Fiscal Debates Then and Now

Member Group : Salena Zito

WASHINGTON – Hard to imagine that it was not part of our capital city’s architectural design for statues of Alexander Hamilton, the first Treasury secretary, and Albert Gallatin, the fourth and longest-serving Treasury secretary, to stand at opposite entrances of the massive pillared building beside the White House.

That those statues have their backs to each other suggests that these two financial giants’ ideas were constantly at odds.

From the dawn of our little experiment in self-government until today, as we debate our latest fiscal crisis, our leaders have been conflicted over how we should manage our finances.

"Hamilton, the West Indies-born Federalist, was a visionary financier and, I’d dare say, almost a completely modern capitalist," said Curt Nichols, a political science professor at Baylor University.

He said Hamilton certainly was ahead of his time, envisioning and championing the creation of a large commercial republic with a robust central government able to raise taxes, regulate commerce and incur debt.

In these ways, he may somewhat resemble Democrats of today. Yet Hamilton looked to emulate the British; he was loath to cut military spending (in order to protect commercial interests) and conscious of establishing and maintaining America’s credit rating.

Gallatin, the Swiss-born Jeffersonian Democratic-Republican, was a competent financier (a rarity in his party; remember, Jefferson often was close to personal bankruptcy) and more traditional in his outlook.

"He prioritized paying off the national debt in order to fulfill a more agrarian ideal," said Nichols.

Gallatin was an acolyte of French philosopher Jean-Jacques Rousseau, who stressed the virtues of small government. He preferred the wilds of Western Pennsylvania to elite city life; his home, Friendship Hill, still stands atop a Fayette County summit.

He also was infamously involved in the Whiskey Rebellion but actually played a moderating role in avoiding great bloodshed, rather than being the oft-reported instigator of the rabble.

"In these ways, he may somewhat resemble Republicans or tea-party identifiers today," said Nichols. "Yet Gallatin looked to Revolutionary France as the example to emulate; he was very quick to cut the military to dangerously low, almost nonexistent levels and supported both the U.S. Bank" — a kind of forerunner to today’s Federal Reserve — "and internal improvements such as federal spending on roads, bridges and canals."

Bert Rockman, a visiting scholar of political science at the University of Pittsburgh, said today’s fiscal impasse has to do with who has the best leverage — not so different from the battles that Hamilton and Gallatin waged.
"And, for now, the Democrats have the advantage," Rockman said. "The Democrats have found their populist impulse, whether responsibly or not. Gallatin might well approve; Hamilton, I suspect, would not."

It is no mistake that Treasury is located beside the White House; it and the War Department were the first two branches of government with which George Washington’s administration conducted business.

That was because the Founders envisioned their initial job as protecting the people they governed and ensuring domestic tranquility. You need money to field armies.

After several fires destroyed the original Treasury building, it was President Andrew Jackson’s volatile relationship with Congress that led to placing Treasury in the White House’s line of sight to the Capitol; his order was to "block my view of that damn place."

When Hamilton took charge of the finances of the newly independent United States, the government was bankrupt, thanks to the War of Independence. His advocacy of a national bank and the assumption of war debt laid the groundwork for federal power and economic expansion.

Gallatin initially was thrown out of his U.S. Senate seat from Pennsylvania on a party-line vote over whether he met the office’s nine-year U.S. citizenship criterion. He went to Treasury after a swift rise in Congress, where he condemned the growing national debt and railed against military spending.

Hamilton and Gallatin’s clashes over big versus small government clearly exist in today’s battle over the federal fiscal crisis, according to Rockman, who adds: "There is always some rough precedent for every ‘unprecedented’ situation we think we are currently going through."

Read more: