Life and Debt in the US

Randall Stephens

Has the United States ever defaulted on its debt? Yes. It did so in 1790 and in 1933 as well. Both cases are quite different from the current situation in D.C. (More on that below.)

The second of those had to do with the repayment of gold obligations. When "President Roosevelt and the Congress decided that it was a good idea to depreciate the currency in the economic crisis of the time," writes Alex J. Pollock, "they also decided not to honor their unambiguous obligation to pay in gold."

Arthur Schlesinger dealt with the matter in his Coming of the New Deal, 1933-35. The administration, wrote Schlesinger, aimed to break loose from foreign economic entanglements. Here's Schlesinger:

From the viewpoint of classical theory, Roosevelt's decision to abandon the international gold standard was, indeed, a wanton step. When Britain had left gold in 19S1, it had at least done so because the pressure on its gold reserves left it no alternative. But, despite Roosevelt's professed fears about a raid on American gold by Dutch banking interests, United States gold stocks were, in fact, capable of meeting normal foreign demands. The presidential decision seemed therefore to have a more sinister implication. It meant that American monetary policy was no longer to be the quasi-automatic function of an international gold standard; that it was to become instead the instrument of conscious national purpose. More than that, the step involved the repudiation of obligations to pay in gold long written into the "gold clause" of public and private contracts--an act which damaged all creditors who had hoped to make a killing out of the increase in the value of the dollar (203).

Long before, in 1790, the United States defaulted on its international and domestic obligations. The first government of the new nation enacted the Funding Act of 1790, which allowed Alexander Hamilton, secretary of the treasury, to take on the war debts of individual states. It was intended, in part, to create confidence in the new government. Altogether it amounted to $21.5 million dollars of assumed debt. According to John Carney over at CNBC: "Prior to the passage of the Funding Act, much of the debt was expected to default. It traded at deep discounts to face value. Once the act was passed, the value of the debt skyrocketed—because bondholders were sure they would be repaid by the new federal government. In fact, quite a lot of money was made by people who bought the state debt in anticipation of the Funding Act or with early notice that it had passed. Even at the time of the Founding, traders were profiting from informational asymmetries." That positive outcome had to do with the fact that the federal government was not itself in debt, but was only assuming state debt. That's why, says Carney, "the bonds rallied after the passage of the act."

Some weeks ago historian Julian Zelizer reflected on the political troubles that make the current economic crisis different. "There was a time when Congress worked differently," he observes. "During the committee era, which lasted from the 1910s through 1970s, bipartisan dealmakers were the kings of Capitol Hill. Legislating was seen as an art, and producing policy was the objective." Zelizer, writing on July 5th, hoped for a return to the deal making of recent history. That didn't happen, but a deal has been struck, nonetheless. Zelizer fittingly concludes: "But the fact that we have another example of what should be a routine decision turning into high-stakes gamesmanship should be a stark reminder that we need Congress to work better than this."

Biography Reviews Roundup

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Wesley Stace, "David Bowie, magpie and chameleon," TLS, May 25, 2011

Paul Trynka’s Starman pinpoints the moment when David Bowie made his mark: his performance on Top of the Pops in July 1972. (It also has the best title of a species that has always been extra-terrestrial – Loving the Alien, Moonage Daydream, Stardust, Hallo Spaceboy). As Bowie, playing a blue guitar, skin like china, hair bright carrot, draped his hand over his guitarist Mick Ronson’s gold lamé shoulder, he seemed on the point of kissing him.>>>

Liesl Bradner, "'Linda McCartney: Life in Photographs' reveals intimate family moments," LA Times, May 31, 2011

Before Linda McCartney ever laid eyes on her husband-to-be at the launch party for the album "Sgt. Pepper's Lonely Hearts Club Band" in 1967, she was already a reputable rock 'n' roll photographer capturing candid behind-the-scenes images of late '60s artists such as the Rolling Stones, Jimi Hendrix, the Doors and Janis Joplin.>>>

Jesse Sheidlower, "Noah Webster, Founding Father," NYT, May 27, 2011

Even if he had never written his famous dictionary, Noah Webster (1758-1843) would be regarded as one of the most interesting and influential figures of the early days of the American republic. His phenomenally popular “American Spelling Book,” first published in 1783, outsold every book in the 19th century except the Bible. His relentless book promotion pioneered now common techniques like the author tour, the fabricated blurb and the aggressive stoking of manufactured controversy.>>>

Russell Baker, "The Charms of Eleanor," NYRB, June 9, 2011

In 1918, during the fourteenth year of their marriage, Eleanor Roosevelt, age thirty-three, discovered that Franklin, age thirty-six, was in love with her young social secretary, Lucy Mercer. Long afterward, Eleanor told her friend Joseph Lash that the discovery was devastating, that the bottom seemed to have dropped out of her life. Yet as her subsequent history persuasively testifies, it was also her liberating moment, a life-changing event that opened a world of glorious possibilities for a woman not too timid to explore them.>>>

Tristram Hunt, "Why Marx Was Right by Terry Eagleton," Guardian, May 29, 2011

As the IMF dishes out its medicine in Lisbon, Dublin and Athens, and the limitations of neo-liberalism become more apparent, the moment is surely right for a compelling account of Karl Marx's relevance to the modern world. And in campus conferences, continuing sales of Das Kapital, and even the words of Pope Benedict XVI (moved to praise Marx's "great analytical skill"), there is a growing appreciation for Marx's predictions of globalisation, rampant capitalism, and the instability of international finance. As the Times put in the middle of the 2008 crash: "He's back!">>>

Chris Beneke on The First Prejudice

Randall Stephens

[From Religion in American History]

About a week ago over at Religion in American History Paul Harvey posted on Chris Beneke and Christopher S. Grenda's, The First Prejudice: Religious Tolerance and Intolerance in Early America (Univ. Pennsylvania Press, 2011). The edited volume, "presents a revealing portrait of the rhetoric, regulations, and customs that shaped the relationships between people of different faiths in seventeenth- and eighteenth-century America. It relates changes in law and language to the lived experience of religious conflict and religious cooperation, highlighting the crucial ways in which they molded U.S. culture and politics." I recently caught up with Beneke, a Historical Society board member, by email and asked him some questions about the project and the work being down on tolerance/intolerance.

Randall Stephens: What is the unifying theme of The First Prejudice: Religious Tolerance and Intolerance in Early America?

Chris Beneke: Our title, The First Prejudice, plays on the popular understanding of religious liberty as the nation’s “First Freedom.” It also draws on the proposition that religion was initially the source of the deepest prejudice to afflict early Americans and the object of the first large-scale efforts to mitigate prejudice. We asked our contributors to be attentive to the distinguished and extensive historiography on church and state, but not beholden to it. The idea was to create a history of religious tolerance and intolerance that took into account a broader range of religious and cultural interaction than histories of religious liberty have traditionally done. For us, it presented an opportunity both to build a compelling new narrative of early American religious history-where religious differences are at center stage-and to develop a common set of reference points and questions that would frame more useful conversations about tolerance and intolerance in America.

Stephens: Why did religious tolerance develop in the West when and where it did?

Beneke: In a sense, it depends on what you mean by tolerance (I know it’s annoying when historians say that, but there, I’ve gone and done it). If you mean what Willem Frijhoff calls “everyday ecumenism,” or at least everyday cooperation and non-violence, then it’s very old indeed. Historians have been hard at work in the archives over the past two-plus decades, discovering that sort of tolerance in surprising places across medieval and early modern Europe. But as a commonly accepted ideal, as a stated commitment to some form of equality, and a legal practice that guaranteed a modicum of protection, tolerance is something that developed in the intellectual capitals of northern Europe during the late seventeenth and eighteenth centuries. And though I risk irritating my intrepid co-editor and some contributors by saying this, I think that it took hold in a much more fundamental and irrevocable way in the early national United States.

Stephens: When it comes to religious tolerance did the early United States differ all that much from Great Britain and western Europe?

Beneke: Here's the very short answer: official church establishments persisted across most of Europe into and beyond the twentieth century. In the United States, they did not. The U.S. may have maintained an unofficial Protestant establishment for many decades (via instruments such as the common law, public education, state religious tests.), but the fact that it was un-official and the fact that it was accompanied by substantive protections for free exercise, was critically important. For all the disingenuity involved, an un-official establishment was surely more hospitable toward religious minorities than almost any official establishment might have been. Maybe just as importantly, the commitment to disestablishment and religious liberty meant that the religiously intolerant had to explain themselves and find ways to wrap bigotry in the mantle of tolerance.

These factors have always kept American religious intolerance in check.>>>