The Revolutionary Debt Bomb - And How the Founders Fixed It!

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By Larry Schweikart

Is there anyone out there who doesn’t think our fiscal house is about to slide into the ocean?

Whether one accepts the government’s estimates of a national debt that nears $10 trillion, or whether one thinks the numbers provided by Richard Fisher of the Federal Reserve Bank of Dallas, which includes all the “unfunded” parts of Medicare (A, B, and D) at another $85.6 trillion, for a total of $95.6 trillion, the United States faces a staggering level of debt.[i] And Fisher’s numbers do not include Social Security, which now, for the first time, has seen its out-flows exceed its income, and which adds another $10 trillion (at least) to the totals. The Medicare debt alone would stick each American family of four with a bill of $1.3 million, or about 25 times the average household’s income. Taken together, these levels of debt exceed the Gross National Product of probably half the nations in the world put together.

But history offers some hope. The young republic of the United States of America faced an equally daunting debt bomb in 1788, and, perhaps given the new nation’s utter lack of credit history, an even greater challenge than we face today. But the Founders dug their way out to the point of fiscal solvency fairly quickly, and within a decade the nation was viewed as a sterling credit risk. How was this possible?

It began with Treasury Secretary Alexander Hamilton—often a punching bag for some conservatives because of his big-government proclivities. But Hamilton knew that the only way to establish credit was to pay your bills. The situation confronting the United States, coming out of the Revolutionary War and the Articles of Confederation, was this: states had issued their own debt—some more, some less than others—and the United States, through the Continental Congress had also accumulated debts. Hamilton insisted the nation had to pay them all, and that a policy of “assumption” was the only sure way to convince foreign investors that we were an honorable Republic and not a banana republic! Despite fierce battles, he carried the day in Congress: the U.S. would pay all debts accumulated by the national and state governments. But how? Hamilton’s genius showed in his next maneuver, as he knew he needed to attract the “monied men,” as he called them. He structured a “menu” of new bond/debt options, in which longer-term debts received higher returns. Thus, if an investor had little confidence in the United States, he took short-term bonds which paid off less; and if an investor thought the nation would survive and prosper, he bought long-term bonds with their higher payoff. Throughout it all, Hamilton, contrary to popular opinion, did not wish to see the country saddled with debt. He said debt “is perhaps the NATURAL DISEASE of all governments,” and his first actions as Treasury Secretary were designed to reduce the nation’s indebtedness.[ii]

Hamilton’s restructuring of the debt on the surface may have resembled what Governor Arnold Schwarzenegger of “Koli-for-nya” did in 2004, but only on the surface. Hamilton ensured that payments on the debt went to the oldest debt first, and through a “sinking fund,” no new debt could be contracted until the old debt had been settled—in essence setting the United States up with an “American Express” version of credit instead of a Mastercard/Visa “revolving” credit line. So while the U.S. indebtedness remained at about $83 million when Thomas Jefferson became president, the payments on interest remained at a minimum.

In part, Hamilton also knew that he could count on those whom he knew well—President George Washington, plus John Adams, James Madison, and Thomas Jefferson (two men quite likely to hold the office in the future)—to limit spending and to practice federal frugality. Indeed they did. They ran the government with a handful of secretaries and a few hundred public officials; they carefully watched expenditures, with the largest being the construction of four large frigates under Adams and Thomas Jefferson’s purchase of Louisiana for $15 million. Yet despite the Louisiana Purchase, Jefferson still managed to slice more than one-quarter off the national debt.

All the Founders recognized that for the “monied men” to ally with the new nation, it had to honor its contracts (which it did through assumption); it had to establish a sound currency (which it did by adopting a gold standard and coining money along the Spanish system of tens and fives); and by paying its debts, which it did. By the presidency of Andrew Jackson, the nation had a surplus, but more important, it had a sterling credit record, and investment money flowed into the new nation. Hamilton, Washington, Adams, Madison, and Jefferson had all adroitly kept the “Revolutionary Debt Bomb” from exploding, and instead leveraged it for the growth of future generations. The key was confidence—confidence in the fiscal frugality and restraint of the leaders, confidence by the business sector in the government. Do either of those exist today?

While the numbers are staggering, like all numbers they matter little compared to the “animal spirits” of entrepreneurship, investment, and business growth. A sunny Ronald Reagan dug the U.S. out of deep straits just 30 years ago. The Founders, operating with even less, founded a nation on confidence and freedom, and the lessons of history tell us that such turnarounds can occur if the nation is determined to once again defuse its debt bomb.

Larry Schweikart

University of Dayton

co-author, A Patriot’s History of the United States


[i]. Richard W. Fisher, “Storms on the Horizon,” Remarks before the Commonwealth Club of California, May 28, 2008.

[ii]. One of the best analyses of Hamilton’s program is in Charles Calomiris, “Alexander Hamilton,” in Larry Schweikart, ed., The Encyclopedia of American Business History and Biography: Banking and Finance to 1913 (New York: Facts on File, 1990).

Bill O'Reilly joined the "Glenn Beck Radio Program" on Friday for his weekly take on the 2020 presidential race.

O'Reilly emphasized what a dangerous candidate socialist Sen. Bernie Sanders (I-Vt.) really is, and how the media is working to mislead voters by depicting other Democratic candidates, such as former South Bend, Indiana, Mayor Pete Buttigieg, as "moderate."

"The Democratic Party has been hijacked -- and this is no breaking news -- by the progressive left. Which is now being enabled by the national media," said O'Reilly.

"Bernie Sanders is a dangerous man. In any sane time, media time, that would be clear to everybody. But it's not," he added. "It's like, 'Oh, there's uncle Bernie and he just wants to give stuff away. What a great guy.' [He's] not a great guy, all right? He's a totalitarian. He'll take your freedom, in every area, away. Every area. There isn't one area, that Bernie Sanders wouldn't intrude upon, in your personal freedom. Yet, that's not reported. You don't know it unless you pay attention. It's all a bunch of dishonest blather that has obliterated the so-called moderate Democrat. And there are millions of those people. They don't know what to do because they have no voice in the media."

Glenn pointed out that the media has been "trying to make Pete Buttigieg into a moderate" ever since his strong showing in the Iowa caucuses last week.

"So, Pete Buttigieg: Harvard grad. Rhodes Scholar. Brilliant man, he is brilliant. Great speaker. Almost as good as Beck and I. Not quite, but almost," O'Reilly said. "He's only 38, all right? So, the guy goes out and runs for president after being the mayor of South Bend, Indiana, for eight years, and almost destroying that city. The city is in chaos, yet he's re-elected with 80% of the vote the second time. That's what a good BS'er Pete Buttigieg is.

The two went on to break down Buttegieg's radical policy plans on immigration, abortion, gun control, and more.

Watch the video below to catch more of the conversation:

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On the radio program Thursday, Glenn Beck and his chief researcher, Jason Buttrill, have uncovered new evidence that suggests the coronavirus death toll numbers coming from China are grossly inaccurate.

After vetting several deep-fake videos circulating on social media, Jason unearthed shocking whistleblower-videos released by citizens of the communist state that show entire warehouses filled with body bags, along with other atrocities.

Jason and Glenn break down the real numbers and discuss the possibilities of the outbreak coming to America. Watch the video below for more details:

Don't miss next Wednesday's TV special on the coronavirus in its new time slot at 9PM ET.

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Former South Bend, Indiana, Mayor Pete Buttigieg has surged in the polls in the past month.

With former Vice President Joe Biden dropping below far-left presidential candidates such as the unapologetically socialist Sen. Bernie Sanders (Vt.), and the almost equally extremist Sen. Elizabeth Warren (Mass), Democratic voters seeking a more moderate alternative are setting their sights on Mayor Pete.

But are Buttigieg's policies actually moderate? Not even close, Glenn Beck said Thursday on the radio program.

"[Pete Buttigieg] wants people to see him as a moderate. The mayor of a Midwest city in a red state ... and he's going for the middle, even though he is not a moderate candidate in any way," said Glenn.

Here are just a few example of where Buttigieg stands on the issues:

  • Supports late-term, partial-birth abortion
  • Eliminate the Electoral College
  • Buyback program for assault weapons
  • Raise the federal minimum wage to $15/hour
  • Expand Medicare
  • Decriminalize illegal immigration
  • Pay for infrastructure through changing taxes on corporations, the wealthy
  • Study reparations
  • Legalize marijuana
  • Increase existing taxes on upper-income Americans
  • Cancel some student debt
  • Don't use tariffs to pressure countries
Watch the video clip below for more information:

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An official at the World Health Organization (WHO), the United Nations' health agency, has issued a warning, calling the coronavirus "the worst enemy you can imagine" and more of a threat than "any terrorist attack," during a media briefing on Tuesday.

Dr. Tedros Adhanom Ghebreyesus, WHO's director general, said that a vaccine for the coronavirus will likely take 18 months to develop. The virus has reportedly killed hundreds and infected tens of thousands of people, primarily in China.

"To be honest, a virus is more powerful in creating political, social and economic upheaval than any terrorist attack. It's the worst enemy you can imagine," added Ghebreyesus.

On the radio program Wednesday, Glenn Beck noted that the same agency in charge of developing this life-saving vaccine, has taken the time to officially change the disease's name to COVID-19, citing the concern of "stigmatizing" any specific geographical location, individual, or group of people.

Watch the video below to catch more of the conversation:

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