Our founders’ economic advice to Obama
Last week, I summarized how President Barack Obama has not lived up to his campaign promises to lower the national deficit and debt and get our nation’s fiscal house in order. So now I’m calling on him to heed the economic advice of our nation’s first eight presidents.
Before I highlight some of the Founding Fathers’ wisdom on federal debt and spending, let me remind readers how Crossroads GPS recently summarized Obama’s relation to national debt:
“January 20, 2009: The National Debt Was $10,626,877,048,913.08 (Obama Takes Office). (Treasury Department, accessed 5/23/12)
“May 22, 2012: The National Debt Was $15,721,218,607,447.09 (Most Recent). (Treasury Department, accessed 5/23/12)
“Obama Has Been In Office For 1,219 Days (1/20/09-5/22/12). (Convert Units, accessed 5/17/12)
“$5,094,341,558,534.01 (divided by) 1,219 Days (equals) $4,179,115,306/Day.”
Outside of brief periods in our nation’s history, U.S. presidents have not been very frugal and disciplined with debt management. But our founders and first eight presidents did a much better job with money management than present leaders, who could learn a few fiscal lessons by turning back the clock to our early republic.
True, on Jan. 1, 1791, during George Washington’s second year as president, the national debt was $75 million, but that financial liability was incurred during the entire massive Revolutionary War as the cash-strapped Continental Congress, which lacked authority to levy taxes, accepted loans from France’s government, the Spanish government, Dutch bankers and investors, etc.
It was also true that Washington accrued $7 million more in debt during his entire eight years as president, but with the genius help of Secretary of the Treasury Alexander Hamilton, he firmly established our new and flailing country on solid financial ground and as a global power. And by 1795, Washington and Hamilton also had absolved the U.S. from financial obligations to foreign governments (though we did owe to some private investors in Europe) because American bankers privately assumed the foreign debts at a slightly higher interest rate and then resold them for a profit on domestic U.S. markets.
The second U.S. president, John Adams, essentially broke even with the national debt during his four years in office by starting his term $82 million in the red, dropping the debt by $4 million in two years and then accruing back the same amount by the end of his term in 1801, largely in order to fund a larger, more mobile Army. Nevertheless, Adams highly cautioned against national loans, saying they led to the collapse of many historical empires.
Thomas Jefferson was heads and tails above the presidential pack when it came to cutting federal spending and reducing the national debt. Despite fighting the Barbary Wars and obtaining low-interest loans for the Louisiana Purchase in 1803, Jefferson lowered the national debt from $83 million to $57 million during his eight years in office.
And the next four presidents basically followed suit, with some variance. Despite the War of 1812, further U.S. land acquisitions and the building up of interstate infrastructure, the next four administrations — those of Presidents James Madison, James Monroe, John Quincy Adams and Andrew Jackson — were able to bring the national debt down from $57 million to a mere $33,703.05.
You ask: How did our founders do it?
Here’s a snapshot of their sentiments and policies toward national debt, which are detailed further in the third chapter (“Stop the Nightmare of Debt”) of my book “Black Belt Patriotism”:
George Washington told the House of Representatives in 1793: “No pecuniary consideration is more urgent than the regular redemption and discharge of the public debt; on none can delay be more injurious, or an economy of the time more valuable.”
John Adams wrote to Jefferson from Paris in 1780: “I think we shall do no great things at borrowing (money), unless that system or some other, calculated to bring things to some certain and steady standard, succeeds.”
Thomas Jefferson similarly admonished Samuel Kercheval in 1816, “To preserve (the) independence (of the people), we must not let our rulers load us with perpetual debt.”
The national debt nearly doubled under Madison — largely because of the War of 1812 — but the “Father of the Constitution” said in remorse: “I regret, as much as any member, the unavoidable weight and duration of the burdens to be imposed; having never been a proselyte to the doctrine, that public debts are public benefits. I consider them, on the contrary, as evils which ought to be removed as fast as honor and justice will permit.”
Monroe, who shrank the national debt by one-third, said: “The vast amount of vacant lands, the value of which daily augments, forms an additional resource of great extent and duration. These resources, besides accomplishing every other necessary purpose, put it completely in the power of the United States to discharge the national debt at an early period.”
John Quincy Adams, who also shrank the national debt by one-third, said, “The plain state of the fact appears to me to be that the load of taxation to pay the interest upon the national debt is greater than the nation can bear, and that the only possible remedy will be a composition with the public creditors, or an authoritative reduction of the debt in one form or another.”
Jackson made this passionate presidential commitment: “I stand committed before the country to pay off the national debt at the earliest practicable moment. This pledge I am determined to redeem.” (In January 1835, the national debt was paid off!)
Obama made this statement in a debate before he was elected: “There is no doubt that we’ve been living beyond our means, and we’re going to have to make some adjustments. Now, what I’ve done throughout this campaign is to propose a net spending cut.” But remember the figures: To date, Obama has added more than $5 trillion of national debt, spending about $4.18 billion every day that he has been in office.
Do you really want four more years?
John Adams was right: “Facts are stubborn things.”