Great Nations Pay Their Bills

Great nations pay their bills.

That, I believe, is what this debate boils down to. That is what our founding fathers would tell us if they saw us toying so dangerously with the federal budget and the debt ceiling.

The national debt has always been controversial. The current government shutdown is only the latest episode in a long history of divisive debates over paying the nation’s bills.

Consider, for example, what John Adams’s wife Abigail wrote to her daughter Mary in 1792: “I firmly believe, if I live ten years longer, I shall see a division of the Southern and Northern states, unless more candor and less intrigue, of which I have no hopes, should prevail.”

She wasn’t talking about slavery. She was talking about government debt. And she wasn’t alone.

“With the South filled with debtors and the North creditors,” says the historian Ron Chernow, Thomas “Jefferson feared the country would break apart along sectional lines.”

You have to admit, that really puts things in perspective. Today’s debate may be polarized, but no one seriously expects half the nation to secede because of it. And yet, in the early days of the American experiment, that’s how controversial the national debt was.

After the American Revolution, the new government had a lot of bills to pay. Fighting the mighty British Empire wasn’t cheap. The federal government had racked up $54 million in unpaid bills, and the states owed another $25 million.

There were many in Congress who believed that the government should default on its debt rather than pay the bills. They knew that they’d have to raise taxes to pay the bills, and they believed that taxing and spending were the first steps toward monarchy.

Sounds familiar, no?

George Washington disagreed. During the war, Washington had marveled at the British army’s seemingly inexhaustible supply of money. A great military, he believed, depended on the government’s ability to spend as much as necessary, and that required tax revenue and solid credit — two things that were sorely lacking on the American side.

By the end of the war, investors were fed up with the Americans. The new state governments had refused to collect enough taxes to pay the interest on the debt they had accumulated. The financier Robert Morris warned Washington that investors “who trusted us in the hour of distress are defrauded.” It’s “madness,” he lectured, to “expect that foreigners will trust a government which has no credit with its own citizens.” He begged the federal government to begin collecting taxes to repay their loans.

“With respect to the payment of British debts,” Washington concluded, “I would fain hope…that the good sense of this country will never suffer a violation of a public treaty, nor pass acts of injustice to individuals. Honesty in states, as well as in individuals, will ever be found the soundest policy.”

In other words, when a gentleman gives his word, he honors it. Great nations pay their bills. He did not, however, have an easy time convincing Congress of that.

In his first State of the Union, Washington declared that “an adequate provision for the support of the public Credit is a matter of high importance to the national honor and prosperity.” A few days later, his Treasury Secretary Alexander Hamilton proposed to Congress that the federal government not only raise enough taxes to pay off its debt but also to pay off all the states’ debts as well. Even more controversial, he suggested that they pay the entire face value of the debts, not the low prices that they were currently selling for in the market.

James Madison rose in the House of Representatives to denounce Hamilton’s proposal. It would reward speculators who had purchased the government bonds from hapless war veterans, he argued, and create a dangerously large Treasury bureaucracy.

In the end, Hamilton won, but not before creating many enemies. The investors who stood to gain from his policy lived mostly in the industrial North, while the indebted landowners of the South were suspicious of bankers and their “paper assets.” The debate over Hamilton’s proposal was the beginning of a rift that eventually led to our modern political parties.

Not long after Congress approved Hamilton’s plan, government bonds tripled in value. “The progress of public credit is witnessed by a considerable rise of American stock abroad as well as at home,” boasted Washington.

Still, radical dissenters tried to thwart this goal. In western Pennsylvania, a group of outraged farmers rebelled violently against the new tax the government had placed on whiskey, a product created from their grain. But Washington wouldn’t stand for it. If “a minority…is to dictate to a majority,” he warned, “there is an end put at one stroke to republican government.”

Apropos wisdom for today, wouldn’t you say?

Eventually, the Whiskey Rebellion was quelled, and all the debts were paid off — state and federal — at face value. The American government went on to become the most trusted investment in the world. To this day, it is widely considered the crowning achievement of Hamilton’s career — and one of the most important acts of this new nation.

Our credit is our reputation. It is our word. It is, quite literally, our bond with the investors of the world. To abuse it is not only to invite economic disaster; it is, more importantly, to sever the promise our forefathers made to us and the promise we make to the world. When other nations are in distress, they turn to us. We are the beacon in a sea of uncertainty. We are the deep pockets when all others have gone empty.

We are a great nation. Let’s start acting like it.


This op-ed was published in today’s Huffington Post. An abbreviated version was published in the South Florida Sun-Sentinel.

What George Washington Taught Us in His Darkest Hour

Everyone has heard the story of George Washington‘s nighttime crossing of the Delaware River on a frosty Christmas morning in 1776, but few remember his equally treacherous nighttime march to Germantown only ten months later.

It began on the evening of October 3, 1777. The Continental Army was camped out at Pennypacker’s Mill, about thirty-five miles northwest of Philadelphia, after a disastrous defeat at the Battle of Brandywine Creek.

All year, Washington’s reputation had been growing after the two surprise victories — at the Battles of Trenton and Princeton — that followed his surreptitious crossing of the Delaware. “Had he lived in the days of idolatry,” wrote the Pennsylvania Journal, he would have “been worshiped as a god.” To which Frederick the Great added that Washington’s back-to-back victories “were the most brilliant of any recorded in the annals of military achievements.”

But all that was in the past and nearly forgotten already. On September 11, the British and their German mercenaries had crossed Brandywine Creek, outflanked Washington’s men, and dealt the Americans a horrific blow, killing 200 and capturing another 400.

Almost immediately, Washington’s admirers turned against him. Thomas Jefferson ridiculed his leadership as “too slow, even indolent, much too weak, and…not without his portion of vanity and presumption.” John Adams prayed for “one great soul” to lead them out of this mess.

Convening with his generals at Pennypacker’s Mill, Washington decided to launch an ambitious strike in Germantown “to remind the English that an American army still existed.” He divided 10,000 soldiers into four columns, carefully coordinated to attack the enemy at all angles simultaneously.

The maneuver took a bad turn at dawn when one of the columns encountered a British regiment before reaching their destination. They engaged in a bloody skirmish and wasted ammunition before the British retreated.

Next, Washington found himself in an unwelcome (and unwise) diversion when his column came across a stone country house filled with British soldiers and, instead of sending most of his men around the house as planned, stalled the entire maneuver by trying to overtake it — only to find that it was a nearly impenetrable fortress.

After sapping valuable time in vain, Washington pressed on. By the time he got to Germantown, his careful coordination was dashed, and the Americans found themselves in a confusing firefight amid fog and smoke. By the end of the day, they had suffered twice as many fatalities as the British. The Battle of Germantown was a resounding loss.

While Washington was regrouping, his rival General Horatio Gates was winning an overwhelming victory at the Battle of Saratoga, capturing 5,000 enemy soldiers. That fall, a campaign spread through Congress to replace Washington with Gates. Meanwhile, Gates, believing his own hype, resisted Washington’s orders to send some of his troops to help Washington defend the Delaware.

The tension became so unbearable that Washington threatened to resign when he received word that Congress was planning to promote a brigadier who criticized Washington’s leadership as “miserable indeed.”

But Congress had bigger plans in mind. They created a Board of War to oversee Washington, a not-so-subtle hint that they no longer trusted him to run his own army, and as its first president they named none other than Horatio Gates.

While Washington was fighting on the political front to keep his job, his men were fighting on the physical front to stay alive, for that was the infamous winter they spent at Valley Forge. The conditions were so harsh that over 2,000 men died.

“The General is well but much worn with fatigue and anxiety,” wrote Martha Washington of her husband. “I never knew him to be so anxious as now.”

This portrait of Washington — defeated repeatedly, hounded by critics, tired, and anxious — is the opposite of the legend that we usually celebrate today, on his birthday, but it’s the key to understanding his monumental achievement. It was from this depth of despair, this dire moment of complete failure, that Washington rallied his pitiful band of amateur soldiers, inspiring awesome loyalty and uncommon courage to defeat the mighty British empire.

What set Washington apart from his peers wasn’t his ability to conquer — he actually lost more battles than he won — but rather his ability to survive, to persevere, to stand tall in the face of every setback.

Greatness, he taught us, lies not in the ease with which we succeed but rather the fortitude with which we fail — and the gusto with which we get up, dust ourselves off, and try again. And again. And again. Until we get it right.


An abbreviated version of this op-ed was published in today’s South Florida Sun-Sentinel.