wrote that "[T]he power to raise money is plenary and indefinite, and the objects to which it may be appropriated, are no less comprehensive thin the payment of the public debts, and the providing for the common defence and general welfare. The terms "general welfare" were doubtless intended to signify more than was expressed or imported in those which preceded..." ("Those" refers to the preceding terms in the General Welfare Clause.)

2.) argued in Federalist No. 23 that the power "to raise armies; to build and equip fleets; to prescribe rules for the government of both; to direct their operations; [and] to provide for their support...ought to exist without limitation..." (He defends his position further, but nevertheless, this was his belief.)

3.) supported the tax on whiskey which lead to the infamous Whiskey Rebellion. After the rebellion broke out, Washington, after Hamilton's urging, led a force a 13,000 militiamen accompanied by Hamilton, who eventually was put in charge, to put the rebellion down and facilitate collection of the taxes. Many officers of Washington's army where holders of government bonds. The rebellion increased the default risk of the bonds and therefore the prices of the bonds (no bueno for bondholders)

4.) supported an ever increasing supply of government bonds and therefore more government borrowing. Debt finance was more politically palatable than tax finance and Hamilton knew that the majority of the bondholders would be wealthy individuals, hence creating a powerful political faction that would be reliable agitators for tax increases to ensure the quality of their bonds.

5.) supported numerous tariffs and excise taxes, a carriage tax, and a national property tax which provoked a rebellion in Pennsylvania called the Fries Rebellion. He believed these taxes would actually encourage production (he hadn't met Arthur Laffer) and would maintain the quality of government bonds. Higher taxes would ensure a higher credit rating and therefore increase the demand for government bonds. The tariffs he endorsed were designed to protect Northern manufacturers against European competitors, to the detriment of Southern importers of Northern goods.

6.) succeeded in getting the federal government to nationalize the war debt of the states. Citizens of states such as Virginia that already fulfilled their state's war debt obligations were forced to help pay for the war debt obligations of states like Massachusetts whose citizens had not yet discharged their war debt.

7.) argued in favor of a central bank, the Bank of the United States, in his Opinion as to the Constitutionality of the Bank of the United States by claiming that the "implied powers" expressed by the Constitution enabled the federal government to charter a national government bank. The purpose of the bank was to issue bank notes representing gold and silver and to act as a depositary for government funds. It eventually began engaging in fractional reserve banking and lent money to Northern businesses and the government, the latter receiving $6.2 million in 1796 when the Bank's reserves were only worth $2 million, causing a 72% rise in prices from 1791 to 1796.

8.) was "the bastard son of a Scotch peddler." (John Adams)

Personally, it appears that Hamilton was the precursor to the nonsense of over-spending, over-borrowing, and monetary inflation that plagues the U.S. today. Given these details, I don't understand why an advocate of limited government and capitalism would champion Hamilton today.

(The points against Hamilton are all derived from Thomas DiLorenzo's excellent book Hamilton's Curse).