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History & Politics of National Debt

(Featured Image: Heald Square Monument, ‘Financiers Monument,’ Solomon, Washington and Morris) (History & Politics of National Debt, c. 2016; by a servant; print and use freely for nonprofit use)

History & Politics of National Debt

CHAPTER ONE: FUNDING THE REVOLUTIONARY WAR

In 1774, the British Parliament passed a series of punitive laws known as the Intolerable Acts which they recorded was in response to the Boston Tea Party (1773) and colonial defiance.  The American Colonies answered not with submission, but rather by forming the Continental Congress which first met in Philadelphia on September 5, 1774, with delegates from each of the 13 colonies except Georgia.  The Congress gave Britain an ultimatum to repeal the Intolerable Acts; and also petitioned King George III for other rights and representation.  Before their second meeting in 1775 we were at war; and of course in 1776 declared our independence.

The American Revolutionary War lasted from 1775 to 1783.  The United States Constitution was created September 17, 1787 through various committees, Plans and compromises by delegates at the Constitutional Convention in Philadelphia.  However, it was not ratified until June of 1788 and not in force unto 1789.  And April 30, 1789, former Commander-in-Chief of the Continental Army, George Washington, became the first President of the United States.

May of 1781, the Bank of North America was chartered by the Confederation Congress.  The private bank opened in Philadelphia Jan. 1782, and service as a central bank.   It sold shares of stock and was the first initial public offering in America.   The bank made loans to both the public and private sectors.  And by 1784, Alexander Hamilton in New York, and William Phillips in Boston, would also found commercial banks.  The Bank of North America would have its first charter revoked and gain a second charter in 1786.

Before 1800, there were at least 28 Chartered National banks, including: the Bank of New York (1787 – capital $ 2 million), the Bank of New York (1784; 1791; 2007 Bank of N.Y. Mellon), the Bank of the United States (PA, 1791; $ 10 million capital), the Massachusetts Bank (1784; Merged with First National Bank of Boston 1903; 2004 acquired by Bank of America), the Bank of Maryland (1790), Union Bank (1792), Bank of Pennsylvania (1793; capital $ 3 million), and Manhattan Company.

Robert Morris, a founding father of the U.S. (signer of Declaration of Independence, Art. of Confed., & Constitution), and Superintendent of Finance 1781-1784, obtained and owed about 60% of the shares of the Bank of N.A.  Next to Gen. George Washington, Morris was called by some, ‘the most powerful man in America.’  He oversaw much of the Continental Navy, and was also called the ‘Financier of the Revolution.’  Morris served as a Senator of Pa. from 1789 to 1795.  However, due to greedy land grab attempts during the Panic of 1796-1797 he went bankrupt in 1798.

The text Rise of the American Nation (1966) states, ‘Alexander Hamilton (1754-1804) was second only to Washington in his influence upon the new government in its early years.  Only 32 years of age when he became Secretary of Treasury… was convinced that the federal government should be as strong as possible…  Hamilton convinced Congress that a debt must be paid if the nation’s credit was to be established.’

In 1757, when Colonist and states were printing their own debt-free currency, Benjamin Franklin stated, ‘In the colonies we issue our own money. It is called colonial scrip. We issue it in proper proportion to the demands of trade and industry to make the products pass easily from the producers to the consumers. In this manner, creating for ourselves our own paper money, we control its purchasing power and we have no interest to pay no one.’

When America declared its Independence in 1776, it did not have the power of direct taxation and struggled to raise money through the states.  In 1781, Haym Solomon, who spoke 8 languages, acted as a broker for the American government, and helped raise money for the Revolution.    Families such as James Madison’s gave to the effort.  Solomon, a Jewish immigrate, also led the fight in PA to overturn laws restricting non-Christians from public office.

The French Minister would name Solomon (Salomon) paymaster general of the French forces.  And the Dutch and Spanish governments commissioned him to sell securities to support their loans to the Continental Congress.  The Congressional Record, 3/25/1975 states: “When Morris was appointed Superintendent of Finance, he turned to Solomon for help in raising money needed to carry on the war and later to save the emerging nation from financial collapse.  Solomon advanced direct loans… and Morris’ diary for the years 1781-84 records some 75 transactions between the two men, with frequent entries of ‘I sent for Haym Solomon’.”

In 1780, Robert Morris was nominated for the new Superintendent position, and soon afterwards went to Haym Solomon’s office and told him the Continental Congress was in desperate need hundreds of thousands of dollars.  The story goes that Solomon asked how long the Congress has, to which Morris replied, ‘days.’  Then two days later, Solomon brought to Morris’ office $ 92,000 in negotiable notes, and asked ‘will this help?’  Morris said, ‘You have no idea; the government must pay a debt of $ 100,000 by noon tomorrow.’  Solomon said, ‘I will be back soon.’  Within five days, Solomon raised another $350,000 in notes.  Morris asked how this was possible.  To which Solomon replied, ‘There are subsidies from Holland and France.  They are much interested in our Revolution and want us to succeed.’  And when Morris said, ‘it takes weeks to communicate with brokers in Europe.’  Solomon answered, ‘I know their representatives here in Philadelphia.  They were gracious enough to accept my personal guarantees in these matters.’

From 1781 to 1784, Solomon brokered at least 75 financial transactions for loans and funds to purchase ammunition, muskets, and cannons, as well as food, clothing and medicine.   It is said that Solomon raised $ 3.5 million British pounds from the Sassoon and Rothschild banking houses.  The Jewish-American Hall of Fame online, states in 1782, Madison acknowledged the ‘kindness’ of Solomon, who died at age 44 in 1785.  Salomon was a member of Mikveh Israel Congregation in Philadelphia; he gave the bulk of funds to build its first building in 1782.  Ben Franklin also gave a donation.   Haym was buried at the Mikveh.

It has been reported that Mayer Amschel Rothschild got even richer by secretly funding both sides of the American Revolutionary War.  One account tells that British funds occasionally did not reach America in time to pay troops; and at least on one occasion was lost.  Mayer Rothschild, the oldest son of Amschel, learned his banking as an apprentice at the Oppenheimer banking house in Hanover.   In 1763, after his father’s death, Mayer moved back to Frankfurt.  In 1769 he was appointed court factor to Prince William.

Some say that Rothschild drew up the plans for the Illuminati in 1770; that is unproven.  However, he did have contacts with the American Freemasons.  And not only did Rothschild become Prince William’s personal banker, he lent to William’s family: the king of Denmark, the king of Sweden and George III of England.  Today in Chicago stands a ‘moneylending monument’ with Robert Morris, George Washington and Haym Salomon.

The Bank of North America was granted the charter in 1781, and was funded in part through loans of gold and silver from financiers in Netherlands and France.  Loans from the Bank of North America were used to finance the Yorktown campaign of October 1781.  The Historical Society of Pennsylvania’s article The Bank of North America and Pennsylvania Politics: 1781-1787 (6/2015), states ‘In 1785 the charter of the Bank of North America came under attack in the state assembly and in the Philadelphia newspapers.  The enemies of the bank were the farmers of the democratic West; its chief supporters were the wealthy merchant oligarchy of the East… the Bank of North America was founded by Robert Morris in 1781, the blackest year of the Revolution, when the Continental Congress turned to Morris to save the country’s finances.  Morris declared that the bank would bolster the tottering national treasury by making loans from its capital, and supply the need of a circulating medium by issuing notes on the credit of the stock…  (Its) president… Thomas Willing… partner of …Morris.   By the time Congress had ratified the Peace of Paris (Treaty 1783 ended War), the account of the Bank of North America with the United States was closed.’

The article states, ‘The bank was blamed for having enabled merchants to make unwise purchases of British goods by making money readily obtainable in discounts; and then throwing the merchants into the clutches of usurers by calling for payment of the discounted notes in 45 days.  The farmers complained that they could not borrow money at the legal rates of interest since all the wealthy Philadelphians’ money had gone into bank shares, and insisted that it was impossible for them to borrow from the bank because they could not come to Philadelphia every 45 days to pay or renew their notes.‘        ‘And always there was reiterated the prime objection: ‘the bank forbids paper money which has been the traditional medium of America.’

‘…the legislature appointed a committee to investigate the question whether the existence of the bank was consistent with the public safety, and ‘that equality which ought to prevail between the individuals of a republic’ brought in a report embodying accusations which made former objections seem trivial.  …They foresaw the directors of ‘this enormous engine of power’ who had already threatened to blast the credit of the state’s paper currency, dictating to the legislature ‘what laws to pass and what to forbear,’ and predicted that eventually the foreigners interested in the bank would control its policies, and from domestic tyranny ‘the good people of America (would be) reduced once more into a state of subordination and dependence upon some one or other of the European powers (recorded from the Pennsylvania Gazette, 3/30/1785).’

The Bank of North America cash account was about $ 60 million in 1784 and dropped to $ 37 million in 1786.  The Dutch minister to the United States, with four other N.Y. shareholders wrote Thomas Willing, The bank’s 1786, Stockholder’s Minutes that January state, ‘the very existence of the institution has by this proceeding been drawn into controversy…’  That year, the bank received its second charter, and Thomas Paine had wrote, ‘Common Sense’ against paper money, saying ‘money is money and paper is paper.’  Two of Paine’s articles were, ‘Dissertations on Government, The Affairs of the Bank; and Paper Money’ (Paine, 2/18/1786); and ‘On the Advantages of a Public Bank’ (6/17/1786).

According to Treasury.gov and the History of the Treasury, ‘On June 22, 1775 – only a few days after the Battle of Bunker Hill, Congress issued $2 million in bills; on July 25, 28 citizens of Philadelphia were employed by the Congress to sign and number the currency.’ Benjamin Franklin had acquired $ 2 million from the French government; and in addition to the funds raised by Morris, Salomon, others, in 1782 John Adams, with help from David Salisbury Franks, secured a loan from Dutch bankers.

Franklin, and John Jay (1st Chief Justice) also kept correspondence with Franks.  In 1775, Franks was the president of Shearith Israel synagogue in Montreal (Spanish and Portuguese Synagogue; first non-Catholic temple in Quebec).   In 1776, after failed efforts of the American campaign in Canada, Franks came to Philadelphia.  Franks served with Washington and later carried top secret documents to Franklin in Paris and Jay in Madrid.  After the war, he was made the vice-consul at Marseilles, France.   Though Franks contributed much, due to his association with Benedict Arnold, certain Jeffersonian Republicans questioned his loyalty and had him dismissed.  Franks was given a grant of land and a position in the Bank of the United States, but died in poverty in yellow fever during the epidemic of 1793.

The First Bank of the United States was chartered for a 20 year term from February of 1791 to 1811.  It followed the Bank of North America as the nation’s central bank.  It was supported by Alexander Hamilton, the first Secretary of the Treasury, who saw it as a way to improve the nation’s credit.    Hamilton wanted the Bank on behalf of the Nation, to take over the state’s War debts; to raise money for the new government; and to create common currency.  Hamilton proposed the Bank would be a private company, but subject to $ 10 million in stock capitalization and could not issue notes beyond that amount.  In was said, that by 1791, interest on state debts was about $ 788,000 annually.  Washington, of Virginia, initially was hesitant to sing the ‘bank bill’ into law.

Attorney General Edmund Randolph of Virginia stated that he felt the bill was unconstitutional.  Thomas Jefferson, also of Virginia, was against Hamilton’s proposal as being against the spirit and the letter of the Constitution.  The New York members with Hamilton and others, convinced Congress and Washington of the need; and in March 1791, Washington appointed 3 Commissioners to the Bank: Thomas Willing – its President, Samuel Howell (Merchant, Financier, and billionaire in 2016 $) and David Rittenhouse (Surveyor, Astronomer, inventor; he completed survey of Mason-Dixon line, was the first American to sight Uranus, discovered the atmosphere of Venus, and was the first director of the U.S. Mint).

By December 1778, Continental currency was worth 1/6 its value, and by 1780 the bills were at 1/40 face value.  One problem was with British counterfeiting.  Nevertheless, before 1789, many colonists were content to leave their debts unsettled for years.   By the time Washington became president, Americans began to see the economic need and ethical reasons for paying their debts on time.  However, many elite bankers also took advantage of the times, taking positions in society that former British officers and Loyalist held.  In 1790, the U.S. had 4 national or Commercial Banks; by 1800 the number reached 29, with about $ 27 million in Capital and $ 50 million in assets.

With Washington took office, the National Debt was about $ 65 to $ 70 million.  In terms of 2015 dollars, a $ 65 million national debt in 1789 would equal about $ 1.6 Billion in 2015.  The economic and purchasing power would be much more, but this figure is based on inflation.  In U.S. Dept. of Finance began in 1781, and 1783, the debt was about $ 43 million.  By some sources, France spent $ 1.3 billion livres, Spain spent over 1.15 billion reales, Great Britain spent about $ 250 million pounds, and the US spent $400 million on the war.

When Hamilton reported to Congress in 1790, he insisted that the federal government assume and pay America’s war debt.  He stated, ‘the debt of the United States was the price of liberty.  The faith of America has been repeatedly pledged for it…’  According to Rise of the American Nation (1966), ‘the United States and the separate states owed a combined war debt of more than $ 80,000,000 – a staggering sum for those days.  Hamilton proposed to repay all the debt.  Everybody agreed that the U. S. should pay $ 12,000,000 that it owed to France, the Netherlands, and Spain.  As a result, the United States ‘funded’ these international debts.  That is, the U. S. arranged that, over a fixed period of years, it would repay with interest the countries that had lent the money.  The ‘domestic’ debt was another matter.  Many Congressmen objected to Hamilton’s proposal to repay $44,000,000 that the Continental Congress had borrowed from American citizens during the Revolutionary War.’

The War of course had its effect on the National Debt, but independence and a new government would have its effect on the people and the churches.  According to A History of Christianity in the United States and Canada (1992), “Christian values played a central part in the tumultuous events of the Revolutionary period.  Many believers promoted the movement for independence from Great Britain in the 1770s, and they also rendered great service to the patriot cause during the War itself… Christians and the Christian faith played a substantial… role in shaping of republicanism.  In eighteenth-century Britain and America, republicanism was an ideal rather than a sharply defined system.  In simple terms, the republicanism of this period can be defined as the conviction that the exercise of power defines the political process and that unchecked power leads to corruption… Furthermore, the arbitrary exercise of unchecked power must by its very nature result in the demise of liberty, law and natural rights.  Republicans… tended to favor separation of power in government rather than its concentration… Republicanism was critical for the relation of religion and politics…’

‘…The First Amendment to the US Constitution, with its provision that ‘Congress shall make no law respecting an establishment of religion, or prohibiting the free exercise thereof,’ took effect 1791.  At that time, 5 of the nation’s 14 states provided for tax support of ministers, and those 5 plus 7 others maintained religious tests for state office.  Only Virginia and Rhode Island enjoyed the sort of ‘separation of church and state’ that Americans now take for granted – government providing no tax money for churches and posing no religious conditions for participation in public life.  With less than a handful of exceptions, even the defenders of religious liberty in Rhode Island and Virginia did not object when Congress or the president proclaimed national days of prayer, when the federal government began its meetings with prayer, or when military chaplains were appointed and funded by law.”

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CHAPTER TWO: A New Century, City and War

In 1796, former Southwest Territory, Tennessee, followed Kentucky (1792; previously part of N.Y. & N.H.) and Vermont (1791; previously part of Virginia) into statehood and joined the original 13 colonies as part of the United States of America.  At that time the seat of government was still in Philadelphia; however it would soon be moved to the new capital city and approved land by the Potomac River.   In 1800, as America entered the 19th century, the government entered their new offices on lands donated by Maryland and Virginia, which was called the City of Washington (1791).

Article One; Section 8 of the Constitution: Congress shall have the power to lay and collect taxes, duties, excises, to pay debts, provide for the common defence and general welfare, to borrow money on credit, declare war, and apportion land for a ‘District, not exceeding ten Miles square.’  Congress was divided in the North and South as to where delegates wanted the city.  The Compromise of 1790 would be the first of many congressional compromises to keep the union together.

The Library of Congress preserved Thomas Jefferson’s ‘Account of the Bargain (written 1818)’ of the 1790, “it’s rejection endangered a dissolution of our union… compromise which was to save the union …there had before been propositions to fix the seat of government either at Philadelphia or at George town on the Patomac; and it was thought that by giving it to Philadelphia for ten year, and to George town permanently afterwards… and so two of the Patomac members agreed to change their votes, and Hamilton undertook to carry the other point.”  Thus, in return for Hamilton getting the northern votes to set the seat of government on the Potomac, in part of Old Virginia; Jefferson and Madison got the southern votes to approve a National Bank that would assume and pay back America and its states War debts.  And Washington would sign the bill under the compromise and be allowed to choose the land for the capital.

In 1793, the first year of Washington’s second term the debt with interest and loans reached $ 80 million.  The government paid it down $ 1.9 million in 1794, and then added another $ 5.3 million before Washington left office.  John Adams administration paid back the $ 5.3 in his first three years, but added back $ 4.57 million his last year; bring the National Debt to almost $ 83 million in 1800.   Amidst difficult times, John Adams was a brilliant men and president.  Nevertheless, with Hamilton, Jay, and others such as Captain Pinckney (US Minster to France; planter; brother Gov. of S.C.; Middleton: father-in-law second President of the Cont. Congress), Adams was a Federalist.

Adams had won the 1796 Election by 3 electoral votes over Jefferson.  And he was furious that Hamilton had secretly moved many southern delegates to vote for Pinckney, which nearly cost Adams the election.  Yet, they supported the platform, and as Federalist, they strongly supported a national bank, tariffs and continued foreign relations, including peace and trade with Great Britain.  According to the text, America Past and Present (1984), “American taxpayers complained more and more about the cost of maintaining an unnecessary army.  The President was only too happy to dismantle Hamilton’s dream… the French …government headed by Napoleon Bonaparte… refused to compensate the Americas for vessels taken during the Quasi-War (1798-1800)… but they did remove restrictions on United States commerce.  Not only had Adams avoided war, he had also created an atmosphere of mutual trust that paved the way for the purchase of the Louisiana Territory… (Though Adams) ‘most successful’ act… it cost him reelection… 1800, Jefferson 73 votes to Adams 65 electoral votes.

Before Adams left office, he appointed John Marshall and other ‘midnight judges’ who agreed with their Federalist policies and principles. Marshall, the second Chief Justice of the Supreme Court, served as an army officer, congressman, Sec. of State, and envoy to France.   According to Rise of the American Nation: “During his long term as Chief Justice, John Marshall established three basic principles of American law.  The three principles became the foundation stones of the federal union. (1) …Marshall stated that the Supreme Court has the power to determine when an act of Congress is unconstitutional…  In Marbury v. Madison (1803) the court stated, ‘The powers of the legislature are defined and limited… a legislative act contrary to the Constitution is not law… It is emphatically the province and duty of the judicial department to say what the law is…’  …As Jefferson expressed it, Marshall made the Constitution ‘a mere thing of was in the hands of the judiciary, which… (they) may twist and shape into any form they please.’  Marshall declared (2) that the Supreme Court had the power to set aside laws of state legislatures when these laws were contrary to the Constitution, and (3) that the Supreme Court had the power to reverse the decision of the state court.”

Thomas Jefferson took office in 1801 as a Democratic-Republican.  The party was formed by Jefferson and Madison in opposition to the Federalist Party.  However, Jefferson took a moderate position and continued many of the Federalist programs.  In order to better the union, Jefferson kept on many Federalist in offices, and in his Inaugural address stated, ‘We are all Republicans, we are all Federalists.’  Jefferson opposed the bank and felt it unconstitutional, but could not stop its charter which ran to 1811.

In 1795, General Anthony Wayne, a skilled Indian fighter, arranged a treaty with 12 Indian tribes in which they would gave up their claims to most of the Ohio land, and the US government would pay them and agree to their claim of the rest of the Northwest Territory.  Settlers moved west and many New Englanders helped build and settle villages.  They brought with them not only their crafts, but their ministers and schoolmasters.  By 1803, the territory of Ohio became a state.  More territory and population in the Union offered more resources and strength, but it also came with obligations.

When Jefferson took office the January 1801 national debt was about $ 83 million.  After his first 3 years, the debt was paid down almost $ 6 million, to $ 77 million in 1803.  However, he ceased the opportunity of the Louisiana Purchase in 1803.  He had agreed the Robert Livingston, minister to Paris, would offer Napoleon up to $ 10 million for the land.  Though Napoleon and the French had their wars and debt, he would not take less than about $ 15 million for the entire area.  Livingston, on behalf of the U.S., agreed to pay 50 million francs ($11,250,000) and to assume claims of American citizens against France that amounted to about $ 3,750,000 (18 million francs).   It was agreed and became the largest land transaction in history.

In the Senate, Jefferson’s enemies, the Federalist, opposed the transaction, stating $ 15 million was too high for such an empty wilderness.  Jefferson held firm and won over Congress; little did the Federalist know what population  and resources the 530 million acres or approximate 828,000,000 square miles would yield; not only the port of New Orleans for international trade, but the great Mississippi River, timber, furs, fertile soil for crops and cattle, and of course oil.  The price was about 3 cents an acre.  Due to the Louisiana Purchase, the national debt increased $ 9.3 million in 1804 to $ 86.4 million.  However, Thomas Jefferson won reelection and would decrease the debt significantly every year of his second administration.  By the end of 1808, the national debt was paid down over $ 20 million during his second term and was about $ 65.2 million.

One of Jefferson’s best known quotes is from a Monticello letter to John Taylor, dated 1816, ‘I believe that banking institutions are more dangerous to our liberties than standing armies. If the American people ever allow private banks to control the issue of their currency, first by inflation, then by deflation, the banks and corporations that will grow up around [the banks] will deprive the people of all property until their children wake-up homeless on the continent their fathers conquered. The issuing power should be taken from the banks and restored to the people, to whom it properly belongs.’

Jefferson would be followed by his friend and fellow Republican James Madison.   During Madison’s first term, his administration also paid down the National Debt significantly each year from 1809 to 1812; about another $ 20 million reduction to $ 45 million in 1812.  However, the banker’s best friend – war – would change that.              According to the Congressional Research Service, Report ‘Costs of Major U.S. Wars,’ the American Revolution cost $ 101 million ($ 1.8 Billion, FY2008$) and the War of 1812 between America and Great Britain cost $ 90 million ($1.2 Billion; 2008$).  Thus, by the end of Madison’s second term, national debt increased about $82 million to $ 127 million end of 1815.

Jefferson had made his position clear, ‘I consider the foundation of the Constitution as laid on this ground: That ” all powers not delegated to the United States, by the Constitution, nor prohibited by it to the States, are reserved to the States or to the people.”  Nevertheless, April 1791, due to the great international debts and the great compromise in Congress, Washington had signed the bank bill which gave the Bank of the United States a 20 year charter until 1811.  It was reported that during its first five years the nation borrowed over $ 8 million from the bank, and consumer prices rose in some cases over 70%.

According to America Past and Present (1984), “Jefferson wanted to diminish the activities of the federal government.  He urged Congress to repeal all direct taxes… and to help pay the debt inherited from the Adams administration; Jefferson ordered substantial cuts in the national budget.  The President closed several American embassies in Europe… and slashed military spending.  In his first term Jefferson reduced the size of the United States Army by 50 percent… leaving 3,000 soldiers to guard the entire frontier…’

‘(After the Louisiana Purchase) in 1804, (Vice President) Aaron Burr decided to run for the governorship of New York.  Although he was a Republican, he entered into political negotiations with High Federalists who were plotting the secession of New England and New York from the Union.  …Alexander Hamilton described Burr as ‘…a dangerous man… who ought not to be trusted…’ Whether Hamilton’s appeals influenced the voters is not clear.  Burr blamed (him) for his …defeat and challenged (him) …to a duel.  Though Hamilton condemned this violence – his son had recently been killed in a duel – he accepted …July 11, 1804… N.J., the vice-president shot and killed the former secretary of the treasury.  Both N.Y. and N.J. indicted Burr for murder.  (As Jefferson concluded his) …second term, the United States found itself in the midst of a world at war… France and Great Britain, fought for supremacy…’

‘(During James Madison’s second year in office) the overwhelming majority of the population – 84% in 1810 – was directly involved in agriculture.  Southerners concentrated upon staple crops, tobacco, rice and cotton, which they sold on the European market.  In the North people generally produced livestock and cereal crops… the prosperity of the United States depended primarily upon its agriculture and trade.”

At that time, Madison and Congress could not see as clearly and rapidly as today.  They made several poor decisions and threats concerning trade with both England and France.  And at home the Bank charter was soon ending.

Nathan Mayer Rothschild (1777-1836), the Jewish German banker son of Mayer Rothschild, was over the Rothschild’s banking in London.  According to The Rothschild Archive (www.rothschildarchive.org), “At the age of 20, Mayer Amschel Rothschild (1744-1812) established a business as a dealer in coins and bills… in Frankfurt.  The Elector of Hess became one of the first Rothschild clients in 1769… When the Elector was obliged to go into exile in 1806, …(he) concealed his coffers from the occupying forces …(at) the House of Rothschild… Thanks to prudent investment, the fortune was returned to the Elector with interest at the end of the Napoleonic wars. When Nathan Rothschild permanently established his banking business in London in 1809, one of his first major transactions was the investment of £550,000 of the Elector’s funds in British government securities and bullion… the success of this business laid the foundations for the Rothschilds’ rise to prominence… (Later) politician Randolph Churchill (1849-1895) the father of Winston Churchill was an intimate of the Rothschild family…’

‘September 1810, Mayer… and three sons, Amschel… Salomon… and Carl, became partners…  Nathan… made his first home in Manchester, the centre of the English cotton trade, and set up a cloth wholesale business… by 1811 he had wound up the Manchester wholesale business to concentrate on banking from his base at New Court…  James, the youngest of the brothers, went on to found the French business… James… was in Paris from the age of 19 (1811), coordinating the purchase of specie and bullion for Nathan.”

One of the famous sayings of Mayer Amschel Rothschild (1744-1812) was, ‘let me issue and control a nation’s money supply, and I care not who makes its laws.’  Yet, 1811, the year before his death, America was threatening the banks life-blood – its influence over the government as a central bank and its ties to international banking.   Benjamin Franklin and Thomas Jefferson had made their arguments against the bank when the nation was young, Madison would not have it any easier.  And though the charter was up in 1811, and there was still opposition to a central bank, rather than state banks, the national debts were in the tens of millions and war was on the horizon.

Napoleon in 1787 had said, ‘When a government is dependent for money upon the bankers, they and not the leaders of the government control the situation, since the hand that gives is above the hand that takes … financiers are without patriotism and without decency.’  When the 20 year charter for the Bank of the United States came up for renewal in 1811, it was January and Congress came from debates on the issue.

According to The Bicentennial Almanac (1975), ‘1811: Jan. 24-Feb. 20. …the renewal was defeated… Feb. 11 For the third time in four years the US prohibits trade with Great Britain… Mar. 4 The Bank of the United States is closed permanently…  May 1 The British 38-gun frigate Guerriere stops an American vessel… the U.S. 44-gun frigate President searches… May 16 …overtakes a ship thought to be the Guerriere but later discovered to be a British corvette, the Little Belt… the President shells the British ship… Nov. 1 The United States offers compensation for the Little Belt affair, on condition that the British repeal their Orders in Council. The offer is refused.  Nov. 4 The 12th Congress convenes, led by ‘War Hawks’.”

So the Democratic-Republican majority Congress voted against the renewal of the bank’s charter.  By 1805, the First Bank of the United States had branches in at least 8 states and D.C., including a branch in New Orleans.   In 1809, the Bank asked Congress to renew the charter and expand its capitalization.  In 1810, Congress debated and but did not renew.  March 1811, the bank closed as the National Central Bank, and by autumn, Rothschild was issuing loans to help finance the British for the War of 1812.

First Bank functioned as a commercial bank and made loans to individuals.  Though it was a central bank, it did not set monetary policy or regulate other state banks.  First Bank was bought in part by Girard Bank (which in 1983 was acquired by Mellon Bank, then sold to Citizens Financial 2001; which is a subsidiary of the Royal Bank of Scotland). After the First Bank closed, the country became subject to economic pressures and more so War was once again approaching; and with trade restraints, duties on imported goods fell, followed by a rapid reduction in revenue and a rapid increase in Debt.  By 1811, the Nation had 118 Commercial Banks with authorized capital over $ 76 million and estimated assets of over $ 142 million.

James Madison is considered to be the ‘Father of the Constitution.’  Perhaps this is why he fought so hard for national, civil and religious liberties.  A graduate of Princeton, who completed a postgraduate year in divinity, though a deist in much of his religious beliefs, Madison fought for the civil rights of the Baptist Church.  He was for separation of church and state like Jefferson, but not for separation of churches from the nation.  It was he believed and stated, America was ‘teaching the world the great truth that Governments do better without Kings and Nobles than with them… (and) Religion flourishes in greater purity, without than with the aid of Government (quoted in Noll’s, A History of Christianity in the United States and Canada).  And as to his fight for national liberty, the Madison and America would teach the world the great truth that not only could the United States withstand the greatest naval power in the world – Great Britain – but also that it will not yield or fall to any invasion of its coast or borders.

Some called the War of 1812, the ‘second war of independence.’  1807, Britain again was seeking to control America, by restricting its trade through the Orders of Council.   In 1808, Jefferson pushed through his own Embargo Act.  In 1809, the Act was repealed by Congress, due to the greater economic losses suffered by America over either France or Britain.  In 1810, Napoleon and Madison could not reach a mutual agreement, and in 1811 when the banks charter was denied, it was the last straw for the Rothschild backed powers of the government in Britain.

At that time, Major General Andrew Jackson said, ‘If Congress has a right under the Constitution to issue paper money, it was given them to use by themselves, not to be delegated to individuals or corporations.’ And about that time when the bank charter was not renewed, Nathan Rothschild, head of Rothschild banking in England and financier of wars, threatened with an ultimatum, ‘Either the application for renewal of the Charter is granted, or the United States will find itself in a most disastrous war.’  Andrew Jackson’s response to this was, “You are a den of thieves vipers, and I intend to rout you out, and by the Eternal God, I will rout you out.” Nathan Mayer Rothschild’s reply to that being, “Teach those impudent Americans a lesson. Bring them back to colonial status.”

According to America Past and Present, “November 1811, the American troops routed the Indians at the battle of Tippecanoe.  Harrison immediately became a national hero and decades later… (would be) elected president… In 1811 the anti-British mood of Congress intensified… the ‘War Hawks’ …Henry Clay… John Calhoun… Republicans repudiated Jefferson’s policy of peaceful coercion.  Madison surrendered to the ‘War Hawks.’ On June 1, 1812, he sent Congress a declaration of war against Great Britain… (in part for all) …a matter of national pride.  Andrew Jackson wrote, ‘For what are we going to fight!  …we are going to fight for the reestablishment of our national character, misunderstood and vilified at home and abroad.’ …(However) when the United States Treasury appealed for loans to finance the war, wealthy northern merchants failed to respond.  The British government apparently believed that the New England states might negotiate a separate peace and during the first year of war, the Royal Navy did not bother to blockade the major northern ports.”

The War of 1812 is most noted for the Battle of New Orleans that took place January 1815; however, the war lasted almost three years and was fought in many locations, including Canada, Michigan Territory, Ohio, New York and Washington, D.C. where in 1814 the British set fire to the White House and Treasury Building for the American attacks on Port Dover, and Fort York in Ontario, Canada.   The British only occupied Washington one day, and by a miracle a heavy ‘storm saved Washington.’  Out of the War would come respect for the strength of the United States, as well as notable Generals such as, Jackson, Brown and Scott; and the war would propel Andrew Jackson, J.Q. Adams, James Monroe and William Harrison to the presidency.

Nevertheless, as all wars, it came at great cost, by the time the Treaty of Ghent (Belguim) ended the War in 1815, the Nation’s Debt was about $ 82 million.  By the time Madison’s second term ended in 1816, the debt would be $ 127 million – nearly equal to all the assets of all the commercial banks in America.  As stated earlier the war cost was about $90 million.

As to the time and the Second Bank, A History of the United States: To 1876 (1959) states, “The War of 1812 led to chaos in shipping and banking, stimulated the growth of manufactures, and exposed dramatically the inadequacy of the existing transportation system.  Hence the postwar issues of re-establishing the Bank of the United States, protecting the new industries, and providing a nationwide network of roads and waterways.  On these issues the former war hawks Clay and Calhoun became the leading advocates of the national as opposed to the local or sectional point of view…  The wartime experience seemed to make necessary another national bank…  Congress (approved) chartering a second Bank of the United States, in 1816… the government owned a fifth of the stock, appointed a fifth of the directors, and deposited public funds in the bank.  In return for the charter, the bank had to pay a ‘bonus’ of $ 1,500,000 to the government…’

‘…Once the Bank of the United States began to exercise its power, the state banks had to stay on a specie-paying (metallic currency) basis or risk being forced out of business.  The war had a disastrous effect upon American shipping, especially after the British blockade was extended to include the New England coast.  Between 1811 and 1814 exports dropped from $ 61 million to $ 7 million and imports from $ 53 million to $ 13 million.  The total tonnage of American vessels engaged in foreign trade declined from about 950,000 to less than 60,000 tons.  Some ships managed to escape the blockade but others were caught and confiscated, altogether about 1,300 of them.’

‘Farmers, unable to get their produce out to the markets of the world, suffered… but manufactures prospered as foreign competition almost disappeared in consequence of the embargoes and the blockade…  As the war came to an end, the manufacturing prospects …were suddenly dimmed.  …In 1816, the protectionists brought about the passage of a tariff law with rates high enough to be definitely protective, especially on cotton cloth… The second Bank of the United States, by providing credit and currency, and the tariff of 1816, by lessening the competition of foreign goods, contributed to the growth of manufactures.  But something else was needed… better transportation.”

  CHAPTER THREE:

James, John, Jackson and America’s lowest Debt

            In 1817, James Monroe, a Democratic-Republican, took office after America’s two great wars for independence and his administration assumed a National Debt over $ 127 million.   During Monroe’s first term, his administration cut the debt every year, in 1818 alone $ 20 million, the highest is history at that point.  The $ 127 million was reduced to $91 million by 1820.  At that time, the nation had about 340 commercial banks, with authorized capital of nearly $ 200 million and assets over $ 340 million.  By the end of Monroe’s second term in 1824, the national debt was $ 90 million.  And commercial national banks went down from a height of 342 to 268 in 1822.  Though that number would rise again to more than 300 before he left office, there would be no single Central Bank of the U.S.

In 1811, Monroe was appointed as Madison’s Secretary of State. According to the National Archives at www.founders.archives.gov, in January 1815, Jefferson wrote Monroe, saying, “But you have two more serious causes of uneasiness; the want of men & money. for the former nothing more wise, nor efficient could have been imagined than what you proposed. it would have filled our ranks with regulars, & that too by throwing a just share of the burthen on the purses of those whose persons are exempt either by age or office; and it would have rendered our militia, like those of the Greeks & Romans, a nation of warriors. but the go-by seems to have been given to your proposition, and longer sufferance is necessary to force us to what is best.—we seem equally incorrigible in our financial course. altho’ a century of British experience has proved to what a wonderful extent the funding on specific redeeming taxes enables a nation to anticipate in war the resources of peace, and altho’ the other nations of Europe have tried and trodden every path of force or folly in fruitless quest of the same object, yet we still expect to find in juggling tricks and banking dreams, that money can be made out of nothing, and in sufficient quantity to meet the expenses of a heavy war by sea and land. it is said indeed that money cannot be borrowed from our merchants as from those of England.’

‘But it can be borrowed from our people. they will give you all the necessaries of war they produce, if, instead of the bankrupt trash they now are obliged to receive for want of any other, you will give them a paper promise funded on a specific pledge, and of a size for common circulation. but you say the merchants will not take this paper. What the people take the merchants must take, or sell nothing. all these doubts & fears prove only the extent of the dominion which the banking institutions have obtained over the minds of our citizens, and especially of those inhabiting cities, or other banking places: and this dominion must be broken, or it will break us. but here, as in the other case, we must make up our mind to suffer yet longer before we can get right. the misfortune is that in the mean time we shall plunge ourselves into inextinguishable debt, and entail on our posterity an inheritance of eternal taxes…”

Again according to the National Archives, the following year, 1816, Jefferson wrote to S.C. Senator John Taylor.  Jefferson warned, “If the American people ever allow private banks to control the issue of their currency, first by inflation, then by deflation, the banks and corporations that will grow up around them will deprive the people of all property until their children wake up homeless on the continent their Fathers conquered…. I believe that banking institutions are more dangerous to our liberties than standing armies…. The issuing power should be taken from the banks and restored to the people, to whom it properly belongs…”

Nevertheless, out of necessity Madison signed the 1816 tariff and banking bill and part of the bonus $ 1.5 million would be used for roads and canals.   With war behind us, Monroe’s administration would continue to bring down the national debt.  In his first term, the debt was reduced from about $ 127 million to $91 million in 1820.  Though his second term would only reduce the national debt to $ 90 million in 1824, he kept spending down, even after having to provide some stimulus following the Panic of 1819 and depression.  As the banks extended credit to certain speculators and merchant elite classes, prices on cotton and wheat fell to half and even 1/3 of its value.  Many factories and banks closed.  And many common Americans became bitter and hostile towards Banks.

Concerning notable events, in 1817 while Jackson held troops along the Florida frontier, Adams was negotiating with the Spanish minister, Don Diego de Onis, for the acquisition of Florida.  By December 1817, Mississippi entered the Union as the 20th state.  March 1818, Jackson seized the Spanish fort at St. Marks, and in April took the fort at Pensacola.  By the end of the year, the British government agreed to allow American seamen to fish off the coast of Newfoundland.

About that time in 1818, Illinois entered the Union; and Sec. of State John Q. Adams, gave the Spanish an ultimatum to turn of Florida to the United States.  February 1919, Adams and the Spanish Minister to America signed an agreement through which Spain ceded Florida to the U.S.  December 1919, Alabama joined the Union, followed by Maine in 1820 and Missouri in 1821.  In 1835 the first steamer crossed from England to New York.  The first U.S. photograph was taken in  1839 and the first telegraph line was completed in 1844.  Florida would remain a territory until 1845.

 Missouri Compromise Map.jpg

          Before Missouri joined the United States as a state, Congress had to reach an agreement concerning the rights and powers of Northern and Southern states.  With revivals and religion conscience changing in the 19th century in both Europe and America, the US would have abolished slavery sooner had it not been for the cotton industry.

According to America History: A Survey (1979), “American …population (was) doubling every 25 years or so.  The total figure, lower than 4 million in 1790, approached 10 million by 1820 and rose to nearly 13 million in 1830 and to about 17 million in 1840… the Negro population increased more slowly than the white.  After 1808, when the importation of slaves was made illegal, the proportion of blacks to whites in the nation as a whole steadily declined.  In 1820 there was one Negro to every four whites; in 1840, one to every five.  The slower increase… was due to their comparatively high death rate… Immigration accounted for little of the population growth before the 1840s.  The long years of war in Europe… had kept the numbers …down… Of the total population of nearly 13 million in 1830, the foreign-born numbered less than 500,000, mostly naturalized citizens.  Soon immigration began to grow; reaching …60,000 in 1832 and nearly 80,000 for 1837… immigrants could get passage across the Atlantic for as little as $20 or $30.”

In 1819, Missouri requested to enter the Union as a slave state.  There were already significant struggles in Congress over the issue.  Congress reached an agreement, allowing Missouri to enter as a slave state; and admitting Maine as a free state and restricting slavery for all territories above latitude 36 degrees 30’.  By 1854, it would be repealed by the Kansas-Nebraska Act and popular choice would be the new law.

Between 1816 and 1824, there was only one political party.  So John Quincy Adams took office in 1825 with the Democratic-Republican Party.   Before 1808 he was a Federalist and after his term he would join the Anti-Masonic Party and then the Whig Party.  Though Adams was anti-slavery and predicted a civil war over the issue, he would not live to see the War.  However, Adams sought to make a better American economy, lowering debt at the same time.   He reduced the debt each year of his one term from about $90 million to about $ 67 million.

So due to war, both the Second Bank of the United States and national debt rose; but in post-war years the debt was reduced and the Bank was again challenged.  Shortly after Nathan Rothschild’s threats and the War of 1812 the Second Bank of the U. S. was chartered in 1816.  The Bank could issue currency, purchase government debt and serve as a central official depository for Treasury funds.  Also, during this time the government was determining what programs such be funded, such as national roads and turnpikes that were being extended.

In 1818, the Bank had almost $ 22 million in notes and deposits; adding millions to the Nation’s money supply and sparking an economic boom (especially for the rich class).  However, as price of goods significantly increased, the bank reserves where affected and at times in danger; and even cut money supply dramatically.

In 1830, by the fifth census and with 24 states, the population of the United States had reached more than 12,866,000, of which over 2 million were slaves.   This was up from the first census of 1790 and a little more than 3,929,000.   New York city had reach almost 215,000 people, moving it to become the largest city, from its second position and 33,000 people in 1790.  And Philadelphia drop from the top position to second with about 161,000.  Others were as follows: Boston with over 85,000 (1830) from 18,000 (1790); Baltimore over 80,000 (1830) from 13,500 (1790); New Orleans soaring to 46,000 (1830) from less than a few thousand in 1790; Charleston at 30,000 (1830) from 16,000 (1790); and the nation’s capital, Washington with over 27,000 from less than a thousand in 1790.

In 1832 Jackson made it clear during his campaign that he was going after the Bank.  The Bank had four more years left in its charter, but that did not mean that the people and Jackson could not bring the central bank and national debt to its knees.  Jackson refused to put more government money into the Bank, and to spend more money than the nation brought in.   Also, Jackson had an investigation done on the Second Bank, and found as he said, “beyond question that this great and powerful institution had been actively engaged in attempting to influence the elections of the public officers by means of its money.”  Nevertheless, the Andrew Jackson administration would accomplish something no other administration before or after has – no National Debt.

Many say it came with a high cost.  Because government money was put into various state banks, bad leaning policies and speculation by many borrowers lead to depression and the Bank Panic of 1837.  Where many state banks failed and the nation was in a five year depression.  To counter the deepening depression and avoid future losses, the government kept money safe in vaults of the U.S. Treasury.  Yet, companies where beginning to invest into manufacturing from 1820 until the Civil War doubling the investment every decade: from $50 million in 1800, 1810, and 1820 to over $ 150 million in 1830, over $ 300 in 1840 and $1billion by 1860.

By the Civil War ocean trade routes extended throughout the world.  Fishing and whaling were big industries, like cotton, corn and tobacco.   In 1846, the Smithsonian Institution opened encouraging scientific research and the ongoing industrial revolution.  Even as early as 1800, the whole process of making cloth from cotton was accomplished by textile machines.  By the mid-1800’s steam engines were common and much more powerful then early models; and most big factories used steam.

But perhaps more notable than all these things was the fact that during Andrew Jackson’s last term the Nation had no debt.  It was truly free from Central Banks that the power of the Rothschild elite type.   Jackson had run on the slogan, ‘Jackson and No Bank!’ and he with Congress delivered on that promise.  Jackson during his campaign told Americans that ‘more than 8 million of this stock of the bank is held by foreigners…’ and that Americans should not allow foreigners and Central bankers to ‘control our currency.’  Jackson called the national debt, a ‘national curse.’  In 1835, after Jackson paid off the national debt, an assassination tempt was made on his life.   However, this did not take away from the fact that, January 8, 1835, it was the only time in history that a U. S. Senator from the floor of Congress announced before a President and Congress, ‘Gentlemen, the national debt is PAID!’

CHAPTER FOUR:

GROWTH, WAR and DEBT

          Martin Van Buren had served under Jackson as Secretary of State, Minister to the United Kingdom and Vice President.   In 1837, Van Buren would become President, and yet, due to economic depression, some would call him ‘Martin Van Ruin.’  He would be leading the way into today’s types of Presidents, professional politicians, a lawyer-President.  But moreover, like most Presidents that followed them, he attempted to cure America’s economic problems by putting federal funds in an independent treasury, Central banks, rather than state banks.   By the end of his first year the debt was over $ 336,000; by the end of 1839 the national debt rose above $10 million.

In 1840, Congress and Van Buren’s administration pay off about $ 6.8 million, yet with expenditures, he was defeated by the Whig party in 1840 and left office with a national debt of about $ 3.6 million.   William Harrison became President; however, he died of pneumonia with only 32 days in office.  His vice president John Tyler succeeded him and became the 10th President of the United States.

Tyler believed in state rights, but he also believed in territorial expansion, and that it was America’s ‘manifest destiny’ to expand coast to coast.   Days before he left office he annexed the Republic of Texas into the United States.  Tyler had opposed Jackson, and it showed in his administration.  By his third year, the National Debt reached $32,700,000.   Tyler has been considered a terrible President in part because he abandoned his party’s platform once in office.  He was the first president to rise to office by succession due to the death of a president.  He was pro-slavery and a hard man.  The entire Harrison cabinet resigned and Congress attempted to impeach Tyler.  Congress did succeed in reducing the debt during his last year; lowering it to $23,500,000 in 1844.

James Polk, would had served as a Governor and form Speaker of the House, began his Presidency in the same fashion reducing the National Debt to $16 million his first year and holding it around $ 15 million in 1846.  However, 1847 would be quite a different matter.

In 1845, high tariff rates were cuts in the United States, following Britain’s repeal of high tariffs on imported corn.  In 1846, following the annexation of Texas, the United States was again at war; this time it was the Mexican-American War which lasted until 1848.

In 1844 when Polk took office, he offered to purchase the ‘Texas’ disputed lands from the Mexican government.  They rejected the proposal and killed US troops that had entered the land.  After thousands were killed on both sides, a treaty was agreed to, but it would not last.  The United States agreed to pay $15 million for war damages.   And it also assumed $3.25 million of debt that the Mexican government owed to American citizens.   Thus, in 1847 and 1848, due to the war, damages, liabilities, assumed debts and general budget expenditures the US National Debt rose over $31 million from $ 15,500,000 at the end of 1846 to over $47 million.

In 1849, Major General Zachary Taylor became President.  Taylor died due to a gastrointestinal illness only a few months into his second year.   Several territories were considering statehood and the slavery issue was still dividing the nation.   In 1849, Congress tact on another $16 million in debt, being the nation’s debt to $63 million; and in 1850 Taylor’s vice president, Millard Fillmore became president.  Fillmore’s administration kept both the debt and the status quo of slavery in check.  At the end of his term in 1852, the national debt stood at $66 million.

The Compromise of 1850, actually a series of five Congressional bills, would be the most notable legislation during his term.  The Treaty of Guadalupe Hidalgo which ended the Mexican-American War placed the former Mexican lands between California and Texas as part of the United States.  The lands included parts of New Mexico and Arizona; and also parts of Wyoming, Utah, Nevada and Colorado were ceded to the United States.  Senator Henry Clay, now called by some, ‘the Great Compromiser,’ led the passage of the 1850 law.  He had owned slaves in Kentucky, but freed them at his death by will.

The 1850 law allowed California to enter the Union as a free state, and allowed the people of New Mexico and Utah through voting and their own sovereignty to choose whether they would allow slavery or not.   Texas gave up lands to New Mexico and in exchanged was given $10 million to pay its debts to Mexico.  Slave trade was abolished in the Nation’s capital – the District of Columbia, however the Fugitive Slave Act was passed which gave authorities to judges, marshals and commissioners to fine up to ‘$1000 for each fugitive’ and imprison up to 6 months, any officer or marshal who did not arrest an alleged runaway slave; or any person aided a runaway slave.

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Franklin Pierce and the Congresses during his administrations took a serious position on reducing national debt.   During his four years Pierce cut the debt in more than half, from $ 66 million to less than $ 32 million.  In 1854, his administration cut the debt by more than $17.5 million – by about 30% in one year.

Pierce was a former brigadier general in the Mexican-American war,  a member of the House of Representatives and a senator and attorney general, who’s father was a governor.  His 3 sons died young, the 11 year old in a railroad accident which he and his wife witnessed.  Moreover, his vice president William King (the only U.S. high executive to take the oath of office on foreign soil) died in Cuba of tuberculosis after 45 in office.  His position was not filled, and for the next three years Missouri’s proslavery David Atchison served as the president pro tempore of the Senate.

Due to his perceived pro-slavery stance and certain foreign policies and positions such as his efforts to annex Cuba, Pierce was not reelected.  However, during his term he appointed James Guthrie as Treasury Secretary and sought to deal with America’s unsettled accounts, tariff collections, reclaimed funds in private banks and prosecuted corrupt officials.  Through Pierce now is one of the few presidents who significantly cut our debts, it is likely that this would not have been the case had his administration had able to purchase Cuba from Spain for $ 120 million as proposed by 3 of his diplomats.    Some say he was a failed president because he helped weaken his Democratic party which after Buchanan’s term, the Republicans would mostly dominate for about the next 70 years.   And many site other reasons for Pierces’ low review, nevertheless, Pierce was more fiscally responsible than the vast majority of presidents, and stands with a very few who greatly cut National Debt.

In 1857 James Buchanan took office with many of Pierces’ former cabinet and executives still serving under Buchanan.  That year – 1857 – would be the last lowest point of our National Debt, from which it would begin its never ending climb through a great many years of wars and influence of central banks and partially corrupt corporate lobbied congresses.   In July 1857, the national debt was less than $ 28,700,000.

The massive increase in tariff revenues — despite the lower rates — meant that the U.S. government began running huge budget surpluses beginning in 1849, and paid off nearly all of the national debt. By 1857, the national debt by some sources had been reduced to $23 million — less than one dollar per person in the country.

However, the failure of the Ohio Life Insurance and Trust Co. burst a European speculative bubble in U.S. railroads and caused a loss of confidence in U.S. banks.  This was known as “The Panic of 1857”. This recession lasted until 1860.  In 1857, Congress had passed the Tariff of 1857, a huge tax cut that brought a few years of deficits; but it also aided in economic prosperity for some portions of society up to the Civil War.  Then, in order to pay for the Civil War; income tax was significantly raised on the rich.
The banks offered the Union loans with a 24 to 36% interest. Lincoln refused.  About 2% of population died and reconstruction cost was very high and needed in the South.   In 1861, the Northern states had a population of about 22 million people.  The Southern states had about 9 million.  The Northern army had over 2.1 million soldiers and the Confederate States less than 1.1 million.  Approximately 620,000 to as many as 800,000+ soldiers died from combat, starvation and disease.  If on the higher side, the Civil War produced 7 times more American deaths than World War I (116,500), and twice than of World War II (405,400).
Although, Lincoln in many ways was a great and godly man, it would be during his administration – during the United States’ only Civil War – that the National Debt would rise nearly 500% (479%) in 1862 and over 113% in 1863.  In total, from 1860 to 1865 the debt would increase an astronomical 4000%.   It would not be until Wilson and WWI that the debt rose again 155% in 1918.   During WWII under Roosevelt it rose about 89% in 1943 and over 500% from 1941 to 1946.
On July 1, 1862, Congress passed the Internal Revenue Act and the first income tax, 3% on annual incomes over $600 but less than $10,000 and 5% on incomes over $10,000. This generated almost $55 million in revenues for the Union.  Southern states income taxes were not readmitted to the Union – the United States – until about 1870, and used for Reconstruction.
In 1864, a year before the end of the war, Congress increased the new income tax: five percent (5%) on incomes over $600 (equal to about $48,000 in current dollars) and up to 10 percent (10%) on incomes over $10,000 ($800,000 in current dollars).  After the war, the rates were reduced to a flat five-percent rate, and imposed only on incomes over $1,000.  After the war, clamor for repeal of the income tax increased dramatically among citizens, business groups, and prominent newspapers and politicians.
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1896 Flag with 45 stars

CHAPTER FIVE:
Civil Rights, Southern Reconstruction and Western Expansion
         About six months before the end of the Civil War, Nevada became a state in 1864.  Nine more western states would be added by 1896 and the last 3 continental western states in 1907 and 1912.   Alaska and Hawaii were not added until 1959.    In 1865, the 13th Amendment to Constitution abolished ‘slavery’ and ‘involuntary servitude, except as a punishment for crime.’
In 1866 Congress had passed the Civil Rights Act of 1866 which was the first U.S. federal law to grant equal protection by law to all citizens.  In 1865, President Andrew Johnson had vetoed the bill, and did so again in 1866, but 2/3rds of Congress overcame the veto.  The Act stated that ‘there shall be no discrimination in civil rights or immunities among the inhabitants of any State… on account of race, color, or previous condition of servitude.’  To insure the purpose of the Act and define citizenship, Congress passed the 14th Amendment.
The 14th Amendment required that ‘all persons born or naturalized in the United States… shall’ not be ‘deprive …life, liberty, or property, without due process of law; nor deny to any person… the equal protection of the laws.’  It also set the requirement for ‘Representatives in Congress’ to be ‘male citizens twenty-one years of age.’   It stated in ‘Section 4. The validity of the public debt of the United States, authorized by law… shall not be questioned… But neither the United States nor any State shall assume or pay any debt or obligation …or any claim for the loss or emancipation of any slave…’   And in 1869, the 15th Amendment was passed stating that ‘The right of citizens of the United States to vote shall not be denied or abridged by the United States or by any State on account of race, color or previous condition of servitude.’
The war and amendments may have released 4 million slaves to their freedom, but it would take another hundred years and more civil right acts to bring racism and hatred to its knees.
Just as there were great battles in Congress over the rights of all citizens, there were struggles over taxes and reconstruction efforts.  By the end of 1864, the National Debt was about $ 1.8 billion.  A year later to pay for Union debts it reached $ 2.6 billion.   The next two years it remained level due to higher taxes.   And in 1867 to 1868 the deficit was reduced each year, leaving the debt unchanged from the $ 2.6 billion 1865 level.
And again due to higher taxes on the upper classes, especially the rich, the National Debt was being taken serious by Congress.  During 7 of 8 President U. S. Grant administration’s, Congress reduced the debt each year.  From 1869 to 1876, the National Debt was reduced from $ 2.6 billion to less than $ 2.2 billion.  And all this during Reconstruction.
By 1870, all of the Confederate states were again part of the Union of the United States of America.   Reconstruction would bring state-funded public schools to blacks and the poor.  Roads and Railroads expanded across the country.
Moreover, this was during a fight over income taxes.  The New York Times wrote on January 19, 1871, “We have reached the time when the income tax can be no further defended. The people demand its repeal with one voice, and repealed it should be.” And America’s first income tax was abolished the next year.

The post-war Congresses were dominated by protectionist Republicans who often kept tariffs so high that revenue suffered, so they retained excise taxes on alcohol and tobacco to make up the revenue difference.  Most federal revenue was nevertheless raised by tariffs between 1866 and 1913.   It would take until 1892, for Congress to pay off about two-thirds of the $2.7 billion Civil War debt.

By this point in history, nearly every year for last 500 years some part of Europe had been in rebellion, revolution or at war.  Up until this time, battles were fought on land and sea.  Communications were more often than not very slow and transportation mostly rudimentary.  The soldier primarily had single shot weapons and special weapons were more for shock than effect.

In the late 18th century rockets were used on the battlefield; and submarines were tested and employed.  By the early 1800’s, the British were using Chinese technology in Shrapnel shells; anti-personnel artillery which fired out metal balls.   In 1836, the Colt ‘revolving gun’ was invented, but owned by very few.  The Belgian’s had the Mitrailleuse machine gun in 1851 and by the Civil War, Union forces held not only the advantage of steel mills and large cities, but by 1862 – the Gatling gun.   The crank weapon was capable of mowing down tens of fleshly creatures, firing up to 400 rounds per minute.

By 1866 the French also had mitrailleuses in service; and the British, Germans, Russians and rest of the military world was seeking weapons of mass destruction.

 

CHAPTER SIX

HAYES through CLEVELAND: 1877 to 1896

       President Rutherford B. Hayes took office in 1877 barely defeating Tilden.  The Republican oversaw the end of Reconstruction and pledged to return the country to peace and prosperity under a gold standard.   The United States had adopted a silver standard based on the Spanish silver dollar in 1785, and made various attempts at metallic standards, including based on the gold and silver franc.   The Coinage Act of 1873 moved us away from silver bullion due to its high price at the time.  At the time, greenbacks were in demand and easier to carry than gold.  Nevertheless, the Bland-Allison Act of 1878 required the U.S. Treasury to buy silver and circulate silver dollars.   That year the gold stock of America had returned to high level of almost 80 tons.  And in 1879 the country was returned to a true gold standard, with both silver and gold certificates and coins placed in circulation.

The country faced many struggles, the racist Klan in the south and railroad strikes; but the during this time industry was becoming more grand, and the federal government and national banks had fully instituted a system of chartering banks.

While the nation’s congress debate currency issues and while banks spread and gave out loans as never before, America was facing foreign policy issues once again.  The Mexican border was very violate and Indian Territories had to be addressed.

During Hayes’ one term presidency, the first three years the national debt climbed over $160 million to $ 2.3 billion; however, in 1880, Hayes administration and Congress reduced the country’s debt by almost $ 230 million to $ 2.1 billion.   Before Hayes left office he tried to better conditions for blacks through educational scholarships; and he sought to reform a tough prison system.

In his diary, 1887, Hayes wrote:

In church it occurred to me that it is time for the public to hear that the giant evil and danger in this country, the danger which transcends all others, is the vast wealth owned or controlled by a few persons. Money is power. In Congress, in state legislatures, in city councils, in the courts, in the political conventions, in the press, in the pulpit, in the circles of the educated and the talented, its influence is growing greater and greater. Excessive wealth in the hands of the few means extreme poverty, ignorance, vice, and wretchedness as the lot of the many. It is not yet time to debate about the remedy. The previous question is as to the danger—the evil. Let the people be fully informed and convinced as to the evil. Let them earnestly seek the remedy and it will be found. Fully to know the evil is the first step towards reaching its eradication. …We may reach and remove the difficulty by changes in the laws regulating corporations, descents of property, wills, trusts, taxation, and a host of other important interests, not omitting lands and other property.

In 1881, James Garfield took office as the 20th President of the United States.  In 1870, he was the chairman of the House Banking Committee.  As president, the Republican Garfield was an advocate of free trade, expanded educational opportunities, and the gold standard.   Garfield sought to continue Hayes’ civil right reforms and fight against corruption in the government – such as in the Post Office Department.  However, six months into office, Garfield was assassinated.

Thus, Vice President Chester Arthur became president in September 1881.  He also continued the Republican platform.  However, Arthur was not always at peace with his fellow Republicans – he and Conkling and Tilden – all of New York, had sought the presidency before, and was opposed by Hayes on several points.

In 1882, thought the National debt was over $ 2 billion, by Congressional math the federal government had collect a surplus of $ 145 since the end of the Civil War.  The Democrats wanted lower tariffs, which would reduce the cost of imported goods, while Republicans supported high tariffs to ensure higher wages, specifically in manufacturing and mining jobs.  Arthur agreed with the abolition of excise taxes, except on liquor.

Concerning immigration, Congress passed the Chinese Exclusion Act of 1882, halting the immigration of Chinese laborers to open more jobs to Americans.  However, European immigrates were still flooding in; from 1880 to 1930 about 27 million would come to America.   Between 1831 or 1840, immigration had quadrupled to about 600,000, most being Irish, followed closely by Germans, and the remaining 20% being mostly British and French.  Between 1841 and 1850 over 1.7 million Europeans came to America, again led by the Irish running from the ‘Great Famine’ which killed about 1.5 million; then Germans, British and a small percentage French.  In the 1850s, Chinese immigrants began pouring into San Francisco.

In the 1880s the term ‘new immigration’ was being used to describe the Catholic and Jewish immigrants from Italy and Russia.  In 1880 alone, 9% of the total population of Norway immigrated to America.   Between 1880 and 1930, almost 4.6 million Italians came to America with the help of steam powered ships; after 1892, millions of immigrants came in through Ellis island, New York.  Between 1820 and 1870 only about 7,500 Russians came to America; between 1891 and 1999 about 600,000 came, and another 2.5 million between 1901 and 1914.  Many were Russian Jews fleeing poverty, starvation, persecution and the coming World War.

Arthur became very ill in 1884, and did not seriously seek re-election; he would die in 1886.  The national debt was reduced each of his four years, from just over $ 2 billion in 1881 to $ 1.8 billion in 1884.

Grover Cleveland took office in 1885 and would become the only U.S. president to serve two non-consecutive terms.  He was a Democrat and ran opposing high tariffs, free silver, inflation, imperialism, and industry subsidies.  He begin as a fiscal conservative reducing the National Debt from $ 1.8 billion to about $ 1.7 billion.  However, his second term would not be so conservative.

In 1889, Cleveland was defeated by the Republican Benjamin Harrison, grandson of President William Harrison.   At this time, farmers relied on railroads to ship there crops to market, likewise petroleum, cattle and other products were shipped on rails.  There were significant problems with the railroads raising cost and businessmen, such as Rockefeller, paying off railroad companies to give them unfair advantages.

By the 1880s petroleum, or oil, was an important part of America’s economy and industry.   It would soon go from being used for oil lamps, kerosene and gas lighting, to powering engines.   Additionally, by the 1890s America would see the rise of turbines and hydro-electric power.  With banks, railroads, oil, steel, and electricity came the vast growth of corporations and big business.   And as the names of Vanderbilt, Carnegie, Chase and Rockefeller became well know, America’s national debt and taxes would be forever changed.  With big business and more sophisticated lobbyist came greater corruption and debt.

Some key marks of the republican Harrison’s administration was the creation of National Forests, the Sherman Antitrust Act of 1890, and Congress passing the Tariff Act of 1890, called the McKinley Tariff, which raised the average duty or tariff (tax) on imports to almost fifty percent in order to protect domestic industries from foreign competition.  This struggle between Protectionism and Free Foreign Trade would have a never-ending place in politics.  During Harrison’s first three years, Congress reduced the debt slightly and added slightly in his four year.  He entered office with the national debt under $ 1.7 billion and left in 1892 with the debt under $ 1.6 billion.

Unlike Cleveland’s first term as president, during his second term the national debt would increase from $ 1.6 billion to nearly $ 1.8 billion in 1896.  In 1894 the Populist influence in a resurgent Democratic Party prompted Congress to enact a tax on incomes over $4,000 at two percent, roughly the equivalent of $320,000 today when measured against the gold standard of the day. “The imposition of such a tax is but a gentle, playful exercise of a dangerous power. It is merely showing demagogues the path of demagogy,” New York Democratic Congressman William Bourke Cockran railed against the income tax in congressional debate. Nevertheless, it was tariffs and taxes, used properly that helped keep the National Debt manageable.

It is said that from Grant to Cleveland’s last term was the ‘Gilded Age (coined by Mark Twain)’ because these presidents avoided major national crises during their presidencies; and because it allowed a few to get rich during rapid economic growth while the great majority remained in poverty.  However, their time presented changes as they came, and had oil and mechanization came earlier, war and politics would have faced and likely welcomed them earlier.  For you will always have corruption and seekers of power and wealth.

Through strikes had occurred before the Revolutionary War and the Labor Movement gained strength immediately following the Civil War with the 1866 launched of the National Labor Union, it would not be until the end of 1886 and the formation of the American Federation of Labor that labor ‘unions’ began to hold political power.   In 1890, 11 million of the nation’s 12 million families earned less than $1,200 per year, with the average annual income of $380 – poverty.  Laborers made it possible for the rich to enjoy diamonds, electric lights and phonographs decades before they became common to all.

“What is the chief end of man? – to get rich.  In what way? – dishonestly if we can; honestly if we must.” – Mark Twain (1871)

CHAPTER SEVEN

Mechanization, Corporations, Taxes and a Continental United States

It was not until 1912 that the United States had an official flag by executive order.  Moreover, that was the year that 48 states formed the continental United States as we know it.  It was also the year of the 17th Amendment which established the election of U.S. Senators by popular vote as opposed the often corrupt state legislators.

As interesting and important as these were, they would go unnoticed compared to the 16th Amendment which in 1909 gave Congress the “Power to lay and collect Taxes, Duties, Imposts and Excises, to pay the Debts and provide for the common Defence and general Welfare of the United States…”  However, up until 1913, tariffs (custom duties) and excise taxes were the chief sources of federal revenue.   That was in great part because, through the 16th Amendment was passed in 1909, it was not until 1913 that it was ratified by the states.

Nevertheless, recall that our first income tax was passed during the Civil War in 1861.   And due to exemptions and deductions, only about 1% of the population paid income taxes in 1913 at a rate of about 1% – less than the 3% in 1861.

But what drove taxes and corruption and greed to never before seen levels?  In great part it would be the married of banking, technology and laws.  The ability to form corporations and they be recognized entities that could gain enormous fortunes through politics and banking would be most significant in the modern nature of America and soon Globalization. Likewise, mechanization would drive industry, expansion, technology, war and debt to new and ever advancing highs and levels.

In 1884 the Maxim gun began a change in war, as would modern artillery and a mechanized army.  Of course, ships and air support would later be as significant in World War II as tanks, artillery and rapid fire weapons.  War would forever be a focus of large corporations.   The Nation began in debt largely due to the Revolutionary War, then increased debt

Now, it is said that the Progressive Era was from 1890 to 1920 and was in response to various major economic and social problems including corporate greed, political corruption, poverty and inequality of wealth, racism, class warfare, and a move for better education, environment and workplaces.  But most or all of these things have always been subjects of politics and social concern.

When McKinley took office in 1897 the National Debt was about $ 1.77 billion.  He would increase the debt over 18% in his third and four year to over $ 2.1 billion in 1900.  Part of the increases were $ 50 million towards a stronger military, and investments into annexing Hawaii and support for Cuba.  McKinley supported the gold standard signing the Currency Act of 1900.

In his 1896 ‘Acceptance Speech,’ McKinley stated:

“…The government of the United States must raise enough money to meet both its current expenses and increasing needs. Its revenues should be so raised as to protect the material interests of the people, with the lightest possible drain upon their resources, and maintain that high standard of civilization which has distinguished our country for more than a century of its existence. The income of the government, I repeat, should equal its necessary and proper expenditures. A failure to pursue this policy has compelled the government to borrow money in a time of peace, to sustain its credit and pay its daily expenses…”

Not long into his second term he was assassinated in 1901.   His first Vice President, Garret Hobart had died while in office, and his second, Roosevelt succeeded him – at the time as the youngest President in history – age 42.

Theodore Roosevelt would become known for his ‘Big Stick’ Diplomacy and progressivism.  He was reelected and served in total from 1901 until 1909.  By this time America had rapid expansion of corporations, large-scale agriculture, big industries, labor unions, a societal melting pot – and was no longer dominated by Anglo-Saxon Protestants.

Agricultural modernization in large corporate farms were beginning to effect small family farms.  Capital versus labor would have to be addressed, and what role would America play in Europe’s struggles and foreign opportunities?

Roosevelt’s Republican administration would see the construction of the Panama Canal.  Concerning colonization through war, he plainly stated, ‘We want no wars of conquest.  We must avoid the temptation of territorial aggression.’  However, we would without war welcome the annexation of Hawaii and had already occupied Guam in 1898 during the Spanish-American War.

During the Roosevelt years in office, he sought reforms to help the poor and working class – most that were not passed and some that divided the Republican Party.  He called for a federal income tax, but the Supreme Court had previously ruled that would require an amendment.  Before leaving office, Roosevelt supported Taft for the 1908 Presidency.  Teddy was the first President to issue over 1000 Executive Orders (1081), more than all the previous 25 presidents combined.

Theodore Roosevelt would win the Nobel Peace Prize for in part in ending the Russo-Japanese War.  Also, he signed the National Monuments Acts, protecting National forests and sites such as the Grand Canyon.   In 1912, Roosevelt would narrowly lose to Wilson.  When Roosevelt took office in 1901 the National Debt was just over $2.1 billion; and through his first five years had only a slight increase in the debt, his last three increased the debt about $350 million to over $2.6 billion – nearing the post Civil War high of 1866.

William Taft was a Secretary of War, the 10th Chief Justice of the U.S., and 27th president.  Like Roosevelt, he was a Republican.   During his first year in office, Congress passed the 16th Amendment in 1909, permits the levying of an income tax; yet, it would not be until his last year, and last days in office that the amendment was ratified – 1913.   Taft was greatly involved in foreign policy throughout the world, even supporting a loan to Nicaragua and trade with the Philippines.  However, like Teddy Roosevelt, he opposed immigration from China and Japan.  Also, like Roosevelt, he fought against monopolies using the Sherman Antitrust Act – 70 cases in 4 years, Roosevelt had 40 in 7 years.   One of the big break ups was Rockefeller’s Standard Oil Company in 1911.

During Taft’s first 2 years, there was a slight increase to debt; in his 3rd and 4th year over $ 210 million was added reaching an all time high of $ 2.87 billion in 1912.  Nevertheless, with income tax, the Federal Reserve and War, the National Debt would never be that low again.

In 1872, the marginal income tax was 2.5% for married filing jointly incomes over $2,000.  There were no income taxes 1873 to 1893; in 1894 the rate was 2% on family income over $4,000.  Then the Supreme Court declared income taxes unconstitutional in 1895, and there were no income taxes until 1913.  Through the Amendment passed in 1909, it was not ratified until 1912 and in 1913 the rates on married couples was 1% of the first $20,000; 2% from 20,000 to 50,000, and increased until 7% on portions of income above $500,000.   Those rates did not change until after the Federal Reserve and the beginning of World War I.

CHAPTER EIGHT

TAXES, FEDERAL RESERVE, WAR,  AND DEBT

The term ‘modern’ was said to have been coined in the 16th century from the Latin modo (‘just now’).  Though it has been used to describe historical period since the Middle Ages, the ‘late modern’ period development in science, technology, warfare, industry, banking and politics were much grander than ever before.  Many historians then began using Contemporary for the period from post-WWII to present; and some still used Modern, late Modern or Postmodernism.

Nevertheless, the last 100 years or so have been a most distinguishable time in history.  In 1903, the Wright brothers conducted ‘the first sustained and controlled heavier-than-air powered flight.’  In 1905, they accomplished fully controllable flight.  By 1915, machine guns were mounted on airplanes for war (WWI).

Although, the history of the modern car began around 1886 with Karl Benz; it was not until 1908 that the Model T was being manufactured by Ford, and not until 1913 that he installed the first moving assembly line for mass automobile production.   The next year, 1914, tanks were being experimented with by most major countries.  In 1914, Colonel Estienne of France said, ‘Victory in this war (WWI) will belong to the belligerent who is the first to put a cannon on a vehicle capable of moving on all kinds of terrain.’

By the end of the 15th century, printing presses and paper mills were being established in Europe; and France had a postal system – England followed suit in 1533, and the colony of Virginia in 1661.  Newspapers and Libraries could be found throughout all developed countries in the 18th century; and electric telegraphs and electrotyping were emerging in many countries.   By WWI radios, telegraphs and telephones were in great use by modern governments and militaries.

So when Woodrow Wilson took office in 1913, America and much of the World was in great transition.   At that time, America’s national debt was nearly $ 3 billion.

December 23, 1913, as many in Congress had left for Christmas break, Wilson signed the Owen-Glass Act or Currency Bill, which is called the Federal Reserve Act of 1913.  It passed the Senate with a 43 to 25 vote (68 of the 100 Senators).   The Act created a privately owned central banking system.

The Reserve Bank issued shares to Banks like National City Bank (Rockefellers major share holder), Chase National (Rockefellers and Chase), First National Bank (Morgan), Rothschild Banks of London and Germany, Warburg Germany Banks, Goldman Sachs Bank, etc.  Senator Nelson Aldrich was chairman of the Monetary Commission that led to passing of the bill.  Aldrich’s grandfather was Nelson Aldrich Rockefeller.

Paul Warburg became a naturalized US citizen in 1911; in 1914 the German banker was on the first Federal Reserve Board, and in 1921 would be a founding member and director of the Council on Foreign Relations (1921) founded by Wilson’s advisor, Colonel Edward House.

William McAdoo, secretary of Treasury, became the first Chairman of the Federal Reserve Board.   He owed J.P. Morgan for bailing out his Railroad Company.  He was a campaign manager to Wilson and married Eleanor Wilson in 1914 (later divorced).  In 1914 he arranged the closing of the NYSE for several months to protect his banker friends.  He was a co-founder with Wilson of the League of Nations.

In 1919, McAdoo wrote an article for The OUTLOOK entitled ‘The League of Nations.’  He said ‘our isolation has been destroyed forever.  Three thousand miles of the Atlantic are no longer a protection… (yet) No League of Nations can be created without America.’  The League of Nations was created in 1920, and would lead to the United Nations and towards Global Governance.

So the Central Banks were in full swing with the Federal Reserve ready to fund WWI (1914-1919); look past the tanks, bombs, artillery and machine guns killing over 30 million people and war was great for central banks, economies and big business.  And taxes would mostly pay for it – of course we would and never will pay off the National of course: Debt; by the end of the War, in 1919 – Wilson’s seventh year in office – the debt climbed to over $ 27 billion.  Remember it was under $3 billion when he took office.  Andrew Jackson decreased the debt 100%, but Wilson increased it over 800% – it being nearly $26 billion when he left office in 1920.  But worst, now Central Banks cover the world, tie into the United Nations World Bank and IMF, connected to the Bank for International Settlements (BIS), and knowing no borders and few masters, such as the Rothschild and Rockefeller families who own interest (often controlling interest) in dozens of Central Banks worldwide.

In efforts to repay the Federal Reserve loan for the war and National Debt, when Wilson entered office the 1913 Income Tax on Married Filing Jointly was 1% on the first $20,000 and increased to 7% on portions over $500,000.  In 1916, it double to 2% on portions up to $20,000; 12% $500,000 to $1 million; and 15% over $2 million.

By 1917, it was full on: 2% on the first $2,000; 7% $10,000 to 12,500; 12% $20,000 to $40,000; 31% $100,000 to $150,000; up to 67% on portions over $2 million.   In 1918, income tax was 6% up to $ 4,000; 20% – $18K to $20K; and 77% over $1 million.  In great part due to public outcry for raising from 1% to 20% on $20K in 6 years, in 1919 and until Wilson left office in 1921, taxes were reduced slightly: 4% on the first $4K; 16% – $18K to $20K; 68% for portion $200K to $300K; and 73% for over a million.

Wilson wrote in ‘The New Freedom (1913),’ “…A great industrial nation is controlled by its system of credit. Our system of credit is privately concentrated. The growth of the nation, therefore, and all our activities are in the hands of a few men…  Corporations have come to cover greater areas than states… The Roosevelt plan is that there shall be an industrial commission charged with the supervision of the great monopolistic combinations which have been formed under the protection of the tariff, and that the government of the United States shall see to it that these gentlemen who have conquered labor shall be kind to labor. I find, then, the proposition to be this: That there shall be two masters, the great corporation, and over it the government of the United States; and I ask who is going to be master of the government of the United States? It has a master now,—those who in combination control these monopolies. And if the government controlled by the monopolies in its turn controls the monopolies, the partnership is finally consummated… We have come to be one of the worst ruled, one of the most completely controlled and dominated Governments in the civilized world no longer a Government by free opinion, no longer a Government by conviction and the vote of the majority, but a Government by the opinion and duress of a small group of dominant men… “

CHAPTER NINE

DEPRESSION, DEBT, WWII, FDR AND  TOWARDS A NEW WORLD ORDER

By the 1929, for many America on the surface seemed to be moving towards a great spirit and standard of living.  War World I was over; it was still illegal to manufacture and sale ‘intoxicating liquors;’ women have had the right to vote for almost a decade (ratified 1920); where the transatlantic telegraph failed in 1858, Alexander Bell spoke through a phone in 1876, and transatlantic cables were now successful; and most homes began using electricity and having telephones or near access to phones.

Republican Warren Harding took office in March 1921 and died 29 months later.  He appointed Andrew Mellon (one of the richest bankers in the world) to be the Secretary of Treasury; and Herbert Hoover as Sec. of Commerce.  It was not until the end of his first year that the Treaty of Versailles was ratified and war technically over.  Harding did not embrace the League of Nations, and even urged for disarmament and lower defense costs.

In 1921 the U.S. agreed to give Colombia $25 million as a settlement for U.S. involvement in the Panamanian revolution of 1903, when Panama began to separate from the country of Colombia.   And at the time America was in a postwar economic decline.  And concerning taxes, Harding stated ‘I can’t make a damn thing out of this tax problem…’  So he compromised with the big banks and Congress – the Revenue Act of 1921, and in 1922, the 4% rate remained on incomes below $4,000; and drop to 16% on $20K, and 58% for portions above $200,000.

Seeking modernization for our country helped with jobs in highway construction and government, commercial and residential building.  And due to other cuts, even the cost to spend $162 million on America’s highways alone between 1921 and 1923 did not increase the National Debt.  During Harding’s term the debt was reduced nearly $3 billion by Congress and his administration to less than $23 billion in 1922.

Republican Calvin Coolidge, our 30th President, took office in 1923, as Alfred Smith (Gov. of N.Y.) wrote, ‘his great task (would be) to restore the dignity and prestige of the Presidency when it had reached the lowest ebb in our history… in a time of extravagance and waste…’  And there must have been a lot of waste, because Coolidge would continue in that fight to reduce National Debt; for every year of his six years in office the debt was reduced – from $23 billion to $17 billion in 1928.

In 1924, Coolidge became the first president to make a public radio address.  During his terms he felt that the League of Nations (42 founding member nations) did not serve America’s interests, and did not favor our membership at that time.  Before Obama, Coolidge was the last president to visit Cuba in 1928.  During that time America had troops in several Central American countries.  Coolidge did withdraw troops from the Dominican Republic in 1924.   In 1925, Income Tax for Married Filing Jointly reduced to 1.5% up to $4,000; 9% for $18K to $20K; and 25% over portions over $100,000.  Coolidge did not run for election saying, ‘If I take another term, I will be in the White House till 1933… Ten years.. is longer than any other man has had it – too long!’

 

In 1929, Republican Herbert Hoover was elected President.  Taking office Hoover said, ‘soon with the help of God… poverty will be banished from this nation… We in America today are nearer to the final triumph over poverty than ever before in the history of any land…’  Months later began the Great Depression – worldwide economic depression from about the Stock Market Crash of October 29, 1929 through the 1930s.    And before this, the Great Mississippi Flood of 1927 displaced over a million people.   Hoover was correct that America would be the richest nation in the world, but he would not see America’s great rise in standard of living.

Hoover did set aside over 5 million acres for National Parks and National Forest.  He fought against organized crime.  He advocated a pension (now security security) of $50 per month for Americans over 65.  His administration began Boulder Dam (Hoover Dam).   Also, he visited 10 countries in Latin America to build trust and mediated between several of their conflicts.

In 1929, Coolidge and Hoover administration policies saw the National Debt reduced to $16.2 billion in 1930.  Then Coolidge moved Congress to approve over a billion dollars for public works, in part paid for by an increased tax on corporations from 12% to 13.75%.  Congress also approved various relief and infrastructure spending in efforts against the Depression.  By the time Hoover was defeated in a landslide by Roosevelt, the National Debt in 1932 was increased by $3 billion to $19.5 billion.  Yet, this increase would be seen historically as very modest, and next to Roosevelt’s over 900% increase while in office – Hoover’s would not be noticed.   In 1932, the income tax rate was increased to pay for social programs and debt; it was 4% on the first $4,000; 14% on $18K to $20K; and 63% on portions above $1 million.

Democrat Franklin Delano Roosevelt (FDR) took office in 1933, with the Great Depression in full swing.  FDR would be the only president to be elected 4 terms and served a little over 12 years (‘longest serving President of the U.S.’) dying shortly after taking office in 1945.  In 1947, Congress would passed the 22 Amendment limiting Presidents to two elected terms and not more than 10 years (thus could be limited to 1 elected term if assumed the office).

FDR’s administration and Congress did change the income tax rates in 1936 to 17% on $18K to $20K; and 62% on portions $100K to $150,000; up to 79% on portions above $5 million.  The average income in 1940 was $1,368.  In 1941, before America entered World War II that December, the tax rate was again increased to 10% on the first $2,000; 13% for $2K to $4,000; 69% on $100K to $150K; and 81% for portions over $5 million.  After the war started, the rate in 1942 again increased to 19% on the first $2,000; 22% – $2K to $4,000; 52% on $18K to $20K; and 88% on portions over $200,000.  Before WWII ended, in 1944 the income tax on families again increase to 23% on the first $2,000; 25% – $2K to $4,000; 56% on $18K to $20K; 81% for $60K to $70K; and 94% on portions over $200,000.    In 1945, the average annual salary was $2,800, milk was 62 cents a gallon, gas 21 cents, a car was about $1,250 and about $10,000 for a house.  The Stock Market S&P 500 was at 152, and minimum wage 40 cents per hour.

Though WWII would both end the Great Depression and skyrocket our national debt, FDR did enact several ‘New Deal’ programs to create jobs and aid Americans.  In 1933 the Civilian Conservation Corps was created to provide jobs in parks and public works divisions.  The Civil Works Administration was also created to offer high paying construction jobs; but only lasted a year due to cost.

The Federal Housing Administration was created in 1934 to deal with failing banks and mortgages.  Since its inception it has insured over 34 million properties.   According to the FHA website (2016), “When the FHA was created, the housing industry was flat on its back.  Two million construction workers had lost their jobs.  Terms were difficult to meet for homebuyers seeking mortgages… 50 percent of the property’s market value, with a repayment schedule spread over three to five years… America was primarily a nation of renters.  Only 4 in 10 households owned homes.  In the 1940s, FHA programs helped finance military housing… for returning veterans…”

FDR also approved the Federal Security Agency in 1939.  It was abolished in 1953, it administered social security and federal education funding; as well as regulated food and drug safety.   The Social Security Administration (SSA) begin as the Social Security Board when FDR signed the Social Security Act in 1935; the SSB was renamed the SSA in 1946.  According to the SSA.gov site (2016): “In 1953, President Eisenhower abolished the FSA and created a new Department of Health, Education and Welfare (HEW).  SSA was made part of this new cabinet agency.  HEW was replaced by the Dept. of Health & Human Services on 5/4/80…”

And FDR created several another ‘New Deal’ programs, including the Public Works Administration which ended in 1941 during WWII and increased wartime production; and the Tennessee Valley Authority (1933) which is the largest public provider of electricity in the United States.

During WWII under Roosevelt it rose about 89% in 1943 and over 500% from 1941 to 1946.  The National Debt was $ 22.5 billion at the end of Roosevelt’s first year in office – 1933; it climbed to $ 136.7 billion in ten years in 1943 mid-WWII; by the time FDR died in office in 1945 the National Debt was over $ 200 billion.   His programs and the War would cause another $ 50 billion in 1945 alone during Truman’s first year.

In 1946, after millions of War deaths and billions in War Debt – income taxes on Married Filing Separately was 20% on the first $ 2,000 and the top bracket over $200k dropped to 91%.  The tax rates remained unchanged until slightly increasing in 1951 and again in 1952.   20% on the first $4,000 and 91% on portions over $400,000 for Married Filing Jointly remained in place until significantly reduced in 1963.

In 1950, minimum wage increased to 75 cents per hour; the stock market was at 235, milk 82 cents a gallon, gas 27 cents, a car about $1,750 and $14,500 for a house.  Many households continued 2 working adults post-war.  Median household income was about $3,400.

So Democrat Harry Truman took office in 1945 after FDR’s death and was reelected serving until 1952.  He managed to keep the National Debt level at 1945 $ 258.7 billion and when he left office in 1952 it was $ 259 billion.  Republican Dwight Eisenhower also served two terms and likewise managed to keep the debt relatively level; especially considering the U.S. had entered the Korean War.   In 1953 to debt was $266 billion and in 1960 it was about $289 billion.

In 1956, minimum wage increased to $1 and the Stock Market climbed to 499; gas at 30 cent a gallon and milk at a dollar.  Median household incomes were about $5,000; they would nearly double by 1970 to about $10,000, and double that by 1980 to $21,000.

In 1961, Democrat John F. Kennedy took office.  Nuclear weapons and the Space Race were at the forefront.  Additionally, the Civil Right Movement of the late 1950s and 1960s was slowly advancing was non-violent protest and debates until Kennedy was assassinated in Nov. 1963.  In 1964, the Civil Rights Act was signed by Johnson but ‘Negros’ remained segregated and discriminated against in many ways for years after Martin Luther King Jr. was assassinated in 1968.

In 1961, at the end of Kennedy’s first year, the National Debt was about $289 billion; and reach $ 300 billion by his death in 1963.  Democrat Lyndon Johnson’s was reelected for one term; his administration seen America troops to the Vietnam Conflict/War in 1965.  He left office in 1968 with the nation’s debt at $347.5 billion.

 

 

Our National Debt began in great part due to the Revolutionary War; ending at $ 83 million when Washington left office in 1796.   The year after the Louisiana Purchase in 1803 (affecting 13 states, over 820 sq. miles, less than 3 cents an acre) the National Debt increased 12% to $ 86 million.  During the War of 1812, which actually lasted until 1815, the Debt increased from $ 45 million to $100 million by the end of 1815 and 27% in 1816 to over $ 127 million.  Victorious over Central Banks, Jackson was able to pay off the National Debt in 1835.  That would be the last time in history.  Due to the Civil War the Debt would rise nearly 500% (479%) in 1862 and over 113% in 1863.  In total, from 1860 to 1865 the debt would increase an astronomical 4000% – from less than $ 65 million to almost $ 2.7 billion.   It would not be until Wilson and WWI that the debt rose again 155% in 1918.  On July 1, 1862, Congress passed the Internal Revenue Act and the first income tax, 3% on annual incomes over $600 but less than $10,000 and 5% on incomes over $10,000.  With taxes and tariffs Grant was able to reduce the debt over $ 300 million to less than $ 2.2 billion in 1876.   And for the most part, Congress paid down debt until 1898 – $ 1.8 billion; this was the year the Spanish-American War began and a time of territorial expansion.    Income taxes started again in 1913, the same year the Federal Reserve was founded.

Civil War – Lincoln 1863 (first time over $ 1 billion); WWI – high in debt Wilson, $27 billion (1919); FDR took office with $27 billion and would be the first president to have the National Debt reach $50 billion (early 1942 WWII), $ 100 billion (1943), $ 200 billion 1944 and dying in office early 1945.  Truman inherited FDR’s New Deal programs and WWII spending but managed to keep the National Debt level at about $258 billion.

National Debt in 1836 under President Gen. Andrew Jackson: Zero; Debt after the Civil War in 1865: $2.6 billion and reduced below and held to less than $2 billion by 1900; after WWI and the loans from the Fed. Reserves Central Banks 1919 $ 27B – reduced and held to less than $17B – even during the Great Depression; by WWII about $40B when Germany invades Poland (1939) to $270B in 1946.  About 42 years later the Debt reaches the ONE TRILLION mark in 1981.  The Reagan administration listening to Trilateral Commission type republicans reduced taxes on the top brackets and in 8 years increase the national debt by 187%.  Bush 1 in 4 years by 56%; Clinton 40% over 8 years; George 2 77% in 8 years; and Obama more than 100% in 8 years – doubling the debt.   National Debt 1990 before entering the Gulf War over 26 years ago: $ 3.2 Trillion and now $ 20 trillion.  And likely will increase to $ 25 trillion regardless whether HRC or Donald Trump is elected.

 

America will “NEVER” again pay off the NATIONAL DEBT!

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