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Hamilton's Blessing: The Extraordinary Life and Times of Our National Debt (1997)

by John Steele Gordon

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Most of us only know Alexander Hamilton as the man whose face graces our ten dollar bills. Or, perhaps we know him as the unfortunate answer to the Jeopardy question: “Who was on the wrong end of a duel with Aaron Burr?” That is too bad because, as this fascinating book makes clear, he really should be most famous for being the architect of the United States’ first set of economic policies in his role as the country’s Secretary of the Treasury. In particular, it was Hamilton who crafted a system of issuing debt at a federal level to replace the less efficient method of relying on the states to serve that role.

Hamilton’s Blessing is not really the story of any one man though; rather, it is the history of how America’s national debt developed and has changed over the past two centuries. If that sounds like a dull, painful reading experience, rest assured that it is not. In the hands of a talented historian like Gordon, this is a lively tale replete with myriad accounts of visionary economic insights as well as catastrophic political blunders. A key focus of the narrative is how the collective attitude in the United States regarding the act of borrowing money to pay our bills, which has been both the blessing that Hamilton promised and the curse that many others predicted, has evolved over time.

Today, things like income and inheritance taxes, the existence of a central bank, and a federal government that borrows more than it can ever hope (or intend) to repay are taken as given. However, these are relatively recent developments; a tax on personal income in the United States was introduced to help pay for the Civil War and only became a permanent fixture shortly before World War I. Also, for the country’s first 150 years, lawmakers followed Adam Smith’s prescription of paying back in good times what we needed to borrow strategically in the bad (e.g., wars, economic depressions). Starting in the 1940s, however, that attitude changed dramatically as John Maynard Keynes’ theory of managing the economy with active deficits began to take hold. That path, justified by the belief that the old pay-as-you-go mentality is irrelevant because “we are just borrowing from ourselves,” is the one we are still on today.

It has been said that there is no such thing as a pure economy—only political economies exist. The author emphasizes this point by noting that, removed from the discipline of having to balance the national budget, the last several generations of politicians have lacked the resolve to fix our convoluted tax system or cut federal spending at appropriate times. As a consequence, the national debt has now reached levels that would be incomprehensible to someone living just 50 years ago. While it is occasionally number-heavy and a little dated, this book provides the reader with both a superb historical context and sobering vision of our economic future. ( )
  browner56 | Feb 13, 2011 |
I am partial to small books: despite size, most have a message. To those of the same mind, I recommend adding John Steele Gordon's book Hamilton's Blessing to their list. It is a serious effort to explain evolving views on the country's national debt that is worthy of the time devoted to its reading. Dealing with what some might say is a great idea gone awry, it is an excellent, readable, and eminently understandable chronology of what happened, what went wrong and, in the author's view, why with respect to our national debt...
 
History in the hands of a deft historian can be really delicious, even if it is about economics. "Hamilton's Blessing" is John Steele Gordon's history of our national debt, stretching from its inception during George Washington's presidency up to the modern day.

The national debt was the brainchild of Alexander Hamilton, the first secretary of the U.S. Treasury. Hamilton saw the national debt as a way to absorb the debts incurred by the individual states during the Revolutionary War, and also as a device for creating capital for the new nation's growing industries.
 
At the opening of his useful new book, ''Hamilton's Blessing: The Extraordinary Life and Times of Our National Debt,'' John Steele Gordon drops what at first seems an encouraging tidbit of news. The present national debt of more than $5 trillion is certainly ''incomprehensible to the average American,'' he admits. ''For the record,'' he writes, ''laid out in silver dollars, it would be about 120 million miles long, wrapping around the equator 5,000 times.''

However, ''considered as a percentage either of gross domestic product (usually called G.D.P., it is the sum of the goods and services produced within our borders) or of Federal revenues,'' our debt ''is nowhere near as high as was the British national debt in 1819, the year Queen Victoria was born and when Britain was, in the words of the late historian Cecil Woodham-Smith, 'within sight of the heights of power and of wealth from which it was, briefly, to dominate the world.' ''
 
In a colorful, sweeping narrative, American Heritage business columnist Gordon charts the history of our national debt, a mere $80 million in 1792, but now a staggering $5.1 trillion. Alexander Hamilton, first secretary of the treasury, conceived of a manageable federal debt as a strategic instrument of national policy, and indeed, deficit spending helped the North win the Civil War...
 
In 1916 the national debt could have been paid off by the nation's richest man, John D. Rockefeller. This year the two richest Americans, William Gates and Warren Buffett, working together would go broke trying to pay even two months' interest -- approximately $50 billion -- on the national debt.

Does that get your attention? It is from John Steele Gordon's lively little book, ''Hamilton's Blessing: The Extraordinary Life and Times of Our National Debt.'' This 198-page primer appears just in time for the beginning of the great debate of this year, and perhaps of the remainder of the decade.
 
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To Eleanora Gordon Baird, to whom I am much indebted, with love
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In 1790, a British journalist, searching for a way to bring home to his readers the size of his country's national debt, seized upon an image that has a distinctly modern ring to it. The debt, he wrote, is of "a sum which the human mind can hardly form an impression. Were it to be laid down in guineas in a line, it would extend upwards of four thousand three hundred miles in length."
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Amazon.com Amazon.com Review (ISBN 0802713238, Hardcover)

Over the past couple of decades, our national debt has become a favorite political football for Democrats and Republicans alike. Yet few Americans seem aware that the debt has a long and (mostly) honorable history. Alexander Hamilton considered it a kind of political Krazy Glue, which would also spur American industry by keeping taxes high. This borrowing power enabled the North to win the Civil War without wrecking its economy and rescued us from the Great Depression. John Steele Gordon doesn't deny the dangers of an entire nation living on credit; indeed, he believes that our fiscal affairs are a mess. But he puts this mess in fascinating perspective. And he's quick to see the human side of economic behavior: "One problem," he writes, "is that human nature predisposes us to recognize depression easily and quickly, but prosperity, like happiness, is most easily seen in retrospect." Bull's-eye!

(retrieved from Amazon Mon, 30 Sep 2013 13:56:22 -0400)

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