Is America’s National Debt Finally Excessive?

In the summer of 1790, Alexander Hamilton, then the thirty-five-year-old Treasury Secretary of the newly formed United States of America, proposed that the new country assume the war debts of all thirteen states and pay them back in full, for the at-the-time large sum of $25 million (how quaint!) It was a radical notion. The country was broke, it had no credit, and it didn’t have a trustworthy national currency. James Madison, representing Virginia in Congress at the time, objected to the assumption of the state debts. He argued that it was fundamentally unfair for Virginians to be taxed to pay back state debts when Virginia had already been fiscally responsible and paid back its own debts. Sounds like an argument you could hear on the floor of Congress today.

But what Hamilton knew is that a young nation that pooled its resources and paid its bills on time today could borrow against the future, and a nation that could borrow could invest and build. Nine years earlier he’d written that, “A national debt, if it is not excessive, will be to us a national blessing.” That idea was now being put into practice in a brand-new country.

Two hundred and fifty years later, with the country celebrating its semi-quincentennial (everyone’s favorite word this summer), I think it’s worth examining how that bet turned out. And whether we’ve finally found the edge of Hamilton’s little qualifier; if it is not excessive.

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