FReeper Book Club: The Debate over the Constitution, Federalist #34

Hamilton addresses the needs of the states and the federal government with respect to taxation, to include the prospect of future wars.

² I flatter myself it has been clearly shown in my last number that the particular states, under the proposed Constitution, would have coequal authority with the Union in the article of revenue except as to duties on imports.

³ As this leaves open to the states far the greatest part of the resources of the community, there can be no color for the assertion that they would not possess means as abundant as could be desired for the supply of their own wants, independent of all external control.

⁴ That the field is sufficiently wide will more fully appear when we come to advert to the inconsiderable share of the public expenses for which it will fall to the lot of the state governments to provide.

⁵ To argue upon abstract principles that this coordinate authority cannot exist is to set up supposition and theory against fact and reality.

⁶ However proper such reasoning might be to show that a thing ought not to exist, they are wholly to be rejected when they are made use of to prove that it does not exist contrary to the evidence of the fact itself.

⁷ It is well known that in the Roman Republic the legislative authority in the last resort resided for ages in two different political bodies, not as branches of the same legislature, but as distinct and independent legislatures, in each of which an opposite interest prevailed: in one the patrician, in the other the plebian.

⁸ Many arguments might have been adduced to prove the unfitness of two such seemingly contradictory authorities, each having power to annul or repeal the acts of the other.

⁹ But a man would have been regarded as frantic who should have attempted at Rome to disprove their existence.

¹⁰ It will be readily understood that I allude to the comitia centuriata and the comitia tributa.

¹¹ The former, in which the people voted by centuries, was so arranged as to give a superiority to the patrician interest; in the latter, in which numbers prevailed, the plebian interest had an entire predominancy.

¹² And yet these two legislatures coexisted for ages, and the Roman Republic attained to the utmost height of human greatness.

¹³ In the case particularly under consideration, there is no such contradiction as appears in the example cited; there is no power on either side to annul the acts of the other.

¹⁴ And in practice there is little reason to apprehend any inconvenience, because in a short course of time the wants of the states will naturally reduce themselves within a very narrow compass, and in the interim the United States will in all probability find it convenient to abstain wholly from those objects to which the particular states would be inclined to resort.

¹⁵ To form a more precise judgment of the true merits of this question, it will be well to advert to the proportion between the objects that will require a federal provision in respect to revenue and those which will require a state provision.

¹⁶ We shall discover that the former are altogether unlimited and that the latter are circumscribed within very moderate bounds.

¹⁷ In pursuing this inquiry, we must bear in mind that we are not to confine our view to the present period, but to look forward to remote futurity.

¹⁸ Constitutions of civil government are not to be framed upon a calculation of existing exigencies, but upon a combination of these with the probable exigencies of ages according to the natural and tried course of human affairs.

¹⁹ Nothing, therefore, can be more fallacious than to infer the extent of any power proper to be lodged in the national government from an estimate of its immediate necessities.

²⁰ There ought to be a capacity to provide for future contingencies as they may happen, and as these are illimitable in their nature, it is impossible safely to limit that capacity.

²¹ It is true, perhaps, that a computation might be made with sufficient accuracy to answer the purpose of the quantity of revenue requisite to discharge the subsisting engagements of the Union and to maintain those establishments which for some time to come would suffice in time of peace.

²² But would it be wise, or would it not rather be the extreme of folly, to stop at this point and to leave the government entrusted with the care of the national defense in a state of absolute incapacity to provide for the protection of the community against future invasions of the public peace by foreign war or domestic convulsions?

²³ If, on the contrary, we ought to exceed this point, where can we stop, short of an indefinite power of providing for emergencies as they may arise?

²⁴ Though it is easy to assert in general terms the possibility of forming a rational judgment of a due provision against probable dangers, yet we may safely challenge those who make the assertion to bring forward their data, and may affirm that they would be found as vague and uncertain as any that could be produced to establish the probable duration of the world.

²⁵ Observations confined to the mere prospects of internal attacks can deserve no weight, though even these will admit of no satisfactory calculation, but if we mean to be a commercial people, it must form a part of our policy to be able one day to defend that commerce.

²⁶ The support of a navy and of naval wars would involve contingencies that must baffle all the efforts of political arithmetic.

²⁷ Admitting that we ought to try the novel and absurd experiment in politics of tying up the hands of government from offensive war founded upon reasons of state, yet certainly we ought not to disable it from guarding the community against the ambition or enmity of other nations.

²⁹ If it should break forth into a storm, who can insure us that in its progress a part of its fury would not be spent upon us?

³⁰ No reasonable man would hastily pronounce that we are entirely out of its reach.

³¹ Or if the combustible materials that now seem to be collecting should be dissipated without coming to maturity, or if a flame should be kindled without extending to us, what security can we have that our tranquillity will long remain undisturbed from some other cause or from some other quarter?

³² Let us recollect that peace or war will not always be left to our option, that however moderate or unambitious we may be, we cannot count upon the moderation or hope to extinguish the ambition of others.

³³ Who could have imagined at the conclusion of the last war that France and Britain, wearied and exhausted as they both were, would so soon have looked with so hostile an aspect upon each other?

³⁴ To judge from the history of mankind, we shall be compelled to conclude that the fiery and destructive passions of war reign in the human breast with much more powerful sway than the mild and beneficent sentiments of peace, and that to model our political systems upon speculations of lasting tranquillity, is to calculate on the weaker springs of the human character.

³⁶ What has occasioned that enormous accumulation of debts with which several of the European nations are oppressed?

³⁷ The answers plainly is wars and rebellions, the support of those institutions which are necessary to guard the body politic against these two most mortal diseases of society.

³⁸ The expenses arising from those institutions which are relative to the mere domestic police of a state, to the support of its legislative, executive and judicial departments with their different appendages, and to the encouragement of agriculture and manufactures, which will comprehend almost all the objects of state expenditure, are insignificant in comparison with those which relate to the national defense.

³⁹ In the kingdom of Great Britain, where all the ostentatious apparatus of monarchy is to be provided for, not above a fifteenth part of the annual income of the nation is appropriated to the class of expenses last mentioned; the other fourteen-fifteenths are absorbed in the payment of the interest of debts contracted for carrying on the wars in which that country has been engaged and in the maintenance of fleets and armies.

⁴⁰ If, on the one hand, it should be observed that the expenses incurred in the prosecution of the ambitious enterprises and vainglorious pursuits of a monarchy are not a proper standard by which to judge of those which might be necessary in a republic, it ought on the other hand to be remarked that there should be as great a disproportion between the profusion and extravagance of a wealthy kingdom in its domestic administration, and the frugality and economy which in that particular become the modest simplicity of republican government.

⁴¹ If we balance a proper deduction from one side against that which it is supposed ought to be made from the other, the proportion may still be considered as holding good.

⁴² But let us advert to the large debt which we have ourselves contracted in a single war, and let us only calculate on a common share of the events which disturb the peace of nations, and we shall instantly perceive, without the aid of any elaborate illustration, that there must always be an immense disproportion between the objects of federal and state expenditures.

⁴³ It is true that several of the states, separately, are encumbered with considerable debts which are an excrescence of the late war.

⁴⁴ But this cannot happen again if the proposed system be adopted, and when these debts are discharged, the only call for revenue of any consequence which the state governments will continue to experience will be for the mere support of their respective civil list to which, if we add all contingencies, the total amount in every state ought to fall considerably short of two hundred thousand pounds.

⁴⁵ In framing a government for posterity as well as ourselves, we ought, in those provisions which are designed to be permanent, to calculate, not on temporary, but on permanent causes of expense.

⁴⁶ If this principle be a just one, our attention would be directed to a provision in favor of the state governments for an annual sum of about two hundred thousand pounds, while the exigencies of the Union could be susceptible of no limits, even in imagination.

⁴⁷ In this view of the subject, by what logic can it be maintained that the local governments ought to command in perpetuity an exclusive source of revenue for any sum beyond the extent of two hundred thousand pounds?

⁴⁸ To extend its power further in exclusion of the authority of the Union would be to take the resources of the community out of those hands which stood in need of them for the public welfare in order to put them into other hands which could have no just or proper occasion for them.

⁴⁹ Suppose then, the Convention had been inclined to proceed upon the principle of a repartition of the objects of revenue between the Union and its members in proportion to their comparative necessities, what particular fund could have been selected for the use of the states that would not either have been too much or too little too little for their present, too much for their future wants?

⁵⁰ As to the line of separation between external and internal taxes, this would leave to the states at a rough computation the command of two-thirds of the resources of the community to defray from a tenth to a twentieth part of its expenses, and to the Union one-third of the resources of the community to defray from nine-tenths to nineteen-twentieths of its expenses.

⁵¹ If we desert this boundary and content ourselves with leaving to the states an exclusive power of taxing houses and lands, there would still be a great disproportion between the means and the end, the possession of one-third of the resources of the community to supply at most one-tenth of its wants.

⁵² If any fund could have been selected and appropriated equal to and not greater than the object, it would have been inadequate to the discharge of the existing debts of the particular states and would have left them dependent on the Union for a provision for this purpose.

⁵³ The preceding train of observation will justify the position which has been elsewhere laid down, that a concurrent jurisdiction in the article of taxation was the only admissible substitute for an entire subordination in respect to this branch of power of state authority to that of the Union.

⁵⁴ Any separation of the objects of revenue that could have been fallen upon would have amounted to a sacrifice of the great interests of the Union to the power of the individual states.

⁵⁵ The Convention thought the concurrent jurisdiction preferable to that subordination, and it is evident that it has at least the merit of reconciling an indefinite constitutional power of taxation in the federal government with an adequate and independent power in the states to provide for their own necessities.

⁵⁶ There remain a few other lights in which this important subject of taxation will claim a further consideration.

Hamilton’s topic is a continuation of his previous papers concerning the division of tax revenue between state and federal government. That the states will retain a revenue stream sufficient to meet their needs he shows from three points: first, that exclusivity toward that tax revenue on the part of the federal government is limited to the duties on imports (2); second, that “coordinate authority,” meaning the ability of both state and federal governments to tax, is a feature of the system (5); and third, that the needs of the state for revenue to support defense spending argue to be considerably less due to the assumption of the role of national defense by the federal government (44).

Between the second and the third points, Hamilton pauses to examine the feasibility of this joint government based on historical example and its apportionment of power based on possible future needs.

The first point of these three Hamilton has already treated at length in the previous essays on taxation under the new federal system. The matter is, after all, the only one of those actually codified in the proposed Constitution (Article I, Section 8), and the worst that opponents Brutus and Cato could come up with were imaginings that Congress might decide to expand that exclusivity with laws that were yet to be proposed, much less passed. Indeed, imposts would be the predominant source of federal revenue for the better part of a century to come. Changes to the scope required to enact an income tax would require a constitutional amendment – and would get one.

The issue of coordinate authority would evince itself in arenas far wider than taxation; in fact, it would characterize the broad structure of the governments of the United States to come. Certain opponents saw in this a matter at best of inefficiency, and at worst of outright conflict, and Hamilton is bold enough to state that they are at least partially correct. His case is the Roman Republic.

⁸ Many arguments might have been adduced to prove the unfitness of two such seemingly contradictory authorities, each having power to annul or repeal the acts of the other.

It was, historically, a faction-ridden mechanism remarkable for its inefficiency, and yet Hamilton's point is that it served Rome's needs very well during her expansionist period, and that although such a thing might be theoretically unsound, it existed in fact and served to protect the rights of the Roman citizens, at least insofar as the latter existed.

¹² And yet these two legislatures coexisted for ages, and the Roman Republic attained to the utmost height of human greatness.

Hamilton's point is that such a seemingly clumsy arrangement as coordinate authority between federal and state governments might do the same. It is not the happiest of historical examples, however – in time the organizations of the plebs and patricians both proved susceptible to autocracy under Sulla and Marius respectively, and at last fell to the heir of both, Julius Caesar, and the monarchy of the Caesars to come. As guardians of the rights of the Roman polity these bodies left a great deal to be desired.

It is ironic indeed that the very issue under discussion, the procurement of revenue from the citizen through taxation, should have led to a fatal weakening of the Roman system when, in the 3rd Century AD, the coveted Roman citizenship was opened up from a restriction to the ones who had earned it through birth or military service, to the ones who had not but would earn it through paying taxes, which only Roman citizens were tasked to do. A cash-hungry government would thereby dilute its polity and help provide for its own eventual end.

So the matter was not an inconsiderable one, and Hamilton knew it. It is unclear from the text if Hamilton's own imagination held a period of American expansionism similar to the Roman; it is, however, clear that in his opinion the government he was promoting would not prevent it. The future was very much on Hamilton's mind.

¹⁷ In pursuing this inquiry, we must bear in mind that we are not to confine our view to the present period, but to look forward to remote futurity.

What then of the future, if it held both federal and state governments? Hamilton has already stated that he sees an inverse relationship between the sizes and duties of the respective governments.

¹⁴ ...in a short course of time the wants of the states will naturally reduce themselves within a very narrow compass, and in the interim the United States will in all probability find it convenient to abstain wholly from those objects to which the particular states would be inclined to resort.

He sees this as helping to resolve the seemingly inevitable contest between federal and state government for tax revenue, but there is a very great deal more behind this. It centers around the issue of revenue which the existing Confederation Congress did not have for the most vital and expensive purpose of government in Hamilton's day: national defense. That was not a mistake Hamilton intended the new federal government to make, and it led directly to the accusation of absolutism on his part. It is one of his signature points: because no limit on the nature of the challenges that might present themselves to the new government were imaginable, no limit on the powers of the government to address them would be prudent (20).

Although Hamilton provides a nod to internal “domestic convulsions” (22) the real issue is one of providing for the country's defense against other countries (27). He repeats the point of the unpredictable and knotty issues surrounding naval affairs (26) that he first addressed in Federalist #11. At 28 through 32 he builds a case against the temptations of isolationism that resounds to the present day. A cloud, he states, has been for some time hanging over the European world. Had he written “specter” he would have anticipated Marx by 60 years.

³³ Who could have imagined at the conclusion of the last war that France and Britain, wearied and exhausted as they both were, would so soon have looked with so hostile an aspect upon each other?

The reader struggles not to smile at the last. Who indeed could have anticipated that, except for anyone with even a remote acquaintance with either country's history? In fact, it is not even clear what Hamilton meant by the “last war”. If that were the Seven Years' War in Europe, known in the New World as the French and Indian War, Hamilton might be professing surprise that the two would once again engage as they did over the American War of Independence, to the tune of some 500,000 British pounds in debt for the French, and likely a similar number on the part of the losing side. Or Hamilton might be referring to the War of Independence as the “last war” and the current, to him, difficulties between the two nations. His words apply as well to the immediate future in the Napoleonic Wars, whose expense was to dwarf the paltry sums that now threatened to bankrupt the French government and would do so before the ink was dry on the new Constitution.

There had been two centuries of incredible violence in Europe, and it promised – and delivered – another one to come, and after that, yet another half century that would make the others look like child's play. One suspects that even Hamilton would be horrified at how very right he turned out to be on the matter.

How insignificant? What follows is a grim recitation of the hard economic fact of the day.

³⁹ In the kingdom of Great Britain...fourteen-fifteenths [of state revenues] are absorbed in the payment of the interest of debts contracted for carrying on the wars in which that country has been engaged and in the maintenance of fleets and armies.

They are only one example. As stated, the government of France had just been ruined by it, and the Confederation Congress was receiving insufficient revenues to service even a fraction of its own war debt. The staggered reader may be justified in reaching for a calculator to verify that the number cited is in excess of 90%. While Hamilton provides no source for that figure, it is not difficult to imagine. That was life in the late 18th Century.

By comparison, the present day United States deploys a military force that is often criticized as unnecessarily large – Hamilton would have vehemently disagreed – on a proportion of tax revenue approximating 32%, or roughly one-third of what the British government was experiencing even before embarking on their memorable contest with Napoleon. This represents some 23% of the overall national budget – by the magic of deficit arithmetic, federal spending now totals far more than 100% of tax revenues. It did in France as well before the fall.

Thus Hamilton's case for the empowerment of the federal government in the matter of taxation. With a parting reminder (43) that it is the federal government, and not the states, who will shoulder that burden, he returns to the matter of apportionment. From 45 to 52 he lays out a scenario that demonstrates the difficulties both of apportioning current tax revenues and of anticipating how they are likely to break out in the near future given the changing roles of state and federal governments.

He closes at 53 with a restatement of his case that concurrent jurisdiction was the only feasible alternative to complete subordination of the state governments in the matter of taxation. It is not, he states at 56, the end of the topic, but it is apparent now just how much of that topic depends on the issue of national defense. Hamilton's country will, as he predicted, be pulled at last into the European maelstrom. She will not be ready when she is.

The Roman system when viewed from the 18th century had all these contraditions, overlaps and ability of one office to over-rule the decree of another as a positive feature providing checks and balances and allowing for the difficulty of the concentration of Power and thereby, the reduction of arbitrary power — a touchstone to the Whiggish sensibility.

It is only in the hindsight fo the French Englightenment emphisis on Rationalistic Totalitarian Democracy (Hayek’s terms) that the practical empirical benefits of the complexity began to be viewed as “inefficient” and in conflict with a rational application of direct “rights” based democracy.

The founders knew — we have forgotten.

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