In Part 1, I summarized how President Obama has not lived up to his campaign promises to lower the national deficit, debt or 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 founders’ wisdom on federal debt and spending, let me remind readers how the Washington Post Fact Checker recently summarized President 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)
$5,094,341,558,534.01/1,219 Days = $4,179,115,306 extra spent by Obama’s administration each day of his presidency.
Outside of brief periods in our nation’s history, U.S. presidents have not been very frugal and disciplined with debt management. But our Founding Fathers 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. Critics can decry the founders’ financial policies as obsolete for our bloated bureaucracy, but resurrecting their policies and passion for bringing down the national debt would serve America well at this moment.
As Thomas West, professor of politics at the University of Dallas, explained in his excellent 2010 Heritage Foundation treatise, “The Economic Principles of America’s Founders: Property Rights, Free Markets, and Sound Money”:
“It is true that there were bitter disputes over particular policies during the Founding era, such as the paying of the national debt, the existence of a national bank, and whether to subsidize domestic manufactures, and these differences seemed tremendously important in the 1790s. But in spite of these quarrels, there was a background consensus on both principles and the main lines of economic policy that government should follow.”
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.
And 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, they firmly established our flailing country on solid financial grounds and as a global power. Moreover, in 1795, they absolved U.S. financial or debt obligations to foreign governments (though it did owe to some private investors in Europe) because American bankers privately assumed the foreign debts at a slightly higher interest rate then resold them at 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 $4 million in two years to $78 million, then accruing back the same amount by the end of his term in 1801, largely to fund a larger, more mobile Army. Nevertheless, Adams cautioned against national loans, saying they led to the collapse of many historical empires.
Thomas Jefferson was head and tail above the presidential pack when it came to federal spending and reducing the national debt. Despite fighting in the Barbary Wars and obtaining low-interest loans for the Louisiana Purchase in 1803, during his eight years in office Jefferson lowered the national debt from $83 million to $57 million.
And the next four presidents basically followed suit. Despite the war of 1812, further U.S. land acquisitions and the building up of interstate infrastructure, etc., the next four administrations of Presidents Madison, Monroe, Quincy Adams and Andrew Jackson were able to bring the national debt down from $57 million to a mere $33,703.05. (Yes, you read that correctly: $33,000!)
You ask: How did our founders do it?
Here’s a snapshot of their sentiments and policies toward national debt, which are further detailed in the third chapter (“Stop the Nightmare of Debt”) in 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.”
Washington also wrote in 1799 to James Welch, “To contract new debts is not the way to pay for old ones.”
John Adams wrote to Thomas Jefferson from Paris in 1780: “I think we shall do no great things in 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.”
Thomas Jefferson also wrote to Fulwar Skipwith in 1787, “the maxim of buying nothing but what we had money in our pockets to pay for … [is] a maxim, which, of all others, lays the broadest foundation for happiness.”
Despite that the national debt nearly doubled under President James Madison, largely due to the war of 1812, the so-called “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.” He described national debts as “moral obligations” as far back in Federalist Paper No. 43.
President James 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 another one-third, said, “The plain state of the fact appears to me to be that the load of taxation to pay the interest on 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.”
Andrew 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!)
Compare those presidential statements to President Obama’s financial promise: “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” (spoken during the third presidential debate on Oct. 15, 2008).
Remember the figures: To date, Obama has added nearly $6 trillion in national debt and spent an additional $4,179,115,306 every day that he has been in office.
Do you really want four more years?
John Adams was right: “Facts are stubborn things.”