73-476 AMERICAN ECONOMIC HISTORY: TOPIC 4

  1. The Constitution as an Economic Document

    1. Article I Section 8: Enumerated Powers of Congress

      1. General Welfare Clause and Common Market

      2. Commerce Clause

      3. Uniform Bankruptcy Law

      4. State Debt Deal and D.C.

      5. Necessary and Proper Clause

    2. Article I Section 9

      1. Direct Taxes

      2. Common Market cannot be Limited by States

      3. No Appropriations Without Act of Congress

    3. Article I Section 10

      1. States Cannot Limit Contracts

      2. States Cannot Have Tariffs or Treaties

    4. Article IV Section I: All States Must Respect Each Others' Laws To Ensure a Common Market

    5. Article VI

      1. Revolution Debt Will be Honored

      2. U.S. Law Supreme Law of the Land

    6. Amendment 5 (1791): Due Process and the "Takings" Clause

    7. Amendment 14 (1868): Repudiation of Confederate War Debt

    8. Amendment 16 (1913): Income Tax Amendment

  2. Hamilton's Economic Program

    1. Debt Assumption

      1. Continental Congress Debt

        1. Domestic Debt: $40.4m ($27.4 principal, $13 interest) Paid With 3 Types of Coupon Bonds

        2. Foreign Debt: $11.7m ($10.1 principal, $1.6 interest) Paid With Specie to French and Dutch

      2. State Debt: $26.6m

        1. Political Deal Between Hamilton and Jefferson/Madison -- D.C. For State Debt Assumption

        2. 81% Paid With 3 Types of Coupon Bonds

    2. National Bank

      1. Purpose

        1. Supply Paper Notes for Commerical Transactions

        2. Short Term Loans To Government

        3. Repository for Government Funds

        4. Loans to Individuals so they Could Pay Taxes

      2. Madison and Jefferson Claim Its Unconstitutional. Hamilton Prevails

      3. 20 Year Charter

      4. $10m in Capital: $8m Private, $2m US

    3. Excise Taxes

      1. Annual Interest on Bonds was approx. $2m yearly 1791-1795 or one-half Government Expenditures

      2. Whiskey Tax and Whiskey Rebellion (1794)

      3. Salt, Coal, Boots, Shoes, etc., used to pay Interest on Debt

      4. Hamilton's Policies Favored New England and Coastal Cities at Expense of Interior Farmers

    4. Tariffs

      1. 1789 - 1860 Over 90% of U.S. Government Revenue From Tariffs

      2. A Tariff is a Tax Paid by Consumers on Imported Goods

      3. Losers From Tariffs

        1. National Income Falls

        2. Prices on Competing Goods Rise

        3. American Exporters Lose Business

      4. Winners From Tariffs

        1. Government Tax Revenue Increases (Initially!)

        2. Domestic Producers

        3. Domestic Labor in Protected Industry

      5. Tariffs Persist Because Benefits are Concentrated and Costs Dispersed Which Make them Politically Attractive




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