Updated: Sep 25, 2020
Published on Mises.org 9/18/20
The September 11, 2001, terror attacks shocked the world, leaving ramifications still felt nineteen years later. Few are familiar with the Republic’s first 9/11 tragedy, September 11, 1789, the day Alexander Hamilton was appointed secretary of the Treasury.
Hamilton is glorified as a hero in popular culture, even the subject of a hit Broadway musical bearing his name. He’s the darling of both mainstream progressives and conservatives—usually a telltale sign that someone is one of the worst of the worst. Part of the adoration for Hamilton comes from his rags-to-riches story. Born fatherless in the Caribbean and soon orphaned, it can’t be denied that getting an education in New York, serving as General Washington’s chief aide, and becoming a leading political figure is an impressive turn of events. Progressives love pointing to Hamilton for their “nation of immigrants” narrative, which doesn’t make sense since Hamilton was born in the British Empire. Hamilton, the übernationalist, is also cited by the neocons as their missing link from the founding to their “one nation” and “America as a propositional nation” mythologies. Getting beyond the romanticization, Hamilton’s agenda set the table to give the federal government the tools to erode liberty over the next 230 years.
Hamilton has, perhaps, done more damage to the United States than any other American figure, even Woodrow Wilson and Abraham Lincoln, two more beloved icons of the mainstream. Hamilton was an opportunist, liar, and duplicitous. His vision paved the way to create a nearly unlimited central authority with no checks on its power, contrary to the principles of limited and self-government that many believed they had put in place for the new republic in 1788.
The Bait and Switch
Hamilton knew how to play the crowd. When it was time to ratify the Constitution, the republican Antifederalists feared a strong, central authority. He assured them only the powers expressly delegated to the federal government would be the ones it would have. The second the Constitution was in effect, Hamilton flipped the script.
One such example is in Federalist essay no. 21, Hamilton said that tariffs were better for the economy than direct taxes. Just three years later, he changed his tune and advocated for a laundry list of direct taxes, which played a part in leading to insurrections such as the Whiskey Rebellion.
In Federalist 33, Hamilton said that the Necessary and Proper Clause was harmless and wouldn’t confer any powers to the federal government not expressly delegated to it. He once again flipped the script in office, citing the exact same clause to take federal action not delegated, such as establishing the First National Bank.
When it came to the General Welfare Clause, Richard Henry Lee was concerned that it would be used for “every possible object of human legislation.” Hamilton retorted that Lee’s fears were “absurd.” In office, Hamilton again pulled the bait and switch, relying on this clause as an excuse to do anything and everything, saying the clause allowed for “a vast variety of particulars neither of specification nor definition.”
Hamilton also claimed the Supreme Court would be the weakest part of the government, unable to do anything against the other two branches. Later on, he helped organize the judiciary to become superior to both the Congress and the states.
Hamilton’s Contributions: Taxes, Central Banking, and Cronyism
As first secretary of the Treasury, Hamilton had President Washington’s ear, using this influence to set his nationalist agenda. His list of “accomplishments”—or should I say “abominations”—includes: centralizing power, high taxes, and crony capitalism, just to name a few.
Hamilton’s pet project was establishing the First National Bank in 1791, a central banking system that was a precursor to the Federal Reserve the US now has, which is responsible for so much economic instability. The federal government didn’t have the money for the bank; Hamilton suggested the bank just borrow from itself. He even went as far as to say the public debt “was a public blessing.”
He had proposed the idea of a central bank in 1787, but it was immediately shot down in Philadelphia. With the idea being this unpopular, it was quite a surprise to many of that generation that one was established just a few years later. James Madison saw no constitutional authority for it, Attorney General Edmund Randolph opposed it, and Thomas Jefferson said the Necessary and Proper clause didn’t permit it. Hamilton’s response was that “necessary” meant “no more than needful, requisite, useful, and conducive to.”
Hamilton also got his way when it came to war debts. The question of how states would pay these came up, Hamilton proposed an assumption scheme where the federal government would take on all the states’ debts. This drew red flags for two reasons. First, taking on these debts would expand the power and scope of what was supposed to be a very limited federal government. Second, Southern states had paid off most of their debt—Virginia had altogether. New England states still had most of their debt unpaid. This policy would have the Southern states foot the bill for the Northern states through increased taxes. Madison and Jefferson opposed this unfair plan at first but eventually conceded in the Compromise of 1790, which put the US capitol in the South in exchange for Hamiltion’s assumption scheme.
Hamilton knew that high taxes would be essential for a central government to do all the meddling he wanted. His list of taxes included the “whiskey tax” which unduly burdened farmers in the west who struggled transporting cumbersome grain over the Appalachian mountains. His crony plan gave unfair tax breaks to large distillers in the east. Those on the western frontier refused to pay. Many of them were veterans of the Revolution who thought the tax went against the very principles they had just fought for. Hamilton kept prodding Washington, who wanted to be a moderate on the issue, to use force to crush the insurrection. Eventually Hamilton got his way and in 1794 thousands of federal troops were sent in to squash the rebellion and show off the might of the federal government.
Hamilton turned the Constitution on its head in office to get away with anything he wanted. This set the precedent for legal scholars and judges alike to read anything into the Constitution that served their political agenda.
Hamilton’s ally John Marshall became the fourth chief justice of the Supreme Court and used Hamilton’s influence to forever change our constitutional order when the ink on the document was barely dry. Marshall’s decision in Marbury v. Madison gave the Supreme Court power of judicial review, allowing it to interpret the Constitution however it wants. He also ruled in McCulloch v. Maryland that federal law was above state law—a complete abomination to the federal system the founders had set in place. These decisions ensured that Hamiltion got his way—a centralized system with an authority that has no checks on it.
Hamilton’s bait and switch on the Necessary and Proper Clause has been used to give the federal government complete control over currency. It has also been used with the Commerce Clause to allow the federal government to regulate anything it wants. This started to take root with New Deal legislation, a prime example being Wickard v. Filburn, in which it was held that the federal government can regulate commerce even when purely intrastate.
Similarly, Hamilton’s twisting of the General Welfare Clause has been the excuse for much of the federal activity we see today. His version of it has been continuously expanded, and since the 1930s it has been a blank slate for the federal government to tax and spend on anything it wants. It’s cited so much that many people today actually believe that the General Welfare Clause permits government action “so long as it provides for the general welfare.”
While Hamilton is glorified by power hungry nationalists, remember that his appointment to the federal government was America’s first 9/11 tragedy. If you like high taxes, crony capitalism, central banking, the states relegated to mere corporations, a central authority that can regulate everything you do, and a judiciary that can do anything it wants, thank Alexander Hamilton.