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Hamilton and the Jeffersonian Myth
The great unresolved issue of American political life, that of the relationship between the national and state governments, is once again dominating America's public debate. It is thus fitting that on August 22, 1996, Clio played one of her practical jokes when she had President William Jefferson Clinton sign into law a historic piece of welfare legislation, the Personal Responsibility and Work Opportunity Reconciliation Act, of which his namesake might well have been proud. That bill essentially turns over to the 50 states responsibility for how they will use welfare-related block grants and places renewed emphasis on workfare; although where the new jobs for welfare recipients will come from remains a matter for speculation. As the president stated at the signing ceremony, "The governors asked for this responsibility; now they've got to live up to it."1 By giving the states greater control over welfare policy, President Clinton essentially reversed 50 years of federal domination in this area. In passing the legislation, the Republican Congress that initiated it and the president who signed it were acting out of several, ultimately converging beliefs, including the beliefs that budgetary pressures necessitated welfare reform; that federal welfare policy had been a failure; and that state and local governments were "better equipped than the federal government to make choices" about essential services.2 Yet few people were so naive as to believe that the Personal Opportunity Act would actually bring to an end the ongoing debate over welfare policy; and indeed, along with some other recent legislative and legal developments, it has helped thrust the larger question of constitutional relations between Washington and the state governments into the limelight. These profound implications of the welfare legislation have not been lost on political observers, although it is not clear that the politicians themselves recognized what forces they were unleashing. Writing even before the bill was passed, political scientist Demetrios Caraley argued that "if a combination of severe cutbacks, massive tax cuts, and devolution of power to the states like that proposed by the 104th Congress...is eventually enacted, not only will the federal social safety net for the poor be dismantled, but the federal government in general will become so weakened as an effective instrument for governance that we might well see the beginning of the 'disestablishment' of the `more perfect Union' that the Constitution of 1789 was determined to create and that the Civil War was fought to preserve."3 The welfare bill has already spawned any number of lawsuits that seek a more precise definition of where responsibility actually lies on this issue. New York City mayor Rudolph Giuliani, for example, has said that the city would file suit over the decision by Congress, as part of the Personal Opportunity Act, to rescind the city's Executive Order 104, which effectively provides legal protection to illegal immigrants in a number of settings. But the debate over welfare hardly exhausts the question of relations between Washington and the states. As the New York Times recently reported, the 1996-97 term of the Supreme Court is notable for its emphasis on state-federal relations. According to the Times, the "term is being closely watched for the light it will shed on the evolving constitutional relationship between the states and the Federal Government.... More than at any time in recent history, the Court's recent opinions have displayed broad sympathy for the states and an emphasis on the limits of Federal authority."4 This renewed emphasis on "states' rights" marks a swing in the pendulum away from the secular growth of federal power over the past two generations. At least since the 1930s, the Supreme Court has-with important exceptions to be sure-traditionally upheld the federal government's prerogative across a wide range of economic issues. Indeed, as economists Bruce Elmslie and William Milberg point out, America's Founding Fathers recognized the danger of concentrating too much economic authority in the hands of the state legislatures, for this could lead to "beggar-thy-neighbor" policies, as was the case with tariffs during the Articles of Confederation period.5 Thus, Article 1, Section 8, of the Constitution states: "The Congress shall have the power...to regulate Commerce with foreign nations, and among the several States." Still, this did not end the dispute over where sovereignty lay in economic matters. Rather, it launched a battle that still rages today. It is impossible to discuss this conflict without recalling the two heros eponymi of the historic debate over economic sovereigntyAlexander Hamilton and Thomas Jefferson. In countering Hamilton's effort to build a strong national government, Jefferson developed a grassroots political organization around the myth that "the government that governs best governs least" and its complement, that che best government is the one "closest to the people."6 This myth of an evil central government continues to exercise a powerful hold on the American psyche, allowing one politician after another to run "against Washington." Indeed, even the nominal Democrat Bill Clinton declared in his 1996 State of the Union address that "The era of big government is over." The perpetuation of this myth by elected officials poses an enduring problem for American federalism. Devolving authority to the states has rarely proved useful in dealing with complex economic problems, and the federal government has repeatedly had to clean up the messes created by states' beggar-thyneighbor policies. For example, at the very moment that states' rights are being promoted in welfare policy, some local officials are now asking the federal government to engage its power in the area of investment policy, as they have competed so ferociously against one another for business enterprises and sports stadiums that they have irrationally given away more in tax advantages than they will ever recoup through revenues. Yet, while Hamilton was right in practice about the need for a strong central government in economic matters, the Jeffersonian myth of a limited federal authority continues to mesmerize the American people. Hamilton versus Jefferson It is difficult to grow tired of early American history, with its larger-than-life characters and its epic struggles. Among those struggles, few are as enduringly relevant as that between Alexander Hamilton and Thomas Jefferson. As Jefferson's great biographer (and Hamilton vilif er) Dumas Malone has written, the two men have passed through the ages as "symbols of a conflict of ideas which runs through the whole of American national history. No other American statesman has personified national power and the rule of the favored few so well as Hamilton, and no other has glorified self-government and the freedom of the individual to such a degree as Jefferson."7 Notwithstanding the commonly held view that the two developed an immediate, visceral hatred for one another (it is, for example, remarkable that they apparently never corresponded in writing, and all the more so given the volume of letters the two men otherwise generated), to the contrary, they established a seemingly cordial working relationship at the very beginning of George Washington's term as president. Their profound differences were over ideas. To be sure, Secretary of State Jefferson was hardly comfortable with Treasury Secretary Hamilton's bold proposal for the United States to assume the debts of the states, but he was satisfied by the compromise reached over his dinner table, in which it was agreed that a new capital city would be established along the banks of the Potomac River and which won the votes of recalcitrant Virginia congressmen (notably James Madison). Hamilton's financial program, however, did not stop there, and the following step would cause a fundamental break between the two men. In 1790, as the next move in his master financial plan for the fledgling republic, Hamilton proposed the establishment of a national bank, which would provide credit to both the cash-starved government and private sector alike. Hamilton used as his model the Bank of England. That, of course, was part of the problem; the scheme appeared to be yet another attempt on Hamilton's part to foster a financial elite removed from "the people." The subsequent battle over the bank reflected the sharp political divisions existing in the new country, divisions that would split Washington's cabinet as well. The establishment of a national bank posed a fundamental threat to those who believed in the primacy of states' rights, and they fought its creation on constitutional grounds. The battle thus revolved around the question of whether the Constitution authorized the establishment of such an institution. James Madison argued that a national bank would "directly interfere with the rights of states to prohibit as well as to establish banks," and he sought a way to kill the idea. In a famous phrase, he said that the bank "was condemned by the silence of the Constitution." Its creation would ultimately lead "to the subversion of every power whatever in the several states."8 Despite the efforts of Madison and other congressmen-mainly Southerners-the bank bill was approved by Congress. But the debate had been so heated and divisive that President Washington referred the issue to Jefferson and Attorney General Edmund Randolph for their opinions before deciding whether to sign it. Both men argued against its constitutionality. At this time, the federal government was not responsible for providing a national medium of exchange. States and private banks printed their own currencies, which were discounted by traders and merchants across the country according to the reported risk. The absence of a national currency, Hamilton argued, acted as a brake on American economic integration and growth. For those who disputed the Treasury secretary, this efficiency argument was not the crucial point. In fact, many opponents were willing to allow that a national currency would be useful for purely economic reasons. But the other issues at stake, they claimed, went beyond economics alone and were ultimately more important. In a letter to the president dated February 15, 1791, Jefferson constructed what has ever since been labeled a "strict" interpretation of the Constitution. Taking the Twelfth Amendment as his starting point, which states that "all powers not delegated to the United States, by the Constitution, nor prohibited by it to the States, are reserved to the States or to the people," he asserted that "to take a single step beyond the boundaries thus specially drawn around the powers of Congress, is to take possession of a boundless field of power, no longer susceptible of any definition. The incorporation of a bank, and the powers assumed by this bill, have not, in my opinion, been delegated to the United States, by the Constitution."9 The proposed bank, Jefferson argued, would represent a significant intrusion on state sovereignty. The Constitution had only sought to "regulate commerce with foreign nations, and among the States, and with the Indian tribes"; that is, it only regulated a state's external commerce. Congress did not, in contrast, have power to regulate in any way the internal commerce of a state, "which remains exclusively with its own legislature." Were the national bank to create a single currency, this would represent a severe infringement on the states and on the rights of their citizens and businesses. (By way of analogy, look at the debates over the European Union's efforts to fashion a single European currency.) Jefferson went on to point out that even the bank's supporters said that its creation was not a necessity for the American economy but rather a convenience. Moreover, although he was prepared to admit that bank bills might be a convenient form of payment, convenience was not a sufficient condition, as he wrote President Washington: It may be said that a bank whose bills would have a currency all over the states, would be more convenient than one whose currency is limited to a single State. So it would be still more convenient that there should be a bank, whose bills should have a currency all over the world. But it does not follow from this superior conveniency, that there exists anywhere a power to establish such a bank; or that the world may not go on very well without it. He continued to plead for a presidential veto, stating that "the negative of the President is the shield provided by the constitution.... The present is the case of a right remaining exclusively with the States, and consequently one of those intended by the Constitution to be placed under its protection." President Washington then turned to Secretary Hamilton, allowing him to respond to his critics before making a final decision. Hamilton's letter to the president is a classic document in the annals of state building, not to mention constitutional law. It remains required reading in law schools to this day, and all students (and players) of American politics would find a fresh look at it useful; indeed, President Clinton might have profited from such a reading before signing the welfare bill. Hamilton argued that the issue at stake was nothing less than the sovereignty of the federal government and its ability to function: "Every power vested in a Government is in its nature sovereign, and includes by force of that term, a right to employ all the means requisite, and fairly applicable to the ends of such power, and which are not precluded by restrictions and exceptions specified in the constitution." Employing the doctrine of implied powers, which would become a cornerstone of constitutional law, he stated that if "the end be clearly comprehended within any of the specified powers, and if the measure have an obvious relation to that end, and is not forbidden by any particular provision of the constitution-it may safely be deemed to come within the compass of the national authority."' In the case at hand, the bank would be the primary vehicle by which the federal government would finance its activities through tax collection and loans-the "ends"-and it would provide capital to the growing nation. With this letter, Hamilton rendered an opinion that would forever influence constitutional debates. Even Hamilton's historical detractors have given him his due, recognizing this response as a work of greatness. As Dumas Malone has written, "The Secretary of the Treasury took a full week in drafting his opinion.... How magnificently he rose to [the task], the later constitutional history of his country was to show. His opinion was an extraordinarily skillful defense of his own position and a masterpiece of exposition."" In the event, Washington, now convinced of both the bank's necessity and legality, allowed the bill to become law. But Hamilton's brilliance would not settle the bank's legal claim to existence. Its life would be relatively short, as the Republicans succeeded in killing the effort to renew its charter in 1811. Only after the disastrous War of 1812, when the country found itself in dire financial straits, would the need for a national bank again be recognized. This second bank, however, would also have a short existence, dying at the hands of President Andrew Jackson, who lived up to his campaign pledge to destroy it. The present-day Federal Reserve System was not created until 1913. A Pyrrhic Victory Ironically, the bank's creation would prove a pyrrhic victory for Hamilton, for it intensified sectional schisms and pointed to the deep chasm between advocates of states' rights-Republicans-and the Federalists who sought to build a strong national government. As the historian Rhys Isaac has written, whereas the American Revolution had placed state officials and actors "on the stage of a great historical drama," Hamiltonian federalism, with its concentration of power in the executive branch, "had the effect of dwarfing local centers in comparison with the new national governmental structures that now loomed over them."'2 Hamilton's success in building a national financial system may have provided the foundation for sustained economic growth, but to his opponents it also lay the basis for a monarchy or, worse, a Hamiltonian dictatorship (born in the West Indies, Hamilton could not be elected president). Republican political and economic principles now seemed to be on a slippery slope toward ever-greater centralization of power. This momentum had to be reversed if the true republican vision for America was to be preserved. As a preliminary step, this meant that Hamilton's hyperactive publicity machine must be thwarted. Since coming to the Treasury, Hamilton had adroitly used the popular United States Gazette-the nation's leading newspaper-as a vehicle for propagating his views. Three days after the Bank of the United States became a reality, Jefferson and Madison contacted the writer Philip Freneau about the possibility of his editing a rival newspaper. At the same time, Jefferson offered Freneau a post in the State Department. In October 1791, the first issue of the National Gazette hit the streets. Over the ensuing months, the pages of the two gazettes were filled with vitriolic attacks, pitting Hamilton against Jefferson and embarrassing President Washington, who sought to maintain some order in his cabinet. Of greater importance, two separate political parties would increasingly coalesce around these papers and the spokesmen for their causes. Thus, the factionalism that had so worried Madison and Hamilton during the Articles of Confederation periodprompting their collaboration in writing The Federalist (how distant and strange that collaboration now seemed)-now characterized the political life of the nation. Compounding the growing divisions between Hamilton and Jefferson-and between Federalists and Republicans-over domestic politics and economics was their feud over the French Revolution. As political scientist Paul Peterson reminds us, the Federalists "were alarmed by the execution of Louis XVI and thousands more, the confiscation of private property, and the movement of French troops across Europe."13 This suggested to them the need for closer ties with Britain and the establishment of a strong national army (as opposed to state militias), both of which were anathema to Jefferson and his Republicans, who feared that a national army would be used to suppress any and all political opposition to the central government. Hamilton thought Jefferson had a "womanish attachment" to France, as opposed to his own realistic view of American foreign policy.14 The fallout from the French Revolution would continue to plague the Federalists well beyond Washington's retirement and on through the administration of John Adams. French piracy on the high seas during the late 1790s resulted in the capture of hundreds of American seamen, which caused a break in relations between Paris and the United States in 1798. The subsequent dispute between Federalists and Republicans over the handling of this foreign policy crisis became so heated-Republican-inspired protestors gathered daily outside Congress, while inside, congressmen stooped to fisticuffs and to spitting on one another-that the Federalist-controlled legislature passed the infamous Alien and Sedition Acts, which, as Paul Peterson writes, "came close to outlawing political opposition." Fearing "what he considered to be the Federalists' unlawful and dangerous usurpation of power," Jefferson decided that the time had come to mount a forceful political challenge. c Historian James Sharp writes that Jefferson now departed "from the hitherto ineffective, nationally based, congressionally oriented strategy," as he and other Republicans began to believe that republicanism could best be defended at the state and local levels.'6 Jefferson thus took on the mighty task of organizing the state legislatures around his political beliefs. This new strategy would be most powerfully expressed in his Kentucky Resolutions, penned in October 1798, in which the Kentucky legislature openly challenged the Alien and Sedition Acts on constitutional grounds. "The several States composing the United States of America," Jefferson wrote, are not united on the principle of unlimited submission to their General Government; but that, by a compact under the style and title of a Constitution for the United States...they constituted a General Government for special purposes,-delegated to that government certain definite powers, reserving, each State to itself, the residuary mass of right to their own self-government; and that whensoever the General Government assumes undelegated powers, its acts are unauthoritative, void, and of no force.17 With these words, Jefferson defined the "compact" theory of American federalism, which would stand in sharp opposition to the nationalist model that Hamilton had fashioned as secretary of the Treasury. Later, it would provide the theoretical underpinnings for the South's secessionist movement. At the time, the response to the Kentucky Resolutions was "either overwhelmingly critical or deafening in its silence. State after state north of the Potomac denounced the doctrines set forth in them.... States south of the Potomac...remained tellingly silent."" Still, the mood in many parts of the country was grim, as a growing number of politicians and observers began to doubt the ability of the Republic to endure. Most worrisome, in Virginia, which had passed a resolution similar to Kentucky's (penned by Madison), rumors were now swirling that the militia would soon be called out to offer armed resistance to the federal government. At about the same time, early in 1799, a localized insurrection did occur in eastern Pennsylvania. Hamilton's reaction was that a national army must be mounted to crush any internal resistance to federal authority. Jefferson, in contrast, was more determined than ever to capture the presidency and return the government "to the people." The election of 1800 would prove to be among the most bizarre in American history, with Jefferson and his "running mate," the wily Aaron Burr, gaining an identical number of votes in the Electoral College, thus throwing the election into the House of Representatives. Ironically, Hamilton would end up lobbying his own Federalist Party on behalf of Jefferson, for no man frightened him more than Burr, whom he considered to be unscrupulous: "If there is a man in the world I ought to hate, it is Jefferson. With Burr I have always been personally well. But the public good must be paramount to every private consideration."19 Hamilton's efforts would help turn the tide for the Virginian, but there would be no thank-you letter mailed from Monticello. And a few years later, in 1804, in a grim end to this tale, Hamilton would meet his death by Burr's hand under the Palisades in Weehawken, New Jersey. The election of Thomas Jefferson as president brought an effective end to the Federalist Party. On one level, American democracy had met a great test: the handing over of office to a rival party. On the other, his victory trumpeted the ascendency of states' rights, although more in theory than in practice. For while recognizing the political appeal of states' rights, Jefferson exercised the power of the executive branch to the fullest. By fueling the myth of states' rights, however, he would unwittingly play a role in undoing the American Republic he undoubtedly loved. The Delicate Balance From the Jefferson administration until the time of the Civil War, the United States would continue to seek that delicate balance between national and state prerogatives, the weight shifting in one direction or another with changes in administration, Congress, and the Supreme Court. The Court, for example, might tend to favor the supremacy of the national government, as with Justice John Marshall's decision in McCulloch v. Maryland (1819), in which he determined that a state could not tax the national bank. But in Congress, the spirit of states' rights continued to loom large, finding its fullest expression in the doctrine of "nullification"-in which the states were said to have the right to declare an act of Congress null and void within their borders-as articulated by the Southerner John C. Calhoun. It would take a Civil War for Americans to come to the conclusion that a strong national government was needed to preserve the very liberties that they thought could be entrusted to state legislatures. Further, they came to appreciate that their government could play a useful role in economic reconstruction and in building infrastructure. Yet Washington's path toward political hegemony was hardly smooth. The unpredictable Supreme Court would often stand in the way of the executive branch as it sought to define the limits of national sovereignty. Thus, in 1895, the Court said that "Congress could not break up a monopoly," even if that monopoly had a nationwide impact on prices, if that monopoly's production was concentrated in a single state. Congress could only act, it said, when the company was involved in interstate as opposed to intrastate commerce. Similarly, congressional efforts to place legal strictures on child labor were often declared unconstitutional. With the Great Depression, the New Deal, and the Second World War, even the Court would acquiesce in a significant increase in federal authority. A series of decisions would effectively reverse the restrictions placed on the national government by way of the Commerce Clause, and soon state governments seemed significantly weakened. In issue after issue, from welfare policy to the environment to interstate commerce, the executive branch seemed clearly to have achieved a tight grasp on political and economic power. But as we approach the millennium, that grasp seems to be loosening in favor of the states. The decisions in Lopez v. United States (concerning gun controls) and New York v. United States (concerning nuclear waste) were considered "victories" for states' rights advocates, and in the wake of the welfare act, a host of new lawsuits between the states and Washington may be expected, as local governments discover "unfunded" mandates and as various public interest groups question local policies and programs. This return to states' rights-if that is what we are actually observing-will likely raise new problems of governance. Time and again it has been the federal government, not the states, that has saved the Republic from external attack and internal dissension. To be sure, the preservation of local character and culture-and limited political power-is something to be cherished, but within strict limits. For the most part, proponents of states' rights are romantics who hearken back to a day that never really existed, and their economic and social policies are often a disaster. A Mythical America For all this, it is Jefferson's vision that endures. Jefferson's mythical land of selfsufficient yeoman farmers and tidy, voluntaristic communities still exists in the minds of many Americans. Moreover, his dicta that "the government that governs best, governs least" and that the best government is that closest to the people resonate still. This worldview has proved more enduring- and profitable-than Jefferson could have ever imagined, and even today the quaint streets of some suburban towns and tourist villages seek to connect Americans to an imagined past, with their gaslights (usually electric in fact) and shingled signs. It is fed by the regular cycle of U.S. electoral politics, in which supposedly "local" politicians descend upon Washington to defend their districts' interests. But to mix myth with reality can make for dangerous policies. At the end of the day, Hamilton was right to see the need for a federal government capable of extracting resources from the citizenry for national defense and state building. And as Abraham Lincoln would argue in 1860, the continuation of that government was nothing less than a matter of life and death for the American people. Still, despite its role in securing both freedom and prosperity, Americans have never been comfortable with the Hamiltonian edifice, and historians are ambivalent about its architect. Instead, it is the Jeffersonian myth that is perpetuated and enshrined, and Jefferson's nameand traces of his ideology-that are shared by the current occupant of the White House. [Footnote] [Reference] [Reference] [Reference] [Reference]
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