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Posts Tagged ‘Alexander Hamilton’

There are some who might think I’ve spent way too much time writing about Alexander Hamilton.  Pick a different Founder, you say.  My response is that I will…when I do more learning about them.  Or maybe you don’t much like our First Treasury Secretary, believing him to be the first man to really monkey with the Constitution.  I would point you to the Federalist and argue that, while Hamilton made moves and created financial structures that were controversial in his time, no one better understood the constructs of the Constitution and the limits it placed on the branches of government.

So there!!

Still not convinced?

Oh well, that’s what makes history so intriguing.  Looking back, studying people and events, attempting to put some context around them, and coming to conclusions.  And sometimes, the conclusions we come to are different.

But today is a good day for those of you who are not fans of Alexander Hamilton.  Because even though his influence is felt today here (and all over the world), you can take solace in the fact that he was no longer doing anything under the auspices of the United States Government.  January 31, 1795 was the end of his tenure.

In December of the previous year, a worn out (and somewhat dejected) Alexander Hamilton had told President Washington that he was leaving office.  The reasons were many.  Exhaustion played a role, both in his own life and that of his wife, Eliza.  Then there was the job itself.  Almost since the inception of the Department, Hamilton had battled naysayers.  Members of Congress had railed against him.  They dug through financial dealings line by line, looking for the smoking gun to throw him from office.

The country’s first Secretary of State, Thomas Jefferson, had waged a one-man war against Hamilton.  He had hounded the President about him, strategized with James Madison to discredit him, and partially funded a newspaper to sling mud at him.  And after more than three years of trying, he simply resigned his office in frustration.  We know that Alexander Hamilton was no saint, but in his dealings from the Secretary’s office, there was nothing but honesty, integrity, and sound judgement.

So while sainthood eluded him, his homecoming to New York in February probably felt heaven-sent.  He was declared the patron saint of prosperity.  He was given a lavish party that overflowed with praise as much as food and drink.  The former Secretary received nine cheers that evening (President Washington and Vice President Adams received three each).  There was much tongue-wagging and speculation about his future.  George Clinton, New York’s governor, had just announced he wasn’t running for reelection, and scuttlebutt said the job was Hamilton’s for the taking.  There were even whispers of higher aspirations…some said he would be the second President of the United States.

But Hamilton’s needs were more practical.  He needed money.  For those who accused Hamilton of skimming money from the Treasury, his heavy debt proved otherwise.  Hamilton (like most men who served their country back then) made a meager salary, just $3,500 a year, far less than what he and his large family needed.  He had set aside his law practice (which probably would have made him 10 times his Secretary’s salary) to serve, and paid a large financial price for it.  He had worked tirelessly to clean up the country’s debt, and it was time to do the same for his own.

Alexander Hamilton was ready for private life and private practice, and he would begin on February 1st.  But make no mistake, he would never be far from the public eye and its scrutiny.

Recommended Reading: Alexander Hamilton

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As anyone with a pulse probably knows, the United States government is pretty badly in debt.  I did a few searches to try to find the total, but that was difficult.  It appears that most “debt-clock” sites show the nation in the hole by more than $14,000,000,000,000…14 trillion dollars.

But then there’s this thing called “unfunded liabilities”.  What’s the difference between those and traditional debt?  As best I can tell, a “debt” is money you owe for something you’ve purchased.  You borrowed to buy a car, or a house, or a boat.  So you have the asset, but you still owe money for it…that’s debt.  But let’s say you’ve committed to buying a house, even though you don’t have the money to pay for it.  That’s an unfunded liability.  Once you buy the house and get a physical loan for it, the unfunded liability becomes actual debt.

Like I said, the U.S. government’s debt is more than $14 trillion (and it’s gone up a couple million dollars in the time it’s taken you to read this far).  But the unfunded liabilities (commitments to pay for things) total more than $100 trillion…$100,000,000,000,000.

And since everyone in the country earns (added together) in the neighborhood of just (just!) $60 trillion, well…uh, I’m pretty sure that we’re in deep financial doo-doo.

In 1790, there was debt as well.  The U.S. government had borrowed heavily from the French and Dutch to finance the Revolution, to the tune of roughly $12 million in principle and interest (or about a minute’s worth of modern-day debt).  But in addition, the government had borrowed more than $40 million from its own citizens, handing out I.O.U.s like chucking candy from a float on the 4th of July.

And now that an “official” government was getting under way, one of first things on the docket was establishing good credit.  That meant paying off the debt.  Treasury Secretary Alexander Hamilton felt strongly (as did most of his contemporaries) that debt was bad for people, and worse for governments.  He would write that 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 so he set to work, building a plan to erase the debt and pay back the lenders, which would improve the new nation’s standing, both with its citizens and with the world.  That plan, called the Report on Public Credit, was 51 pages in length (the first page is illegibly shown above), and was read aloud to Congress on January 14, 1790.  It contained (essentially) three parts.

First, there was immediate repayment of the foreign debt.  Hamilton argued that those countries had given us hard currency in a time of great distress.  National honor was at stake.  Second, the United States would repay the $40 million in domestic debt to those that held I.O.U.’s from the government.  They would be paid at full face value with accrued interest.  And finally, since all of the states had built up some debt financing their own portions of the Revolution, the government would assume those debts as well.  They totalled about $25 million.  The grand total of debt to be paid was something less than $80 million (or what our government has run up while you’ve been reading this).  All members Congress agreed with the first point…repaying foreign debt was paramount.

But the battle began in earnest over the second and third points.

Point Two, paying off the domestic debt was important, but who would get the money?  Many of those owed money by the government were soldiers, who had left the army at fight’s end with nothing but a promise of compensation.  And promises don’t pay the bills.  So many of them had sold their I.O.U.’s (for 15 cents on the dollar or less) to speculators, who hoped to make a profit should the government decide to make good.  Now that it was, those folks stood to make a killing, while those who originally owned the debt got nothing.  Detractors of Hamilton’s plan said it wasn’t fair.  Speculators had taken advantage of others and now stood to make a fortune.  Something should be given to both groups.

Hamilton (and those that sided with him) argued that, while many people had sold their debt in time of crisis, they too had engaged in speculation…speculation that the government was not going to make good.  How was that really any different?  And to go back and try to find all these people was a logistical impossibility.  But what’s more, it amounted to the government giving people money that were no longer owed, which many considered discrimination.

As for Point Three (the assumption of state debt), this one really got some states steamed.  Yes, every state had debt after the Revolution.  Massachusetts and South Carolina, in particular, had very large debts.  But some (including powerful Virginia) had already paid off its debts through taxing its citizens.  Others still had some debt, but had sound plans already in place for repayment.  Now the federal government was going to assume all the debts and states like Virginia would be re-taxed.  Once again, Hamilton argued that having one overarching “debt-paying” plan in place was far better (and far more efficient and ultimately less expensive) than individual state programs.

But there was more to it.  Politically, the government was still in its infancy, and many still railed against it.  There were questions as to its long-term survival.  Placing the debt in the federal government’s hands meant that people’s allegiances shifted to the central government.  If people wanted to get their money back, it was in their best interests to see that government survived at least long enough to do so.  And since the plan included paying off 5% of the debt and interest each year, Hamilton’s motive was clearly not to make the central government an all-powerful entity to control the lives of its citizens.  He was basically using a bit of debt to buy a little time for a brand-new system to get grounded.

The Report on Public Credit would create months of debate in Congress.  James Madison, not present at the plan’s unveiling (he was late returning due to a bout of dysentery), would strongly disagree with Hamilton’s proposals.  In our musings together, we’ve often alluded to the friendship-turned-rivalry of these two great men.  That split began right here.

Recommended Reading: James Madison and Alexander Hamilton. Read the perspectives of each.

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Unless you vacation in the West Indies, you’ve probably never heard of Nevis.  Located a couple of hundred miles south and east of Puerto Rico, Nevis is a 36-square-mile chunk of rock dominated by the 3,200-foot natural lookout of Nevis Peak.  If you visit the official website for Nevis, it won’t take you long to figure out that tourism is what drives the economy.  Like many islands in the Caribbean, Nevis is blessed with spectacular views, a tropical climate, and gobs of blue-as-azure ocean.

But in the 18th century, tourism didn’t drive any economy, including Nevis.  And while it’s a relative unknown to us today, back then this small island was well-known, and part of a European rivalry, which saw countries vying for a growing, and very lucrative, sugar trade.  Fortunes could be made very quickly under the right circumstances, and those circumstances usually included lots of slaves to work the plantations.  In addition, the British sent shiploads of criminals and other riffraff to Nevis, hoping to clean up the streets of London.  Ron Chernow described it as “a tropical hellhole of dissipated whites and fractious slaves, all framed by a backdrop of luxuriant natural beauty.”

It was into this environment that Alexander Hamilton made his entrance on January 11, 1755…or maybe it was 1757.  For a long time, 1757 was the recognized year.  And while modern scholarship still hasn’t fully decided which year it was, close examination of the facts gives an edge to the earlier date.

But there is no doubt that Hamilton was an illegitimate child.  In today’s culture, children born out of wedlock make up a significant percentage of all babies born.  In 1755, that was not the case, and it raised eyebrows, even in a place of such moral laxity (dare I say debauchery?) as Nevis.

Rachel Faucette, Hamilton’s mother, was married off as a teen by her mother to Johann Michael Lavien, a man approaching 30 who, despite his flashy dress and aristrocratic pretense, tended to make terrible financial divisions and bumbled from one misfortune to another.  The marriage was a nightmare.  Rachel had no love for her husband, who eventually accused her of adultery (which may have been true) and threw her into prison, thinking some time behind bars would bring her around.

To the contrary, Rachel Faucette Lavien found her will strengthened and, upon her release, she simply left her husband (and a young son) on St. Croix and fled (with her mother) to St. Kitts, right next door to Nevis.  And at some point, she met James Hamilton.  He had come to the West Indies (like so many others) to seek a quick fortune in the world of sugar.  But he was late to the game and lacked business sense (much like Lavien), so he ended up doing menial work attempting to make ends meet.

And from this relationship came two sons, James, Jr. and Alexander.  And while their parents may have gotten married, the Church certainly did not recognize it.  She had not officially divorced her first husband, which meant her “second” marriage was considered null and void.  Her two children were, by extension, illegitimate.

And that stigma would follow Hamilton all his life, despite his tremendous accomplishments.  Whether in the West Indies or in New York, family heritage and bloodlines meant a great deal in the 18th century.  We’ve spent a lot of time discussing many of the facets of this complex man, and it’s safe to say that, throughout the fabric of his persona, the backdrop of his birth and those first 16 or 17 years spent in Nevis were deeply etched into it.

But rather than being overcome by his roots, Alexander Hamilton rose above stigma and hardship.  He studied hard, had a head for business, and impressed those around him, to the point that the leaders on Nevis took up a collection and sent young Hamilton to America, where his talents and intelligence could be developed.  Hamilton became a student, a graduate, an aide-de-camp to General Washington, a powerful lawyer, an awesome orator, a catalyst for a new Constitution when it was needed, and its most ardent defender when it was done.  He was our first Treasury Secretary and, as we have learned on these pages, his influence is still with us, more than 200 years after his untimely death.

As Chernow writes, “Today, we are indisputably the heirs to Hamilton’s America, and to repudiate his legacy is, in many ways, to repudiate our modern world.”

Happy Birthday, Alexander Hamilton!!

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“A little after noon on January 8, 1790, George Washington climbed into his cream-colored coach and rode off to Federal Hall behind a team of four snow-white horses.  In its sparsely worded style, the Constitution mandatd that the president, from time to time, should give Congress information about the state of the Union, but it was Washington who turned this amorphous injunction into a formal speech before both houses of Congress, establishing another precedent.”  Ron Chernow, “master” of Alexander Hamilton, penned those words in his biography of our first President, which was just recently released and is ready for your absorption.

In today’s world, with 220+ years of tradition to back us up, the State of the Union speech is something to which I look forward every year…to not watching.  I suppose it’s because I’ve become jaded to a process that has become so complicated and so expensive (to say nothing of being so mired in unrecoverable debt) that I no longer care to sit for 90 minutes and listen to the Commander-in-Chief talk about spending additional billions (or more) to assist us in our “pursuit of happiness”.  My dad has said many, many times that “everything translates to bucks”, and every word from a President’s lips (nowadays, at least) sounds to me suspiciously like a cash register ringing.

But in 1790, it wasn’t quite that way.  Oh, there was money that needed to be spent, but it wasn’t due to massive bloat in government.  It wasn’t caused by a debt so deep that simply paying on the interest was nearly impossible.

Nope.

It was more about getting an actual government started.  Everything was new.  Chernow writes that everything (including the protocol for this first State of the Union Address) “still had an improvised feel.”  There was no precedent to follow, because new precedent was being set as the sun rose on each new day.  And President Washington talked hopefully about each step forward, desirous that would make the country stronger and more prosperous.

There was joy for North Carolina’s entrance into the Union.  She had rejected statehood in 1788, but voted to join in November of the following year.  He talked of the need to establish credit and spur economic growth, hinting at Hamilton’s upcoming report (which I hope to discuss next week) and accompanying financial program.  Washington spoke of national defense which, along with the Revenue Cutter service (to be started later that year), had some folks already worrying about government expansion and intervention.  Improved learning and a proposal for a national university also had a place in an “Address” that was both brief and to the point.

And then it was done.  The legislators stood up, Washington bowed, and stepped down.

Recommended Reading:  Washington – A Life – Thanks to Martin over at What Would the Founders Think for a review that pushed me over the edge to purchase this book.  If I can ever get Madison’s biography finished…

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I was doing some digging on the Internet the last week and came across an article that referenced the following verses from the Bible…“But there is nothing covered up that will not be revealed, and hidden that will not be known.  Accordingly, whatever you have said in the dark will be heard in the light, and what you have whispered in the inner rooms will be proclaimed upon the housetops.”  Taken from the New Testament’s book of Luke, they are perfectly suited to Today’s History Lesson.

Alexander Hamilton’s affair with Maria Reynolds left a blot on what was the exceptional (if controversial) life of one of America’s most important and influential Founders.  In his biography of the man, Ron Chernow summarizes this black episode by writing, “The Reynolds affair was a sad and inexcusable lapse on Hamilton’s part, made only the more reprehensible by his high office, his self-proclaimed morality, his frequently missed chances to end the liaison, and the love and loyalty of his pregnant wife.”

And he very nearly got away with it.

He probably would have had not James Reynolds ended up in jail.  The husband of Maria Reynolds was, in modern parlance, “a complete jerk.”  He let his wife continue in an illicit relationship with a member of President Washington’s Cabinet, then worked to extort money from him, all the while putting on the facade of the wronged man.

But Reynolds was also a scammer, and that’s how Hamilton’s secret became known.  Reynolds (and another man) tried to defraud the government by passing themselves off as the executors of a dead war veteran in order to collect $400 in benefits.  The plan’s failure landed Reynolds in jail.  And because the name of the war veteran came from a list stolen from Hamilton’s Treasury Department, the charges filed against the defendants were made by Treasury.  Immediately Reynolds suspected Hamilton of engaging in a bit of “payback”, and began dropping hints that he had information damaging to the Secretary.

At first it was believed that the Treasury Secretary was engaged in some sort of illegal activity…maybe illegal speculation or diverting funds or collusion.  Congressman Frederick Muhlenberg was the first to suspect the worst (having talked extensively with Jacob Clingman, Reynolds’ partner-in-crime), and visited with fellow Congressman Abraham Venable and Senator James Monroe.  The three men decided to write a letter and give it to the President, but to visit Hamilton before making the delivery.

On the morning of December 15, 1792, the three entered Hamilton’s office and confronted the Secretary about improper dealings with James Reynolds (who by now had been released from jail and had skipped town).  He responded angrily about the manner of their approach but denied nothing, instead inviting them to his home that evening, where he said he would explain everything.

That night, the three Congressmen, expecting to hear a tale of misdeeds and impropriety that had taken place behind the office door, were instead given a detailed account of a tawdry affair that had taken place behind a bedroom door.  Alexander Hamilton, as was typical, was incredibly detailed.  Chernow continues, “…as if in need of some cathartic cleansing, Hamilton briefed them in agonizing detail about how the husband had acted as a bawd for the wife; how the blackmail payments had been made; the loathing the couple had aroused in him; and his final wish to be rid of them.”  Alexander Hamilton came completely clean…letters, payments, details, dates, times…everything.

The letter to the President was set aside.  James Monroe would later write, “We left under an impression our suspicions were removed.  He acknowledged our conduct toward him had been fair and liberal – he could not complain of it.”

The three men all swore they would keep Hamilton’s confession completely private.  But as our Scriptures above will attest, Hamilton’s deeds were now public, even if the circle of “those in the know” was small.  It wouldn’t take long for news of those deeds to spread.

Recommended Reading: Alexander Hamilton

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Nowadays, the government has all sorts of ways to generate revenue.  When you get your paycheck, part of it goes to the government.  When you buy something, there’s almost always a tax on it.  Still have a land line at your house?  Guess what?…you probably pay a tax to Washington each month.  Win the lottery?…you paid taxes.  Do you drive?  Every gallon of gas is heavily taxed.  Taxes when you live, taxes when you die, and taxes for just about everything in between.  It’s the American way.

In 1790, the government had about one way to generate revenue, and that was via import tariffs.  People tried all sorts of ways to avoid paying them, but the Revenue-Marine, created in August of that year by the Treasury Department, made avoiding the tax man pretty difficult.  And that was good for Washington…well, actually it was still Philadelphia (though Washington was the President).

As 1790 came to a close, a couple of things were pretty apparent.  First, the revenues coming in were substantial.  Treasury Secretary Alexander Hamilton’s goal of reducing the debt and improving America’s credit was being achieved.  The economy was growing and the value of government securities had tripled.  The United States was operating at a surplus.

Second, it was Great Britain that was paying most of the bills.  The old mother country was far and away the biggest importer, which meant she paid most of the tariffs.

Third, at Hamilton’s urging, the federal government had taken on all the leftover war debts of the individual states.  This issue had caused the first major disagreement in Congress (and will eventually get some ink time around here), but had been resolved with one of the country’s first compromises.  It also left the Treasury Secretary in something of a bind.  Import duties were about as high as Hamilton dared raise them and he believed it was necessary to spread the pain around a bit.  But direct taxation of the people was fraught with peril, and a land tax (while good for the coffers) would have been universally loathed.

So Hamilton looked at “sin” taxes, particularly whiskey and domestic spirits.  It wasn’t a new idea.  As Hamilton had taken his post the year before, he had written to his friend James Madison.  “May I ask of you friendship to put to paper and send me your thoughts on such objects as may have occurred to you for an addition to our revenue…”.  Among Madison’s ideas was a tax on home distilleries, believing that “as direct taxes would be still more generally obnoxious and as imports are already loaded as far as they will bear…”.  He also believed that such an excise tax had a social benefit, reducing drunkeness and disease.

On December 13, 1790, Alexander Hamilton presented his plan to Congress.  And as expected, howls of protest were heard.  Home breweries were a sacred part of local culture, and government intervention of any kind (to say nothing of direct taxation) was badly resented.  It was clear that many distillers would only give the government its share at the end of a musket…which is exactly what happened.  And we’ll cover that at some point as well.

Recommended Reading: Alexander Hamilton

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“The mistakes of the father are often visited upon the son.”

“The apple doesn’t far very far from the tree.”

“Like father, like son.”

These are phrases that you and I have probably said hundreds of times.  We watch children grow up and, whether they belong to us or not, we often notice that the path they follow in some ways resembles that of their parents.  And sometimes that’s good.  Some parents work really hard to set an excellent example for their children, and the kids pick up that example and run with it.  Of course, sometimes the opposite is true, and we watch a cycle of anguish and heartache begin to form.  And then we’ll shake our heads, turn back toward our front door, and mutter one of those phrases under our breath.

But sometimes the time-space continuum gets all contorted.  What was “up” becomes “down” and things start to get all wobbly.  When that happens, it’s the behavior of the children that ends up manifesting itself in the parents.  Yikes!!

Parents are supposed to be experienced…mature…capable of clear, sound thinking and good judgement.  Usually…

Well, time and space conspired to create just such a flip-flop in the Hamilton family.  Alexander Hamilton’s family.  Philip Hamilton was oldest of the children and he had every indication of following in his father’s footsteps.  He was intelligent, good looking, and a bit of a rake (in a youthful way).  He was a fine orator and writer.  The future was promising for young Philip, so much so that his father called him the “eldest and brightest hope” for the family.

But like his father, Philip had a strong sense of honor and, even in his youth, would protect that honor at all costs.  July 4, 1801 was a day of celebration.  The country was a quarter century old, and there was celebration and pomp throughout the country.  There was merriment and feasting.  And, of course, there was speech-making.  In New York, the people gathered for the reading of the Declaration of Independence.  When it was finished, George Eacker got up and addressed the crowd.  This young lawyer was a strong supporter of the Republican movement and President Jefferson.  And as we know, Jefferson was no friend of Alexander Hamilton.

Eacker praised Jefferson for saving the Constitution and the Republic from the likes of Hamilton, blaming Hamilton for the XYZ Affair and, once again, accusing Hamilton of favoring a return to monarchy.  Of course, the speech was published in the newspaper.  And Philip Hamilton read the papers.

Fast-forward to November when, by chance, young Hamilton ran into George Eacker at the Park Theater.  The encounter was heated, with strong words and loud voices that created a disturbance for others trying to watch a play.  Eacker muttered that Philip (and the man with him) were “rascals”.  Today, the word “rascal” means very little.  Maybe we think of Alfalfa or Buckwheat in black and white, but that’s about it.  In 1800, however, the word was loaded.  Calling someone a rascal was the codeword to a duel…and that’s exactly what happened.

Two days later, on November 22, Philip Hamilton and George Eacker exchanged gunfire.  Hamilton had already determined to let Eacker pull first before wasting his own shot in the air.  Unfortunately, Eacker did not throw his shot, which ripped through the former Treasury Secretary’s oldest son and dropped him to the ground.  Taken immediately to the doctor, Philip was soon joined by his father and mother, who was pregnant with their eighth child.

At 5:00am on November 23, 1801, Philip Hamilton died from his injuries, leaving grief-stricken parents, brothers, and sisters.  Eliza’s baby, born in June of the following year, would be named Philip in honor of the lost son.

And in a striking coincidence, the father did not learn from the mistake of the son.  As we well know, Alexander Hamilton would meet his end in exactly the same fashion:  a duel in which he had decided to spare his opponent…one Aaron Burr.

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