2012 Endorsements: George Washington

Posted by PITHOCRATES - October 16th, 2012

2012 Election

At first the Six Nations feared the French taking their Land more than the British

George Washington entered the history books when he entered the Ohio Country.  Where the French and the British were claiming the same land in North America.  While his contemporaries went to college Washington went to war.  Over the Blue Ridge Mountains.  In the harsh frontier lands of the Ohio Country.  Fighting for the British against Britain’s archenemy.  France.  Who had seized a half-built fort near the junction of the Allegheny and Monongahela rivers.  Renamed it Fort Duquesne.  And proceeded to turn the surrounding area French.  Until, that is, Washington arrived on the scene.

It is much debated about what happened when the British fell upon a French force outside of Fort Duquesne.  Especially who fired first.  Or what happened after the French surrendered.  The French commander, Joseph Coulon de Villiers, sieur de Jumonville, was wounded.  And as he explained he was on a diplomatic mission to deliver a message to the British Washington’s Indian ally, Tanacharison, who was the diplomatic representative of the Six Nations (Iroquois Confederation), brutally murdered Jumonville while he was explaining his diplomatic mission.  Tanacharison spoke fluent French.  And had apparently heard enough.  For he feared the French taking their land more than the British at that time.

So this international incident brought war once again between the French and the British.  The Seven Year’s War as they called it in Europe.  Or the French and Indian War as they called it in British North America.  Even though the British also had Indian allies.  There were more French in the area.  So Washington built a fort to wait for their counter attack.  Fort Necessity.  The French came.  And after a brutal fight the British surrendered.  The Articles of Capitulation Washington signed included the word ‘assassination’.  Of Joseph Coulon de Villiers, sieur de Jumonville.  Washington later claimed the document was poorly translated from French and that he did not know he was admitting to assassinating a French diplomat.  Whether he did or not it put the blame of the French and Indian War on the British.  Not a very auspicious start for America’s indispensible Founding Father.

Washington felt that the British looked down on him and his Fellow Americans

The British came up with a bold plan to remove the French from North America.  By marching into the Ohio Country.  And taking Fort Duquesne.  Then capturing the forts along the Great Lakes.  And then capturing French Canada.  A bold plan.  Executed by a very experienced general.  Edward Braddock.  A veteran of European battles.  But without a clue of what it was like fighting in the American wilderness.  He had at his disposal the largest military force ever assembled in America.  Equipped with the finest arms.  So confident of victory he told the Indians that were friendly to the British that he didn’t need their help.  And that he was going to take all their land for the British Crown.  Making most switch sides and fight alongside the French against the British.

Washington requested to join General Braddock.  Hoping to get a good military career out of this great military expedition.  And a commission in the British Army.  Braddock took him along.  But disaster fell upon the expedition.  A force of French and Indians fell onto the lumbering column and attacked.  The British regulars formed into ranks as they would on any European battlefield.  And were shot down in droves.  Then broke and ran.  Braddock fell mortally wounded.  Washington then took command and rallied the troops and made an orderly retreat.  While having two horses shot out beneath him.  And four musket ball holes in his jacket.  But he didn’t suffer a scratch.  Washington learned a lesson that day.  You didn’t win battles in the American wilderness with European tactics.  No matter how superior you numbers and arms.

He never would receive that British commission.  Feeling in part that the British looked down on him and his fellow Americans.  They may have been part of the British Empire.  But they were not truly British.  Which made it difficult for Washington to respect his British superiors.  In fact, though he was a good soldier who followed orders he often felt superior to his superiors.  And preferred giving orders.  With the future of a British commission not in the cards he retired from the army.  Married Martha Dandridge Custis.  Thanks to her wealth he became one of the wealthiest men in Virginia.  As well as becoming one of the more successful planters in Virginia.  He had wealth (through his marriage to Martha).  Land.  And leisure time.  He lived the good life.  And spent the money.  And why not?  He married into great wealth.  And had vast land holdings earning wealth.  Life was good.

If George Washington were around Today he would Likely Endorse Republicans Mitt Romney and Paul Ryan

He bought the finest things from London from Robert Cary.  Who ran London’s largest mercantile houses.  Cary & Company.  Washington also sold his tobacco crop to Cary.  And early on he complained about the price he was getting for his tobacco.  And all the charges on his invoices.  But he had even bigger problems.  He was spending more than he was earning.  With the balance due coming from the wealth he got from his marriage.  Worse, his account at Cary & Company was in arrears.  The price for those fine things continued to go up while the price he was getting for his tobacco did not.  He didn’t trust Cary.  But he recognized the real problem was tobacco.  And mercantilism.  Where American colonists sent raw material to the mother country.  And bought finished goods from the mother country with the proceeds.  Making the planters dependent on people like Robert Cary.  Well, after this revelation Washington made some changes.  He planted wheat instead of tobacco.  Wheat he ground into flour in his own mill.  Which he sold locally.  Without going through Cary.  He built a ship to fish the Potomac.  And bought a ship to transport his goods to markets in the Caribbean.  Even all the way to Europe.  He set up a small textile shop to produce linen and wool fabric.  These changes helped Washington return to profitability.  Unlike some of his fellow planters.  Like Thomas Jefferson.  Who would die in debt.

Washington was an astute business man.  Who did not like being controlled by men in faraway places.  Around this time Parliament passed the Stamp Act to raise revenue to help pay the costs of the British Empire.  While he agreed with his fellow colonists that this was taxation without representation he did see something good in it.  The higher tax would reduce British imports.  As Americans gave up on British luxuries and provided for their own needs.  Which would help the Americans get away from the control of people in faraway places.  Something he was more and more interested in.  Economic independence.  Then came the Royal Proclamation of 1763.  Which shut off the Ohio Country to American settlers.  To ostensibly keep the peace with the Indians on the frontier.  Which stung Washington particularly hard.  Having helped to defeat the French to clear them from the Ohio Country King George was now denying this land to those who won it.  Still, they did promise to give some land to the veterans who fought there.  As long as they were a veteran of the British Army.  Yet another British slight directed at Washington.  And evidence of British cronyism when it came to the rule of the American colonies.  Then came the Intolerable Acts.  The Quebec Act.  The Townshend Acts.  Further encroachments by men in faraway places.  Washington had had enough.  And joined those demanding independence from Great Britain.

So if George Washington were around today who would he endorse in the 2012 election?  Well, he would not like the party that wanted to reach further into business affairs from faraway places.  Or that raised taxes and increased the regulations on business.  Or one that elevated the state over businesses.  Where the government picks winners and losers in the market place.  Like the mercantilism of old.  He would not like the smug, elitist politicians who know better than we do.  And change things in our lives to what they perceive as being for our own good.   Such as telling us what cars to drive or what fuels to use to make our electric power.  He would not like the massive spending.  Or the debt it gave us.  As his brief brush with inundating debt shook him to his core.  Making him turn away from the governing powers, returning to his rugged individualism of his days in the Ohio Country.  And so on.  Clearly the party he would not endorse would be the Democrat Party with their oppressive rules and regulations and their nanny state.  So it is likely that if he were around today he would endorse the Republican ticket of Mitt Romney and Paul Ryan.

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Revolutionary War, Sovereign Debt, Report on Public Credit, Hamilton, Jefferson, Madison, Assumption and Residency Act

Posted by PITHOCRATES - August 16th, 2012

Politics 101

In 1792 the Outstanding Debt at all Levels of Government was 45% of GDP

Wars aren’t cheap.  Especially if they last awhile.  The American Revolutionary War lasted some 8 years until the British and Americans signed the Treaty of Paris (1782) officially ending all hostilities.  So the Revolutionary War was a very costly war.  The ‘national’ government (the Continental Congress) owed about $70 million.  The states owed another $25 million or so.  And the Continental Army had issued about $7 million in IOUs during the war.  Added up that comes to $102 million the new nation owed.  About 45% of GDP.  (Or about 35% without the state debt added in.)

To put that in perspective consider that the Civil War raised the debt to about 32% of GDP.  World War I raised it to about 35%.  World War II raised it to about 122%.  Following the war the debt fell to about 32% at its lowest point until it started rising again.  And quickly.  In large part due to the cost of the Vietnam War and LBJ’s Great Society.  Government spending being so great Nixon turned to printing money.  Depreciating the dollar’s purchasing power in every commodity but one.  Gold.  Which was pegged at $35/ounce.  Losing faith in our currency foreign governments traded their U.S. dollars for gold.  Until Nixon decoupled the dollar from gold in 1971.  Ushering in the era of Keynesian economics, deficit spending and growing national debts.  Because of increased spending for social programs governments everywhere now have debts approaching 100% of GDP.  And higher.  But I digress.

So 45% of GDP was huge in 1792.  And it continued to be huge.  Taking a devastating civil war and a devastating world war to even approach it.  It took an even more devastating world war to exceed it.  And now we’ve blown by that debt level in the era of Keynesian economics.  Without the devastation of another World War II.  This debt level has grown so great that for the first time ever in U.S. history Standard and Poor’s recently lowered the United States’ impeccable sovereign debt rating.  And restoring that debt rating at today’s spending levels will be a daunting task.  But imagine trying to establish a sovereign debt rating after just becoming a nation.  Already with a massive debt of 45% of GDP.

In Hamilton’s Report on Public Credit the New Government would Assume Outstanding Debt at all Levels of Government

There was only one choice for America’s first president.  The indispensible one.  George Washington.  Some delegates at the Philadelphia Convention in 1787 who were skeptical of the new Constitution only supported it because they had someone they could trust to be America’s first president.  George Washington.  Benjamin Franklin, John Adams, Thomas Jefferson and James Madison were indispensible at times.  But not as indispensible as Washington.  For without him the Continental Army would have ceased to exist after that winter at Valley Forge.  That same army would have mutinied (for back pay and promised pensions) after the war if he didn’t step in.  Our experiment in self-government would have ended if he did not relinquish his power after the war.  We wouldn’t have ratified the Constitution without having Washington to be America’s first president.  And our experiment in self-government would have ended if he did not relinquish his power.  Again.  After his second term as president.

With the state of the government’s finances after the war there was another Founding Father that was indispensible.  Not as indispensible as Washington.  But close.  For without him the Washington presidency may have failed.  As well as the new nation.  Because of that convoluted financial mess.  The Continental Congress borrowed money.  The states borrowed money.  Some of which went to the Continental Congress.  The army took stuff they needed to survive in exchange for IOUs.  There were bonds, loans and IOUs at every level of government in every state.  Complicating the matter is that most of the instruments they sold ended up in the hands of speculators who bought them for pennies on the dollar.  As the original holders of these instruments needed money.  And did not believe the Continental Congress would honor any of these obligations.  For before the Constitution the government was weak and had no taxing authority.  And no way to raise the funds to redeem these debt obligations.

A few tried to get their arms around this financial mess.  But couldn’t.  It was too great a task.  Until America’s first secretary of the treasury came along.  Alexander Hamilton.  Who could bring order to the chaos.  As well as fund the new federal government.  He submitted his plan in his Report on Public Credit (January 1790).  And the big thing in it was assumption.  The federal government would assume outstanding debt at all levels of government.  Including those IOUs.  At face value.  One hundred pennies on the dollar.  To whoever held these instruments.  Regardless of who bought them first.  “Unfair!” some said.  But what else could they do?  This was the 1700s.  There weren’t detailed computer records of bondholders.  Besides, this was a nation that, like the British, protected property rights.  These speculators took a risk buying these instruments.  Even if at pennies on the dollar.  They bought them for a price the seller thought was fair or else they wouldn’t have sold them.  So these bonds were now the property of the speculators.

Jefferson and Madison traded Hamilton’s Assumption for the Nation’s Capital

Of course to do this you needed money.  Which Hamilton wanted to raise by issuing new bonds.  To retire the old.  And to service the new.  Thus establishing good credit.  In fact, he wanted a permanent national debt.  For he said, “A national debt, if not excessive, is a national blessing.”  Because good credit would allow a nation to borrow money for economic expansion.  And it would tie the people with the money to the government.  Where the risk of a government default would harm both the nation and their creditors.  Making their interests one and the same.

That’s not how Thomas Jefferson saw it, though.  He had just returned from France where he witnessed the beginning of the French Revolution.  Brought upon by a crushing national debt.  And he didn’t want to tie the people with the money to the government.  For when they do they tend to exert influence over the government.  But Hamilton said debt was a blessing if not excessive.  He did not believe in excessive government debt.  And he wanted to pay that debt off.  As his plan called for a sinking fund to retire that debt.  Still, the Jefferson and Hamilton feud began here.  For Hamilton’s vision of the new federal government was just too big.  And too British.  Madison would join Jefferson to lead an opposition party.  Primarily in opposition to anything Hamilton.  Who used the Constitution to support his other plan.  A national bank.  Just like the British had.  Based on the “necessary and proper” clause in Article I, Section 8.  Setting a precedent that government would use again and again to expand its powers.

At the time the nation’s capital was temporarily in New York.  A final home for it, though, was a contentious issue.  Everyone wanted it in their state so they could greatly influence the national government.  Hamilton’s struggle for assumption was getting nowhere.  Until the horse-trading at the Jefferson dinner party with Hamilton and Madison.  To get the nation’s capital close to Virginia (where it is now) Jefferson offered a deal to Hamilton.  Jefferson and Madison were Virginians.  Give them the capital and they would help pass assumption.  They all agreed to the deal (though Jefferson would later regret it).  Congress passed the Residency Act putting the capital on the Potomac.  And all the good that Hamilton promised happened.  America established good credit.  Allowing it to borrow money at home and abroad.  And a decade of prosperity followed.  Hamilton even paid down the federal debt to about 17.5% of GDP near the end of America’s second president’s (John Adams) term in office (1800).  Making Hamilton indispensible in sustaining this experiment in self-government.  Keeping government small even though it was more powerful than it was ever before.  Of course his using that “necessary and proper” argument really came back to bite him in the ass.  Figuratively, of course.  As government used it time and again to expand its role into areas even Hamilton would have fought to prevent.  While Jefferson no doubt would have said with haughty contempt, “I told you so.  This is what happens when you bring money and government together.  But would you listen to me?  No.  How I hate you, Mr. Hamilton.”

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