Hamilton’s Curse–Hamiltonian Hegemony

This entry is part 7 of 9 in the series Hamilton's Curse


Nationalized banking, protectionist trade policy, corporate welfare–is this the definition of the current state of affairs (or those soon to come) in America? It likely will be. It is the definition of a mercantilist system of governance, and it is one that Alexander Hamilton advocated for during the period of the Constitutional convention. Those three legs were (and still are) the base of the stool of Federalist big-government nationalism.

It was, however, not the way government actually operated up until the latter part of the 19th century. Jeffersonian ideals of limited, divided sovereignty still held a pulse until that time, but the times, as the song goes, were a’changing. It took a “crisis” in order to knock the supports out from under the republican form of government.

The crisis, the War between the States, allowed the administration of Abraham Lincoln, the “greatest disciple” of Hamilton according to DiLorenzo, unprecedented opportunity to radically shift the country toward a truly mercantilist position. The method of the manipulation took the form of Congressional acts supported by Lincoln after the point in the conflict when southern Democrat members of Congress had exited.

In order to revive the national banking system, the Legal Tender acts of 1862 were put into place, and a paper money system (greenbacks) was locked into place with the National Currency Acts of 1863-64. The interface between government interest and the banking industry was noted by the New York Times as having “crystallized a centralization of power, such as Hamilton might have eulogized as magnificent” (quote from page 129 of the book).

DiLorenzo goes into a long account of Lincoln’s tariff policy, showing that protectionism and its cousin autarky (economic isolationism) were very welcome in the “house that Lincoln built”. Ohio’s own Clement Vallandigham was willing to speak out against this radical consolidation of power in the hands of the national government, but was deported by the administration for his troubles.

The third leg of the stool, the establishment and nurturing of corporate welfare, took the form of: railroad subsidies; land grants in order to give railroad owners free access to construct; the creation of powerful lobbies; and eventually bribes in order to keep the whole profit-taking scheme going (the Credit Mobilier scandal).

Now, such welfare takes the forms of: subsidies through various bureaucracies (think farm subsidies); favored corporation status (think FDA and other governmental barriers to competition in various markets); the creation of powerful lobbies; and “stimulus” or “TARP” acts to give taxpayer dollars directly to non-competitive private corporations that are “too big to fail” according to the national government.

Then, as now, the public reaction to such scandals as Credit Mobilier and AIG consists of a demand for more governmental control of business, which happened to be the problem in the first place. Not that this is something that the corporations are really trying to avoid. In fact, the public is being hustled by very crafty operators all around. The public naivete is best summed up by DiLorenzo while quoting Butler Shaffer on page 141 “‘government regulation has generally served to further the very economic interests being regulated’ and that the advantages businesses sought were those ‘denied them in the marketplace.'”

From Lincoln through Obama, the mercantilist system advocated and advanced by Alexander Hamilton has grown steadily along with the growth of governmental power and control over all aspects of American life.

It’s just another part of the “curse”.

Hamilton’s Curse- The Founding Father of Crony Capitalism

This entry is part 6 of 9 in the series Hamilton's Curse

GadsdenThis chapter review is being written on July 4th, after something of a hiatus. Not a hiatus from the work that the Policy Institute does but a hiatus from blogging caused by too much to do in the struggle for liberty and too little time to do it. As Christ said “The harvest is plentiful, but the laborers few.”

To the left is the flag that is on this author’s flagpole today. It is the Gadsden flag, an early republican naval ensign. In part that’s because of the flag’s symbolism. A coiled rattlesnake ready to strike was an early symbol of resistance to tyranny, something that is very relevant in today’s political climate.

What does this have to do with Alexander Hamilton? Everything, really. Hamilton was, indeed, a patriot as his military action in battles like the seige of Yorktown demonstrate. Unfortunately, he was also a brilliant and manipulative political strategist who believed that the United States needed to become an aristocratically led monarchy to achieve its destiny as a great empire. And his vision caused him to be involved first in bringing down the Articles of Confederation because they could not be made to conform to his vision of empire, then to rebuild the economy on the model of British mercantilism in order to create the capital necessary to build the empire. Just because a man is both a genius and a patriot, does not mean that he is automatically an admirable figure in a nation’s history, as the book demonstrates.

Dr. Thomas DiLorenzo chronicles the 7 decade struggle to make Hamilton’s economic system the adopted system of the United States and the many faces it wore during that period. It was a see-saw battle which saw Hamilton’s system advance and recede several times, mostly along regional and philosophical lines, before the War Between the States brought Hamilton’s system into use in the United States to stay (for now, at least).

One of the pillars of Hamilton’s system was “crony capitalism,” also called today corporate welfare. It’s modern supporters call the system “tax-financed subsidy.”Modern liberals claim to hate “corporate welfare” but this is a ruse and a political shell game. They are more than willing to supply “tax-financed subsidies” to businesses in the “green economy,” for instance and are more than willing to make revolutionary changes to tax structure to raise the funds for it. When it is pointed out that “tax-financed subsidies” is “corporate welfare,” supporters will launch into lengthy soliloquies on the necessity of the action, all of which purposefully tries to steer the questioner in the opposite direction of his question.  They learned well from Hamilton, whose Report on Manufactures for the new United States government under the Constitution is considered to be either a masterpiece of economic vision or a confusing jumble of economic non-sequiturs, based on the reader’s knowledge of how economies work.

DiLorenzo demonstrates that Hamilton placed himself clearly in the camp of what, in the late 19th century became the “Progressive movement,”  in opposition to Adam Smith’s laissez faire approach to economics. Under Smith’s system (which is not theoretical but empirical, i.e. based on observation), the free market decides where investments are best made. Rewards and punishments come in the form of profitability or bankruptcy. Under the Hamiltonian-mercantilist system, highly educated and specialized central-planning “experts” can best decide where subsidies and protectionist taxation (tariffs) can be applied in order to give a fledgling invention or industry the help it needs in establishing itself. And if the market doesn’t want that particular product? Then obviously, more subsidies are necessary until public perception catches up to “innovation.” DiLorenzo explains in some detail how Smith successfully demonstrated that the best competitors, meaning the best businessmen with the best product wins in a free market. Hamilton argued for the power of government to be used to “level the playing field” but forgot to point out that this means that such a system can be abused to provide rewards for political allies instead of its stated purpose. In British mercantilism the King became a de facto business partner with subsidized business; in Hamilton’s system it is co-operative politicians.

Hamilton’s call for import tariffs had an unintended but not unforseen consequence: the increase of foreign import duties to match. Adan Smith had explained this relationship in the Wealth of Nations. Hamilton arrogantly insisted that Smith’s observations had been mistaken. This led to a form of economic isolationism that Hamilton actually thought a good idea. In fact it created regional strife and industrial stagnation internally and gave foreign manufacturers an advantage in the world market.

Hamilton wrote in his Report on Manufactures of his certainty that only government would have the resources and the motivation necessary to build roads to the interior. Unfortunately for his theory, within 10 years of his publication of the report, state chartered private firms were busily building roads at rates that astounded observers. Road building companies were eagerly invested in by merchants and manufacturers to provide easier access to growing western markets. Unfortunately, this lesson did not make an impression on Hamilton’s enthusiastic supporters later in the 19th century. They insisted in pouring good money after bad in building a system of roads and canals, many of them literally to nowhere, that became a money pit, bankrupting several mid-western states and causing severe economic consequences nationally. A major culprit whose name became prominent later was an ingenious Illinois state legislator and enthusiastic supporter of the Hamiltonoan philosophy who managed to become the key player in bankrupting his state through “internal improvements” crony capitalism in the 1840’s- Abraham Lincoln.

Hamilton’s system went into disgrace for a time, especially during the presidency of Thomas Jefferson. The election of 1800 was a complete repudiation of the Federalist-Hamiltonian philosophy of government. During Jefferson’s first term Hamilton died. Henry Clay became the new champion of what Hamilton had coined the American System. Clay became not only the systems champion but one of its beneficiaries. Being a hemp farmer he received a sizable hemp subsidy (hemp was an important crop because it made the finest marine rope available at the time). As the American System gained ground in the 1820’s in the wake of the War of 1812 it began to cause severe regional divisions between north and south. The industrial north was being subsidized with the tariffs raised by taxing imports into the agrarian south. At the same time the south’s markets were being severely restricted by retaliatory tariffs on agricultural imports. This situation eventually bloomed into the nullification crisis of the early 1830’s and then later into the secession crisis of 1860-61.

In the meantime the twice-chartered national bank, which would have allowed the creation of huge amounts of credit for the federal government was allowed to expire in 1811 and simply killed by withdrawal of funds in 1836. A new national bank was vetoed in 1841 and several times after this. This was an extremely important pillar of the American System. Hamilton’s scheme simply would not work without a vast amount of available credit. Hamilton’s empire was to be built on debt and the creation of fiat money. Jefferson’s system was hard currency (gold and silver based) and “pay as you go.”

As the War Between the States showed, these were incompatible systems and the result was an acrimonious and bloody divorce suit that demonstrated the vast differences between Hamilton’s “living document” method of constitutional interpretation featuring gross abuse of the “General Welfare” and “Elastic” clauses versus the strict constructionist interpretation which posits that the words and phrases in the Constitution have meaning and the intent of the writers of the document should be followed when discernable.

In the next chapter we will see what happened as the American System became dominant and how it got that way.

Hamilton’s Curse- Hamilton’s Disciple: How John Marshall Subverted The Constitution

This entry is part 5 of 9 in the series Hamilton's Curse

HamiltonsCurseIs the Constitution a grant of powers, nigh unlimited, or a restraint on the reach of governments run by self-serving (sinful) men?  What answer have we been given in our modern era?  Most of us would be honest and say that operationally, the former is the answer; some might go so far as to be totally honest and say that the latter is technically and legally the correct response, but our country has been taken down a path away from adherence to the letter of the law, in exchange for being “led by the Spirit”, divorced from the context of the words.

Hamiltonian “will-worship” is to blame for the current state of affairs.  Specifically, according to DiLorenzo, it was the adoption of Hamilton’s view of the ever-growing power of the central state carried out through the machinations of court decisions that have carried us to the murky waters of the swamp of socialistic impulses that our government wallows in today.

Who is the chief priest of the nationalist idolatry?  It was none other than John Marshall, chief justice of the United States Supreme Court, the man who, according to Ron Chernow in his sycophantic biography on Hamilton, stated that beside Hamilton, Marshall felt as a “candle beside the sun at noonday”.   DiLorenzo points out that Marshall relied more strongly on the Hamilton-influenced Federalist Papers than on the Constitution itself as his basis for interpretation of the document.  Hmmm, that seems somewhat akin to relying on the salesman’s word that there are no hidden costs rather than reading the fine print of the contract yourself before signing.

I was definitely struck by one specific point in this chapter:  the vital difference between courts using the Constitution and using constitutional law.   It’s the difference between Jeffersonian federalism and Hamiltonian nationalism; between seeing the governing compact as decentralized or seeing it as consolidated.  This is a significant difference indeed.

Through a series of decisions of the Marshall court, constitutional law has taken the place of the Constitution in deciding our nation’s direction.  Beginning with the infamous (though not for the right reasons) Marbury v. Madison, which, in DiLorenzo’s telling, created a virtual “judicial dictatorship” in the Hamiltonian model (though Hamilton, a master of gamesmanship, would try to belie that in Federalist No. 78), to Gibbons v. Ogden which so broadly defined commerce for federal regulatory purposes as to put all business under the shadow of central control, the courts have made our Constitutional republic “Hamilton’s America”.

Let’s sketch a brief list of the Marshall Court’s “hit parade” on our republican form of government:

Marbury v. Madison–The court gains power to review legislative or executive decisions and declare them void–putting the courts as the final arbiter of the power of supposedly co-equal branches;

Fletcher v. Peck–The court uses the Contract clause to invalidate state law–neutering state courts;

Martin v. Hunter’s Lessee–The court uses the supremacy clause to extend national governmental power beyond Article 1 Section 8 limitations;

McCulloch v. Maryland–The court finds a novel definition for the word “necessary” in the Necessary and Proper clause; now it means “useful” or “convenient” when it allows the national government to assert for itself powers “implied” (not “enumerated”) as it sees “useful”;

Gibbons v. Ogden–The court’s lexionary prowess expands the definition of commerce to an absurdity–giving the national government de facto control (negative sanction) over all business.

Given this list (and there are more examples), it is now very clear that what some of us today would classify as “judicial tyranny” by an oligopoly of nine black robed demigods is really only judicial midgets walking in the footsteps of giants of the imperial judiciary.  The analysis that DiLorenzo gives as to where this truth leaves us now is something that will help you to understand why Hamilton may have been this republic’s own worst enemy.

Hamilton’s Curse Chapter 8–Poisoned Fruits of “Hamilton’s Republic”

This entry is part 5 of 9 in the series Hamilton's Curse

HamiltonsCurse“Conservatives who genuinely believe in limited government are not generally exposed to the Hamilton who at the Constitutional Convention called for a king-like permanent president and who subsequently dedicated himself to undermining the limits on governmental power laid out in the very Constitution he championed in the Federalist Papers.”  This quote from page 171 of the book Hamilton’s Curse is a bit of an understatement, as most Americans, conservative and otherwise, are generally exposed to the results of Hamilton’s efforts in our government, our systems of education, business and finance, to name but a few.  The bowl of Hamilton’s poisoned fruit is spilling over with plenty.

As a matter of fact, the 1930’s saw the implementation of Hamiltonian ideology in a key area:  education.  Charles Beard, et.al., introduced the “economic basis” theory of government, which has since poisoned generations of students, policymakers and jurists with this pernicious theory.  This “economic basis” theorem is pure Hamiltonian, and is a consequence of the shift that happened in this country from 1913 onward (with the implementation of the income tax and the Federal Reserve laying the groundwork for a wholesale restructuring of our form of government.)

DiLorenzo lays out the case for the interface of big business interests supporting big government intervention programs (think the Bush/Obama “stimulus” packages and your on the right track); a laundry list of federal “welfare” to business interests that caps out at a neat $90 billion per year.  Other studies have shown it to be greater than that in some instances.

Couple this with a “justice” system at the federal level (Supreme Court) who from 1937-1995 couldn’t find a single piece of federal legislation to be unconstitutional, and you get the complete Hamiltonian package of an “energetic” government with the “fuel” of commercial interests to drive it onward.

This is an amazing record for a body that routinely passes unconstitutional legislation (and did during that period too).  The key to this amazing record is a wildly broad reading of the interstate commerce clause which basically posits that pretty much any form of human behavior has relationships to interstate commerce, and can therefore be regulated by federal statute.

So what are some of the fruits of this poisonous philosophy of “government uber alles?”  Here’s just a representative sample of the results:

–the use of federal grants to states as a control mechanism to kill states rights (think ‘highway funds’ or ‘crime prevention grants’ and you see the link);

–the use of the Incorporation doctrine (through the 14th Amendment) to apply the strictures on the federal government through the Bill of Rights to the states as a restriction on state sovereignty;

–adoption of the “higher law theory” of jurisprudence:  allowing the courts to sidestep the rules of the Constitution in order to apply novel legal (but extra-constitutional) theories;

–the use of executive orders by the President to control or seize power, thus allowing the Executive to act as dictator;

–manipulation of the monetary supply by the Federal Reserve in order to create economic instability as a precursor to radical shifts in power through legislative enactments;

–attaching citizens to the federal government, tying bondholders and others to a primary interest in the growth of government.  Woods illustrates it this way: “According to economist Gary Shilling, 52.6 percent of Americans in 2007 received significant assistance of some kind from the federal government.” and;

–creating an international mercantilist empire, the needs of which lead to agressive expansions of military force and presence.

These are just some of the ways the fruit of Hamilton’s philosophy has ripened (and rotted on the vine).  Woods sums up the chapter’s theme:  “The final characteristic of empires, according to Morley, is that they are sold to the public in grandiose terms about spreading blessings for all mankind, when in reality their main purpose is to allow those who pull the strings of the empire to accumulate money and power.”

Hamilton would be proud of seeing the modern results of his efforts.

Hamilton’s Curse- Hamilton’s Bank Job

This entry is part 4 of 9 in the series Hamilton's Curse


Alexander Hamilton is widely credited with being the father of the modern American economic system. In fact it can be said that Hamilton is the Victor Frankenstein to the monstrosity that Henry Clay, a master propagandist, dubbed the American System. The American System consisted of a central bank, permanent debt, corporate welfare, centralized authority, heavy taxation, “protective tariffs,” fractional reserve banking, etc. Prof. DiLorenzo describes this system as Hamilton’s attempt to adapt the British system of Mercantilism, one of the primary causes of the War For Independence, to the new republic.

DiLorenzo delves into the opposition to a central bank that Hamilton faced from divided sovereignty advocates like Jefferson, a recently converted James Madison, Edmund Randolph and others. At the request of Washington reports were prepared on the constitutionality of the bank. The strict constructionists all declared it illegal, based on the explicit rejection of the power to create  a national bank by the Constitutional Convention while Hamilton prepared a masterpiece of equivocation in which he revealed his strategy for getting the Constitution he really wanted but couldn’t get at the convention.

Hamilton introduced the idea of “implied powers” based on an expansionist interpretation of the “necessary and proper” and “general welfare” clauses of Article I.  Further, Hamilton introduced the doctrine that the Federal government may exercise ANY power not expressly prohibited to it by the Constitution, flying in the face of the 9th and 10th Amendments and ignoring the state ratification debates.

Foreshadowing much worse abuses to come, a national bank bill was passed and signed by Washington as the result of a compromise involving the expansion of the District of Columbia to make it adjacent to Washington’s property on the Potomac river. Senators threatened Washington that they would withhold their votes on the DC bill until he agreed to sign the bank bill.

DiLorenzo shows that the creation of the Bank of the United States (BUS) resulted in what fractional reserve banking on a national scale must do- inflated the currency, prices rose 72% from 1791-96,  and created cheap credit for northern industrialists, but increased costs for southern planters via import tariffs to pay the service on increased government debt. Thus the regional cracks became sectional divides.

One of the most interesting aspects of the BUS is that the corruption and growth of centralization it spawned at the national level created resentment and opposition at the state level. Several states imposed exorbitant taxes on state branches of the BUS. One of these was Ohio which actually imposed a $50,000 per year tax  in spite of a ruling by John Marshall’s Supreme Court claiming that it was unconstitutional, which it collected (two-years worth) from the BUS branch by force of arms.

The BUS sued Ohio deputies on the basis of Marshall’s decision which earned it the equivalent of a legislative “raspberry,” the Ohio legislature declaring the Supreme Court’s decision meaningless under Ohio’s 10th amendment sovereignty. One wonders if the current Ohio legislature will pass a resolution (HCR 11) in the current session which simply declares that Ohio retains its sovereignty under the 10th Amendment, no forcible collection of taxes necessary?

DiLorenzo explains the common view that while Marshall’s court had usurped the authority of “judicial review” many of its decisions were simply ignored as mere opinion until after the War Between The States and why.

The book chronicles  Hamilton’s BUS legacy in terms of its impact on state banks after it usurped regulatory authority over these banks.  It did so by buying their bank notes, which necessarily kept them afloat, then redeeming their notes demanding payment in specie (gold,  silver and precious metal coins). In so doing it forced many state banks to overextend well beyond their specie reserves causing bank runs.

Favored state banks were not subjected to such treatment but state banks opposed to the BUS were savaged by it.  DiLorenzo explains how policy set by the BUS continued to wreak havoc even after the BUS was de-chartered in 1811 and went out of business. The US Treasury continued many of the BUS policies and even expanded some, due largely to the War of 1812, wreaking inflationary havoc and leading to a re-chartering of the BUS.

The re-institution allowed an inflationary, cheap credit (based on the fact that the BUS had paper out at about 10 times the specie available) real estate boom and an inflation of real estate values followed by a huge bust, the country’s first depression, the Panic of 1819, where real estate values plummeted causing a huge increase in bankruptcies and a lack of available credit causing a decrease in production. Sound familiar? DiLorenzo uses the details of what has been related here to quickly explain, in simple terms, the Austrian theory of boom-bust cycles caused by centralized credit interventionism.

Andrew Jackson, a Jeffersonian, was so appalled by the blatant abuses of power and economic corruption engaged in by the BUS, especially its president, Nicholas Biddle, that he determined to destroy it before its charter expired. Jackson also offered his opinion that John Marshall’s Supreme Court opinion that the BUS was constitutional, was just that, an opinion. And he declared that he believed it to be unconstitutional.

Jackson’s actions toward the BUS were based on a number of factors which DiLorenzo explains well. Jackson stood for free-market economics, reduced tariffs, hard money (money backed by gold) and paying off the national debt. Thus Jackson’s Democrats were the sworn ideological enemies of Hamilton’s Federalists later Whigs and even later Republicans.

The book explains the brilliant methodology by which Jackson managed to drive a stake through the heart of the BUS vampire, though Biddle did not give it up without a fight. Before its death knell, Biddle attempted to manipulate credit so as to create a depression and he was successful in creating a short-lived recession. DiLorenzo chronicles how Jackson and Van Buren worked to establish the Independent Treasury System, considered by many to be the most stable monetary system of the 19th century. It was a hard money system.

The book goes into deeper detail regarding the continued legacy of Hamilton’s economic system; inflation, currency debasement and constant boom-bust, also called bubble-burst, cycles. Inflation can be a boon to unscrupulous politicians (a redundancy?) who use the newly created money to pander for votes, as long as they can slough off blame for the problem onto non-participants (the ubiquitous “middle-man,” private sector, “unregulated” businesses, etc.) or rival political parties.

The book chronicles how inflation is actually a hidden tax and how government interventionism essentially causes businesses to mis-allocate assets due to a lack of knowledge about future values. Hence, depreciation schedules are often meaningless and replacement of old equipment is discouraged. Consumers are also effected because they are not sure of the cost of an item in the future. Thus, they adopt a “buy now” philosophy which discourages savings  meaning less assets are available for investment. Once their credit is used up they retrench. The resulting boom-bust cycles are then blamed on a “lack of regulation” and new centralized restrictive policies are introduced to “fix” the problem, making things, in reality, worse.

In the concluding section of the chapter DiLorenzo asks the question- “how can someone as obviously brilliant, if not a  genius, have been so politically naive as to not know the destruction his system would bring?” He also begins to go about answering it. You’ll have to read it to find out that answer.

Next chapter- Chapter 4- Hamilton’s Disciple: How John Marshall Subverted The Constitution

Hamilton’s Curse- The Hamiltonian Revolution of 1913

This entry is part 4 of 9 in the series Hamilton's Curse

The American Revolution (incorrectly so-called, at least between 1775-83) didn’t end with the Treaty of Paris in 1783. Once the British were defeated the real American Revolution, the internal battle over the form of the American government would take, began. The real revolution was fought between conservatives (the deliberately mis-named “Anti-Federalists” whom we will refer to as the “true federalists”), who originally wanted to retain but amend the Articles of Confederation and a group of nationalists (whose press-savvy leadership adopted the misnomer “Federalists” who we refer to in this article by their true view- “nationalists”) who desperately wanted to eliminate the state governments as sovereign entities and tried to use the Constitutional Convention, unsuccessfully, to do it. Just to clarify- there were Federalists who were true federalists, mostly in the south. That’s why we use the term “nationalists” instead of “Federalists” to differentiate these two groups using the same party label.

Since the nationalists had failed to eliminate the state governments at the convention they devised a plan under the leadership of Alexander Hamilton to subjugate them by adopting a new constitutional hermeneutic clearly not supported by the text of the document. The hermeneutic they adopted said, in effect, whatever authority is not expressly forbidden to the federal government by the Constitution was permitted to it, including the powers reserved to the states and to the people alone. And the method they chose to impose this hermeneutic on the new federal government was to pack the judiciary branch with its adherents.

The battle to subjugate the states see-sawed for 126 years. From splits over a national bank and foreign policy during the Washington administration to Jefferson’s “revolution” of 1800 to the War of 1812, the Monroe Doctrine, Jackson’s “Tariff of Abominations,” the nullification and secession crises, battle over the Bank of the United States, the Missouri Compromise, the Mexican War, “Manifest Destiny,” the Kansas-Nebraska Act, “Bleeding Kansas,” the Dred Scott decision, the “Secret Six,” John Brown’s raid and state treason trial were all merely the warm-ups to the real showdown between nationalists and true federalists over the Constitution and its proper interpretation- the War Between The States. The military victory of the nationalist northern Union over the federalist southern Confederation seemed to answer the question of constitutional interpretation and the nature of the Union by force. But questions answered by force of arms are rarely actually settled.

Even after a victory by force of arms the nationalists realized that there still existed in the language of the Constitution elements of state sovereignty and stiff controls on the growth of size in the federal government in the form of the minting and value of money and restriction of direct taxation (like income taxes). Nationalists knew that those parts of the Constitution that covered these restrictions intact could not be pushed aside by nationalist judicial reinterpretation, something Thomas Jefferson warned against –

Our peculiar security is in the possession of a written Constitution. Let us not make it a blank paper by construction.

Nationalists knew this because even a Supreme court packed with their cronies simply could not create by construction an argument that made explicit prohibition of direct taxation impermissible. That was demonstrated when the Supreme court declared the first two federal income taxes unconstitutional in 1872 and 1896. They just couldn’t get the job done by simply declaring they had the power to pass a tax and attempting to justify it by manipulating the meaning of the clear words of the Constitution.

Nationalists also knew that they had to stop the 10th amendment to the Constitution from being used to stifle federal usurpation of state and local authority as had been done before 1861. The only way to accomplish this was to remove the state governments’ representation in the federal Congress. They had to strip the authority to choose Senators from the state governments and place that authority in the hands of a more easily manipulated body with a short memory and nationalize it as much as possible. They were creating a super-representative with a term length guaranteed to keep the average voter from remembering that a Senator was a profligate tax-and-spender for the first 41/2 years of his term, especially if he supported some showy but meaningless legislation that allowed him to claim that he had been a “true fiscal conservative” his whole term (sound familiar?) during the final 18 months of it.

Last but certainly not least, nationalists understood that their grip on power would be tenuous and their ability to manipulate the populace would be limited without complete control of money and credit. They needed a national bank with the ability to nationalize interest rates and a fiat money supply which could be inflated or deflated to help manipulate voters, especially around presidential election years.

DiLorenzo explains in this chapter how all of this was accomplished within the span of a single year- 1913. He also explains that this was not the result of recent “progressive” tinkering as some historians have claimed but the result of deliberate and concerted efforts by men dedicated to accumulating and centralizing power in a national government at the expense of state and local governments over more than a century.

He also explains that the movement has had several incarnations during that period. Hamilton and his followers were advocates for a high tariff to “protect infant American industry” and an American form of Mercantilism.

Later, Henry Clay modified Hamilton’s vision into his “American System” of corporate welfare for road and canal building (which bankrupted several states, including Lincoln’s Illinois) and other “vital” industries, a national bank to “create credit” for these schemes and centralization of power in Washington, especially the power to tax.

Lincoln, calling himself Clay’s political heir, then further modified and implemented Clay’s system by claiming that the federal government had the “right” to keep states from seceding from the union by force of arms, thus stripping the 10th amendment of any real meaning, and tacitly claiming that it was necessary for northern corporate welfare that southern tariffs continue to be collected. Since he no longer had southern revenues to pay for the war to coerce them back into the union, he forced a graduated income tax (including withholding) through Congress claiming that it was constitutional because it was an “indirect direct tax,” making a mockery of the constitutional prohibition against direct taxation without apportionment.

I have included some media to illustrate what is meant about how nationalists think about the Constitution. Especially illustrative of the ultra-nationalist “living document” theory of constitutional interpretation is this conversation between Judge Andrew Napolitano and Rep. James Clyburn (D-SC) on the constitutionality of the federal health care law. Napolitano is taking the strict constitutional constructionist position (and dropping the ball on federal intervention in education matters).


In this article, Republican party “big tent” proponent, self-titled “conservative” and  naturalized American citizen born in Canada, David Frum, completely fails to make the case that the health care law is somehow constitutional. He does, however, expose his position as a nationalist in the Hamilton-Webster-Lincoln tradition as described earlier by adhering to the arguments stemming from the constitutional position described for that group of thinkers.

By the late 19th century it became clear to nationalists that they still had one obstacle in their path; the Constitution. The language in certain sections of the constitution simply could not be adequately de-constructed by re-interpretation and changes HAD to be made.

Hence the concerted efforts by nationalists to get the 16th and 17th amendments passed. Unfortunately, there was such a complete lack of understanding among the citizenry of what money and its purpose and function were, let alone the constitutional restrictions connected with the coining of it and the regulation of its value, that there was very little protest when the Federal Reserve System, a privately owned and operated national banking system, was created by law in complete violation of the Constitution, in the same year that the 16th and 17th amendments were finally passed. Thus, the last vestiges of the original American Republic  disappeared in a single year. The Revolution of 1913 completed what was started in 1861-5. The conversion of the United States from a federated republic of autonomous states ruled by law under a Constitution which limited the powers of the federation government to a single government entity free from limitations of its power by decree of its own courts and driven by the “will of the people” as manipulated by government/media for the “common good.”

DiLorenzo explains how this all took place in the course of a few short months and what the devastating results have been in the years since.

Hamilton’s Curse-Public Blessing or National Curse?

This entry is part 3 of 9 in the series Hamilton's Curse

HamiltonsCurseIs public debt a blessing or a curse?

Recent developments in our country, including a pending multi-trillion dollar spending package being pushed by the administration, would lead one to believe that if we just spend more, and thus embrace more debt, then the economy will take off: a blessing.

But is it, really? How did our founding fathers view public debt? In Hamilton’s Curse, Tom DiLorenzo addresses the roots of the issue, and the current crisis. In fact, he lets a cat out of the bag in the opening paragraphs of chapter two, when he states: “Goverment debt is every politician’s dream: it gives him the ability to buy votes by spending on government programs (with funds raised through borrowing) that will make him popular now, while putting the lion’s share of the cost on future taxpayers, who must pay off the debt through taxes.” Is this really the system our founding generation sought to bequeath to the American public when they instituted a government to secure the God-given, unalienable rights of life, liberty and the pursuit of happiness?

Take for example the current burden of the federal debt on each and every American, whether their votes have been bought or not, whether aged or just born this very minute: $184,000 per person in 2008 dollars, according to the national debt calculations performed by the Peter G. Peterson Foundation (www.pgpf.org), with a total national debt in the vicinity of $56.4 trillion. What, you say? Just recently you were told that the debt load was a measley $44,000 per person.

Not surprising, really, considering that the “national debt” that most commentators talk about does not include Medicare and Social Security obligations, but instead focuses on just the publicly-held debt (bonds) and money that the government borrows from itself, which is now in the neighborhood of $13 trillion alone. However, our government treats debt like a junkie treats his next fix: absolutely necessary, and the bigger, the better.

Jefferson considered debt to be a curse which “has decimated the earth with blood.” He wanted government debt obligations limited to at most a 19-year term, in order for the accrued debt to be paid off in the same generation in which it was entered. Jefferson had the right idea.

Hamilton saw debt as a blessing, holding the notion that debt gave “energy” to government (hmm, my junkie analogy seems fitting here), and that it was essential for growing the state. As the first Treasury secretary, Hamilton had an opportunity to see his program be adopted and exerted great energy in creating reports to the Congress to persuade them to adopt extensive government debt and taxation.

DiLorenzo explains how in at least two instances Hamilton used his position and policies to benefit himself and political cronies: not unlike what we see today in the politico-financial complex. One scheme saw the Hamilton faction being able to speculate on war bonds at a significant profit (and at significant loss to the veterans who held these obligations which the federal government, unbeknownst to them but fully known to the Treasury secretary and his New York associates, had fully funded to be repaid); another Hamilton scheme was to have the federal government assume each state’s war debts, thus nationalizing that debt and chipping away at state sovereignty.

However, Hamilton’s plans for a permanent debt cycle were generally thwarted, with exceptions of the periods of the War between the States and the Spanish-American war, until the eclipsing of Jeffersonian fiscal restraint by the policies (adopted by the politicians) advanced by John Maynard Keynes and his followers in the first half of the twentieth century.

DiLorenzo explains this legacy, and how this “debt culture” is a curse, not only on the nation, but upon individual enterprise and prosperity. We truly now have “Hamilton’s Voodoo Economics”: read the book and see why.

Hamilton’s Curse- The Rousseau Of The Right

This entry is part 2 of 9 in the series Hamilton's Curse

HamiltonsCurseRecently my two oldest daughters and I were talking about a “test” they’d taken on Facebook- Which President Are You? My youngest and oldest daughters were both Millard Fillmore. My middle daughter and I were both Calvin Coolidge. This goofy little “test” sparked a deeper discussion of a series on the presidents on the History Channel. I was given a copy of this series for Christmas and had already taken note of an interesting phenomena that is quite prominent in this series.

How do you judge whether a US President is good, bad or mediocre? What are the exact criteria that you use to make your determination? Careful. How you answer that question says a lot about your philosophy of American government. It is a direct indicator pointing to whether you are a Jeffersonian or a Hamiltonian, as described in the first post of the series.

In this chapter of the book, Dr. Thomas DiLorenzo, a professor of Economics at Loyola College in Maryland, lays the foundations necessary to explain which of these two basic philosophies we either consciously or unconsciously employ when evaluating the actions of government. Dr. DiLorenzo, a self described library rat, accomplishes this with research into the writing and correspondence of both Jefferson and Hamilton as well as other important thinkers in the Hamiltonian Federalist and Jeffersonian Anti-Federalist traditions. What his research uncovers is the vast differences between these two camps regarding constitutional interpretation, the relationship between state and federal governments, presidential power and the extent of judicial authority.

DiLorenzo chronicles the tireless efforts of Alexander Hamilton from 1780 onward to create a centralized national government. As the philosophical leader of what would later, during the two-year battle to ratify the new Constitution become the Federalist faction and then the Federalist party, Hamilton proved to be a shameless propagandist. He was critical of Jefferson’s supposed adoration of French radicals but he himself adopted the ideas and language of Jean Jacques Rousseau, the  philosopher whose ideas led to the terror of the French Revolution,  regarding the existence of the “general will” which is not necessarily expressed by the public but is “sensed by the ruling elite.” Hence, the “Rousseau of the right” moniker. Terms like “the public interest,” “the general interest,” and “the welfare of the community” pepper his work which was designed to gain democratic favor for his attempts to concentrate and centralize authority. The brilliant Hamilton wrote in a fashion designed to manipulate “the general will” into demanding “more vigorous government.”

It was this talent for constructing nebulous but compelling phraseology that made him one of the chief apologists for ratification of the Constitution. DiLorenzo points out that Hamilton took great pains to reassure the opponents of centralized national authority that the states would maintain their sovereignty. He also points out that this was pure deception on Hamilton’s part. Having worked for years to get a Constitutional Convention convened, he bolted the convention in June of 1787 after it became clear that both his own nationalist plan to eliminate the state governments and appoint an executive who would serve during “periods of good behavior” and James Madison’s plan that also eliminated the state governments were completely stymied by a strong TRUE federalist faction which wanted strong state governments and wanted them to be powerful enough to resist a vigorous central governments attempts to consolidate power.

Hamilton only returned to the Constitutional Convention in September after his true federalist New York colleague delegates, Yates and Lansing, had left and he had worked out a plan by which the new Constitution could be gradually “reinterpreted” to achieve his vision for the government. DiLorenzo does a masterful job of uncovering and explaining the strategy that Hamilton used in his day and which continues even today to weaken the state governments and grow the power of the presidency and the judiciary. In short, Hamilton is the father of the “living document” philosophy of constitutional interpretation.

DiLorenzo finishes the chapter with by recounting Hamilton’s role in the suppression of the Whiskey rebellion of Washington’s second term. Hamilton’s despotic actions in dealing with western farmers, many of them Revolutionary War veterans is one of the most revealing parts of the chapter. Hamilton eschewed negotiations in favor of conscripting an army to invade and conquer the rebellious areas, marching old, sick men through the snow in chains and then attempting to force confessions including implications of others, presaging the actions of one of his philosophical direct descendents, Abraham Lincoln’s actions in the southern states 67 years later.

Next- Chapter 2; Public Blessing or National Curse?


Book Review–Hamilton’s Curse

This entry is part 1 of 9 in the series Hamilton's Curse

HamiltonsCurseThere are times in some of our lives in which we have seminal moments of epiphany where something occurs or some information is presented to us that allow for disparate pieces to fall into place, creating a full and clear picture of how things really are. Some never are able to see the full view, thinking instead that the out of phase vision they have in front of them is all that there really is.

Reading the book Hamilton’s Curse: How Jefferson’s Archenemy Betrayed the American Revolution and What It Means for America Today by Thomas J. DiLorenzo (New York, Crown Forum, 2008, $25.95) was one of those seminal moments for me. It is an important work of scholarship, definitely not hagiographic in nature, that causes a thinking person to reassess the common assumptions that are fostered in this modern age about the way in which our government should conduct itself. As a matter of fact, it is such a volume that a mere review is an injustice; which is why Camp Director and I are planning on giving you the reader an analysis of the central theme and message of this work in a chapter-by-chapter, back-and-forth dialogue.

Please allow me to begin by conducting a small personality assessment. I am going to provide two lists of words for you. Review those two lists, and determine which list you are more attenuated to. Here we go:

limited, diminuative, divided, lassiez-faire, express, steward, de-centralized, curse, benefactor, master, servant

unrestrained, leviathan, consolidated, interventionist, implied, imperial, centralized, blessing, beggar, servant, master

O.K. then: which one is more to your liking? Unsure? Maybe a little context might be beneficial to you:

Governmental authority: limited or unrestrained

Governmental size: diminuative or leviathan

Ultimate governmental sovereignty: divided or consolidated

Economics: Lassiez-faire or interventionist

Governmental powers: enumerated or implied

Presidential attitude: steward or imperial

Governmental control: decentralized or centralized

Debt as an engine of finance: curse or blessing

States’ role: benefactor or beggar

The People: master or servant

The State: servant or master

You see, if you chose the first list, you are likely a Jeffersonian and an adherent to the original view of the compact between the states. If the latter was your preference, you are likely a Hamiltonian. Most people today, especially those in government, finance and politics, are definitely Hamiltonian.

It’s sadly ironic, really. Hamilton’s ideas of unrestrained governmental expansion, unlimited taxation and central planning were expressly rejected in the formation of the Constitution, but we live with the fruits of his legacy, not Jefferson’s, in our body politic today. DiLorenzo points to this fact in the opening chapter “The Real Hamilton” when he astutely summarizes that even so-called “conservatives” such as Pat Buchanan and Newt Gingrich are Hamiltonians economically and, in many cases, politically. The spate of modern biographies, fawning paeans to a flawed subject, issued on Hamilton verify the adage that the “victors write the history” indeed.

It is because ideas do indeed have consequences. The ideas of Jefferson that helped influence the Declaration and in many respects the Constitution have been overwhelmed by the actualization of Hamilton’s philosophy. DiLorenzo summarizes this succintly: “This battle of ideas–and it was indeed a battle–formed the template for the debate over the role of government in America that shapes our history to this day. The most important idea of all, in the minds of Hamilton and Jefferson, was what kind of government America would live under.”(pp.1-2)

As we journey through the chapters of this work, we will also be taking a journey through the shattered landscape that is the consequence of adopting the Hamiltonian philosophy of governing over against the Jeffersonian vision of liberty.