Two and a half centuries after the American Revolution the United States stands as one of the greatest powers on earth and the undoubted leader of the western hemisphere. This stupendous evolution was far from a foregone conclusion at independence. The conquest of the North American continent required violence, suffering, and bloodshed. It also required the creation of a national government strong enough to go to war against, and acquire territory from, its North American rivals.
In A Hercules in the Cradle, Max M. Edling argues that the federal government’s abilities to tax and to borrow money, developed in the early years of the republic, were critical to the young nation’s ability to wage war and expand its territory. He traces the growth of this capacity from the time of the founding to the aftermath of the Civil War, including the funding of the War of 1812 and the Mexican War. Edling maintains that the Founding Fathers clearly understood the connection between public finance and power: a well-managed public debt was a key part of every modern state. Creating a debt would always be a delicate and contentious matter in the American context, however, and statesmen of all persuasions tried to pay down the national debt in times of peace. A Hercules in the Cradle explores the origin and evolution of American public finance and shows how the nation’s rise to great-power status in the nineteenth century rested on its ability to go into debt.
About the Author
Read an Excerpt
A Hercules in the Cradle
War, Money, and the American State, 1783â"1867
By Max M. Edling
The University of Chicago PressCopyright © 2014 The University of Chicago
All rights reserved.
A More Effectual Mode of Administration: The Constitution and the Origins of American Public Finance
"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." This observation in one of Alexander Hamilton's essays in The Federalist suggests that fiscal and financial matters played a prominent role in the framing and ratification of the US Constitution. The troubled finances of the American union were a primary reason for the calling of the Philadelphia convention, and the fiscal and financial powers of the reformed national government were the subject of considerable interest both in the convention and in the ensuing struggle over ratification. But the reverse is even more true: the Constitution was of fundamental importance to the history of American public finance. It provided the authority for the creation of governmental institutions that would give the federal government the ability to draw forth the nation's resources and thereby realize ambitious policy goals.
In 1787, the critical issues confronting the American federal union originated in the vast western reaches of the United States and on the boundless oceans. In the West, the Continental Congress had only nominal control over the American Indians and European Americans who resided there. Britain, the former mother country, violated the new nation's territorial integrity by maintaining military posts on American soil and diplomatic relations with Indian nations living within the borders of the United States. On the Atlantic Ocean and beyond, the expulsion of the American colonies from the common market of the British Empire had led to a sharp downturn in exports and shipping, which in turn had caused an economic depression. A third challenge lay in the cracks that had begun to appear in the federal union, where conflicts of interest between the member states over the Revolutionary debt, commercial regulations, and territorial claims were producing tension. If the term is defined broadly, to include the management of the western domain and its inhabitants as well as interstate relations within the American union, these issues can all be said to pertain to foreign affairs. They concerned questions that fell outside the internal politics of the states, although international commerce, the management of the western lands, and interstate conflicts had obvious impacts on economic and political life. The significance of the framing and adoption of the Constitution lies in the fact that it made possible the creation of an energetic national government that could begin to address issues facing the American nation in the international rather than the domestic sphere. The centralization of fiscal and financial powers that resulted from the framing and adoption of the Constitution is a crucial part of this story.
Historians have not always appreciated the importance of this change because they have insisted on seeing the Constitution as both originating in and aimed at domestic rather than international problems. The predominant interpretation centers on the question of popular political influence over American government and argues that the nationalists of 1787 entered the Philadelphia convention intent on depriving the people of political influence by transferring power from the states to a central government less receptive to the popular will. Far from being successful, however, the founders "failed miserably" in their task. In their new guise as the Federalist party, the heirs of the nationalist reformers struggled courageously through the 1790s to establish a central government that could reach deeply into society to regulate economic and social relations in accordance with the wishes of the elite. But their cause was doomed. Their program lacked the support of the broad layers of the population who still dominated the nation's politics. With the "Revolution of 1800," when Jefferson ascended to the presidency, the Federalist attempt at nation-state formation came crashing down. Thanks to Jeffersonian intransigence the American union returned to its pre-Constitution condition in which the states held "sovereign status in a voluntary and conditional union." States' rights advocates won the day, and the nationalist vision was expunged from the American political tradition. In the nineteenth century, "governance in Washington barely mattered in the lives of ordinary Americans," and the federal government dwindled to become no more than a laughing matter, the ludicrous spectacle of "a midget institution in a giant land."
In recent decades, historians have begun to reinterpret the impulse behind the Philadelphia convention and the long-term impact of the Constitution on the course of American history. Starting with a resurgence of interest in the international history of the founding, key documents such as the Declaration of Independence and the Constitution are now seen less as the expressions of a liberal state-building project than as means designed to allow the American nation to interact with foreign powers. The low profile of the federal government in the regulation of the nation's social and economic relations in the nineteenth century need no longer be seen as evidence of its abject failure. Its mission lay elsewhere.
The founders never designed their national government to deal with what contemporaries called "internal police," a broad field of government activity that included the regulation of the economy and the health, morals, and general welfare of the citizens. This power was left with the states. The state-republics delegated only the responsibility for conducting foreign affairs and intraunion relations to a common national government. Foreign relations included activities such as defense and war making, relations with American Indians, the acquisition of territory, international trade regulations, and commercial treaty making. The most important intraunion task was the preservation of peace between the member states through the settlement of interstate conflicts, such as disputes over territory or, later, over the expansion of slavery. It also fell to the national government to create and maintain a common market by means of a customs union, a common currency, and the protection of contracts in transactions between the citizens of one state and those of another state or nation.
At the conceptual level, the founding was no radical reformulation of American federalism. Although the Constitution altered the system of American government profoundly, it did nothing more than fine-tune an already established division of powers between the states and the national government. The real change from the Articles of Confederation, the compact that first created the American union, was that the Constitution provided the authority and blueprint for a national government that could act independently of the state-republics that together formed the Union. As Roger Sherman pointed out, the powers delegated to the members of Congress by the Constitution were basically "the same as Congress have under the articles of Confederation with this difference, that they will have the authority to carry into effect, what they now have a right to require to be done by the States."
To the extent that historians have failed to appreciate the limited but nonetheless important powers that the Constitution invested in the national government, it is in large part due to the nature of the paper trail left behind by the nation's founders. Private and public commentaries during the framing and ratification of the Constitution are filled with insistent demands that the federal union be reformed. A consistent complaint was the claim that the state governments had neglected the common good of the Union. But these statements have very little to say about what the common good of the Union really was. Nor do they speak of what the national government was designed to do, or even why a federal union was needed. To recover this information it is necessary to return to the original union established by the Articles of Confederation. It is also necessary to pause at points in the Constitutional Convention debates that most historians hurry past on their way to the Connecticut Compromise and the other major decisions of the convention. For it is only when the function of the Union and the role of the national government within it are established that is it possible to fully appreciate the significance of the structural reorganization of the federal union that was brought about by the framing and adoption of the Constitution.
In The Federalist, Hamilton's coauthor of the series, James Madison, wrote what may well be the most astute observation on the nature of the constitutional reform of 1787 when he remarked that
if the new Constitution be examined with accuracy and candour, it will be found that the change which it proposes, consists much less in the addition of NEW POWERS to the Union, than in the invigoration of its ORIGINAL POWERS. The regulation of commerce, it is true, is a new power; but that seems to be an addition which few oppose, and from which no apprehensions are entertained. The powers relating to war and peace, armies and fleets, treaties and finance, with the other more considerable powers, are all vested in the existing Congress by the articles of Confederation.
Properly speaking, the Constitution could not therefore be said to enlarge the powers of the national government, because "it only substitute[d] a more effectual mode of administering them."
This chapter looks more closely at the Constitution as an organizational reform making possible "a more effectual mode of administering" the national government's powers. In large part a familiar story, the inflections and stress will nevertheless vary from the traditional rendition of the business of the Philadelphia convention. Organizational reform may sound dull and almost pedestrian. We are used to employing grander words to describe the achievements of the American founders. But what they did was of the utmost importance to the ability of the United States to shape its own destiny in a largely hostile world. It was only with the Constitution that the federal union acquired national cohesion and a central government with the capacity to act with determination and energy to defend and promote the national interest against other powers and peoples.
The United States willed itself into existence through the Declaration of Independence. Thomas Jefferson's bold statement not only justified the colonies' separation from the British Empire and signaled their claim to the status of "Free and Independent States" but also declared the intention of the "United Colonies" to enter into union. The Articles of Confederation, which followed rapidly on the Declaration, aimed to show the outside world that the thirteen new states stood united in their opposition to the former mother country and were now to all effects an independent nation in the international family of nations. The origins of the American "Confederate Republic" therefore lie in the need "to crush the pr[esent] & future foes of her Independence," as a contemporary congressional committee succinctly put it. Union and independence were intertwined goals from the very birth of the new nation. The same motion that called for a declaration of independence also moved that "a plan for confederation" should be prepared forthwith. In early July 1776 such a plan was presented to the Continental Congress, but the pressure of the War of Independence prevented immediate action. It was not until mid-November of the following year that the Continental Congress adopted "certain articles of Confederation and perpetual Union" tying the thirteen states "into a firm league of friendship with each other, for their common defence, the security of their Liberties, and their mutual and general welfare" and binding them "to assist each other, against all force offered to, or attacks made upon them, or any of them, on account of religion, sovereignty, trade, or any other pretence whatever." Because the Articles of Confederation were a compact of union between sovereign states, they could not take effect until ratified by all the state governments, a process not completed until March 1781.
The importance of foreign relations and war making to the American union is evident in the language of the Articles of Confederation. In the Declaration of Independence, the state-republics had each claimed the "full Power to levy War, conclude Peace, contract Alliances, establish Commerce, and to do all other Acts and Things which Independent States may of right do." Articles VI and IX of the Articles of Confederation transferred the power of making war and peace, sending and receiving ambassadors, and entering into treaties and alliances from the state governments to "the united states in congress assembled." Congress was also invested with the power to arbitrate interstate conflicts among the members of the Union, to facilitate their commercial intercourse by determining the value of coins and fixing weights and measures, and to regulate member states' relations with American Indian nations. In effect the Articles established a division of labor between the states in their individual capacity and the states acting in their collective capacity "in congress assembled." In their former role, the states retained their internal police powers. In their latter role, the states dealt with foreign affairs, including war, and with relations between the member states. The Articles of Confederation did not establish a national government, however. Congress was not a legislature but a "plural executive" or a "deliberating executive assembly" made up by state delegations. It provided a forum in which the states could agree on common measures and coordinate their actions. But there were neither executive departments nor field agencies answering to Congress, nor was there a continental court structure. Under the Articles, the states served as the administrative agents of the Union.
The distinction between internal and international affairs was well established in the late eighteenth century although there was no fixed nomenclature to designate these categories. John Locke distinguished between "executive" and "federative" power, where the latter referred to "the management of security and interest of the publick without, with all those that it may receive benefit and damages from" and included "the Power over War and Peace, Leagues and Alliances, and all the Transactions with all Persons and Communities without the Commonwealth." Montesquieu spoke of two forms of executive power, pertaining to "the things depending on civil rights" and to "the things depending on the rights of nations." By means of the latter, Montesquieu wrote, the magistrate "makes peace or war, sends or receives embassies, establishes security, and prevents invasions." A similar homegrown version of this distinction between different spheres of government action can be found in the so-called Essex Results, the response of the residents of Essex County to the Massachusetts Constitution of 1778, which explained that "the executive power is sometimes divided into the external executive, and internal executive. The former comprehends war, peace, the sending and receiving ambassadors, and whatever concerns the transactions of the state with any other independent states. The confederation of the United States of America hath lopped off this branch of the executive, and placed it in Congress."
Not only was the external-internal distinction well known to the draftsmen of the American union; there was also widespread agreement that it was proper to invest "federative" or "external executive" powers in Congress. Radicals differed little from conservatives on this score. In his 1776 Thoughts on Government, John Adams said that Congress's "authority should sacredly be confined to these cases, namely war, trade, disputes between colony and colony, the post-office, and the unappropriated lands of the crown." Carter Braxton agreed that Congress should "have power to adjust disputes between colonies, regulate the affairs of trade, war, peace, alliances, &c. but they should by no means have authority to interfere with the internal police or domestic concerns of any Colony." Even an early states' rights ideologue such as Thomas Burke held that "the United States ought to be as One Sovereign with respect to foreign Powers, in all things that relate to War or where the States have one Common Interest." Placing these functions in Congress required no radical rethinking of American politics. The American revolutionaries maintained that this distribution of labor had always characterized the British Empire. Only with the acts of Parliament that began in the 1760s had the traditional order been undermined. All the Articles of Confederation did was put this institutional arrangement to paper. As one historian has written, the major duties of Congress—the creation and command of the army and navy, the establishment of diplomatic relations with foreign states, the printing of money, the issuing of requisitions on the states, and the management of the post office—all "belonged to the crown before 1774." In contrast, "Congress did not pass laws, levy taxes, or regulate trade—functions that Parliament had claimed within the empire." Under the Articles of Confederation, Congress assumed the powers not of Parliament but of the king and council.
Excerpted from A Hercules in the Cradle by Max M. Edling. Copyright © 2014 The University of Chicago. Excerpted by permission of The University of Chicago Press.
All rights reserved. No part of this excerpt may be reproduced or reprinted without permission in writing from the publisher.
Excerpts are provided by Dial-A-Book Inc. solely for the personal use of visitors to this web site.
Table of Contents
Introduction: War, Money, and American History
1. A More Effectual Mode of Administration: The Constitution and the Origins of American Public Finance
2. The Soul of Government: Creating an American Fiscal Regime
3. So Immense a Power in the Affairs of War: The Restoration of Public Credit
4. Equal to the Severest Trials: Mr. Madison’s War
5. The Two Most Powerful Republics in the World: Mr. Polk’s War
6. A Rank among the Very First of Military Powers: Mr. Lincoln’s War
Conclusion: The Ideology, Structure, and Significance of the First American Fiscal Regime