Category Archives: Federalist

Federalist No. 13

In Federalist No. 13, after addressing the utility of the union in respect to commercial relations and a navy in Federalist No. 11 and the utility of the union in respect to revenue, Hamilton then approaches the broader subject of the advantage of the union in respect to economy in government. Since we all want a more economical government, this is definitely one of the series’ must reads.

Hamilton starts off by noting that, if we have an efficient government, the money saved from one object may be usefully applied to another, and there will be so much the less to be drawn from the pockets of the people. Is it just me, or have governments around the world forgotten this? Let’s look at North America. Every state and province has their own Department of Motor Vehicles, and every state and province issues their own licenses. And while this is probably as it should be, they all use their own, custom, systems instead of using one, common, system (or at least one system that uses the same APIs and same protocols) so they need to do extra work to get driver history data from drivers who move into the state or province. In addition, many are not able to automatically suck the basic information of the individual in from a Federal database, and we have a duplication of data that leads to propagation of errors. One system, individually administered by each state, would be much more efficient. As prove, look at multi-tenant SaaS, which is gaining traction in enterprise software. Every improvement is able to be immediately leveraged by all for one development cost. But I digress, back to one of Hamilton’s key points:

If the States are united under one government, there will be but one national civil list to support; if they are divided into several
confederacies, there will be as many different national civil lists to be provided for. The whole point of a union is strength and efficiency. Since it is true that when the dimensions of a State attain to a certain magnitude, it requires the same energy of government and the same forms of administration which are requisite in one of much greater extent, efficiency can only increase with size and scale (provided such size and scale is properly administered). The advantage of civil power is that properly organized and exerted, [it] is capable of diffusing its force to a very great extent; and can, in a manner, reproduce itself
in every part of a great empire by a judicious arrangement of subordinate institutions.

Hamilton’s final words deserve to be etched in stone:

If, in addition to the consideration of a plurality of civil lists, we take into view the number of persons who must necessarily be employed to guard the inland communication between the different confederacies against illicit trade, and who in time will infallibly spring up out of the necessities of revenue; and if we also take into view the military establishments which it has been shown would unavoidably result from the jealousies and conflicts of the several nations into which the States would be divided, we shall clearly discover that a separation would be not less injurious to the economy, than to the tranquillity, commerce, revenue, and liberty of every part.

Federalist No. 12

In Federalist No. 12, Hamilton writes on the utility of the union in respect to revenue as a follow up to his piece on the utility of the union in respect to commercial relations and a navy. Given that all organizations require revenue to function, this is an important topic, especially since everyone disdains taxes and wants to know that their tax dollars will not be wasted.

Hamilton is right when he notes that The ability of a country to pay taxes must always be proportioned, in a great degree, to the quantity of money in circulation, and to the celerity with which it circulates. If taxes are too high, it will create too high a burden on the population, but if they are too low, the government may not have enough revenue to effectively function and provide needed services. In addition, commerce, contributing to both these objects, must of necessity render the payment of taxes easier. Taxes are a necessary burden, but paying them shouldn’t be burdensome. Too bad we’ve forgotten this with tax codes so convoluted that five accountants can do the same return and arrive at a different conclusion for the same household!

Hamilton said a great thing when he said that it is evident from the state of the country, from the habits of the people, from the experience we have had on the point itself, that it is impracticable to raise any very considerable sums by direct taxation. Tax laws have in vain been multiplied; new methods to enforce the collection have in vain been tried; the public expectation has been uniformly disappointed, and the treasuries of the States have remained empty — as this is another point that needs to be remembered. The more convoluted the tax code, the more ineffective and inefficient it gets. For example, in Return to Prosperity, Arthur B. Laffer, a noted economist, argues for a flat tax. He notes that if we implemented such a tax across individuals and businesses, not only could we simplify the tax return to a single page, but we could reduce the tax rate to about 13% and collect about the same amount of taxes as we do now! 13%! Given that, in some states, some residents pay over 30% in sate and federal income taxes, many people could see their taxes halved and the government could still collect the additional dollars it needs to operate effectively. If that’s not a win-win, I don’t know what is!

The primary argument he puts forth as to how a Union would be better, and fairer, than a collection of states with respect to the collection of revenue is the following:

The relative situation of these States; the number of rivers with which they are intersected, and of bays that wash there shores; the facility of communication in every direction; the affinity of language and manners; the familiar habits of intercourse; – all these are circumstances that would conspire to render an illicit trade between them a matter of little difficulty, and would insure frequent evasions of the commercial regulations of each other.

But if, on the contrary, there be but one government pervading all the States, there will be, as to the principal part of our commerce, but ONE SIDE to guard—the ATLANTIC COAST.

In other words, there would be no illicit trade between the states, and the only worries with respect to duty and tax evasion would be in global trade, with respect to goods originating from Europe or India. With only one border to patrol (with the unified navy that would be obtained as per the previous argument for a Union), we would be able to stop the smugglers and impose fair taxes across the board. Because ocean going vessels would have to dread both the dangers of the coast, and of detection, as well after as before their arrival at the places of their final destination if they attempted to unlade prior to entering port, an ordinary degree of vigilance would be
competent to the prevention of any material infractions upon the rights of the revenue.

It is therefore evident, that one national government would be able, at much less expense, to extend the duties on imports,
beyond comparison, further than would be practicable to the States separately, or to any partial confederacies.

Federalist No. 11

In Federalist No. 11, Hamilton returns to the helm in addressing the people of the State of New York in the Independent on the utility of the Union in respect to commercial relations and a navy. Starting with this essay, we start to move away from generic advantages of a republic over a democracy and a Union over a confederacy to a specific set of advantages, of relevance to the people, possessed by a republic Union.

Even in 1787, global trade was critical to economic growth. (In fact, in 1817, Congress did away with all internal taxes and relied solely on tariffs on imported goods to provide sufficient funds for running the government. The first income tax was not enacted until 1862 to support the Civil War. Before this, taxes were limited to a few commodities, starting with sugar in 1764 and stamps in 1765.) In the 1600s and 1700s, European countries captured profits of 200% to 300% by way of long-distance trade with the Americas and the east. In fact, at one point in time, the British East India Company was an imperial power in its own right, with its own military! Thus, commercial relations would be critical to the rise, and acceptance, of America.

Hamilton starts off by noting that there are appearances to authorize a supposition that the adventurous spirit, which distinguishes the commercial character of America, has already excited uneasy sensations in several of the maritime powers of Europe. They seem to be apprehensive of our too great interference in that carrying trade. There is thus reason to believe that some countries may favour the policy of fostering divisions among us, and of depriving us, as far as possible, of an ACTIVE COMMERCE as this would prevent our interference in their
navigation, [prevent our interference in their] monopolizing the profits of our trade, and clip the wings by which we might soar to a dangerous greatness.

If we continue united, we may counteract a policy so unfriendly to our prosperity in a variety of ways. By prohibitory regulations, extending … throughout the States, we may oblige foreign countries to bid against each other, for the privileges of our markets. In addition, a further resource for influencing the conduct of European nations toward us, in this respect, would arise from the establishment of a federal navy. There can be no doubt that the continuance of the Union … would … create a navy which, if it could not vie with those of the great maritime powers, would at least be of respectable weight. This would create, since just a few ships sent to reinforce either side in a third-party maritime conflict, would be sufficient to decide the fate of a campaign and this creates a situation so favourable would enable us to bargain with great advantage for commercial privileges. Thus, by a steady adherence to the Union we may … become the arbiter of Europe in America. It is arguable that under a vigorous national government, the natural strength and resources of the country, directed to a common interest, would baffle all the combinations of European jealousy to restrain our growth.

In addition, an unrestrained intercourse between the States themselves will advance the trade of each by an interchange of their respective productions … and the veins of commerce in every part will be replenished. As a result, the aggregate balance of the commerce of the United States would bid fair to be much more favourable than that of the thirteen States without union. And, then, the thirteen States, bound together in a strict and indissoluble Union, concurrent in erecting one great American system will be superior to the control of all transatlantic force or influence, and able to dictate the terms of the connection between the old and the new world!

 

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Federalist No. 10

In our last post, we discussed how in Federalist No. 9 Hamilton addressed the subject of the Union as a safeguard against domestic faction and insurrection to the people of the State of New York. In Federalist No. 10, James Madison gives us his first contribution to the series while continuing to address the same subject in the New York Packet.

Madison starts off by noting that among the numerous advantages promised by a well-constructed Union, none deserves to be more accurately developed than its tendency to break and control the violence of faction. This is because a government, without violating the principles on which it is based, will not fail to set a due value on any plan which provides a proper cure for the violence of faction.

Given that the instability, injustice, and confusion introduced into the public councils, have, in truth, been the mortal
diseases under which popular governments have everywhere perished, it is vital that the subject be properly addressed and that the American constitutions do so and improve on the popular models for government, both ancient and modern.

There are essentially two methods of curing the mischiefs of faction: the one, by removing its causes; the other, by controlling its effects. There are again two methods of removing the causes of faction: the one, by destroying the liberty which is essential to its existence; the other, by giving to every citizen the same opinions, the same passions, and the same interests. But where the first remedy is concerned, it is worse than the disease. But it could not be less folly to abolish liberty, which is essential to political life. And the second expedient is as impracticable as the first would be unwise. Because, as long as the reason of man continues fallible, and he is at liberty to exercise it, different opinions will be formed. As a result, the CAUSES of faction cannot be removed, and that relief is only to be sought in the means of controlling its EFFECTS.

If a faction consists of less than a majority, relief is supplied by the republican principle, which enables the majority to defeat
its sinister views by regular vote. But when a majority is included in a faction, the form of popular government … enables it to sacrifice to its ruling passion or interest both the public good and the rights of other citizens. This could allow the faction to concert and carry into effect schemes of oppression, which must be avoided.

Fortunately, a true republic varies from a democracy in two respects. First, the delegation of the government, in the latter, to a small number of citizens elected by the rest; secondly, the greater number of citizens, and greater sphere of country, over which the latter may be extended.

In the first case, we can assume that the elected representatives have the wisdom to best discern the true interest of their country and the patriotism and love and justice to see it through. And if that isn’t enough, when you extend the sphere of influence, you
take in a greater variety of parties and interests; you make it less probable that a majority of the whole will have a common
motive to invade the rights of other citizens; or if such a common motive exists, it will be more difficult for all who feel it to
discover their own strength, and to act in unison with each other. As a result, a rage … will be less apt to pervade the whole body of the Union than a particular member of it; in the same proportion
as such a malady is more likely to taint a particular county or district, than an entire State.

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Federalist No. 9

In Federalist No. 9, we again have Hamilton addressing the people of the State of New York in the Independent Journal, but this time he is addressing the union as a safeguard against domestic faction and insurrection as a follow-up to his piece on the consequences of hostilities between the states.

He begins the piece by stating that a FIRM Union will be of the utmost moment to the peace and liberty of the States, as a barrier against domestic faction and insurrection. To stress this point, he begins with a discussion of how it is impossible to read the history of the petty republics of Greece and Italy without feeling sensations of horror and disgust at the distractions with which they were continually agitated and at the rapid succession of revolutions by which they were kept in a state of perpetual vibration between the extremes of tyranny and anarchy. These were, after all, republics, and since what is being proposed is a republic, one must address why the current instantiation of the republic will enable a FIRM Union between the states while previous instantiations did not.

The reason the current instantiation will not be subject to the distractions, agitations, tyranny, and anarchy of the republics of old is because the science of politics, however, like most other sciences, has received great improvement since the time these republics were created and the efficacy of various principles, not known to the ancients, is now well understood.

In particular, the regular distribution of power into distinct departments; the introduction of legislative balances and checks; the institution of courts composed of judges holding their offices during good behaviour; and the representation of the people in the legislature by deputies of their own election are wholly new discoveries, or have, at the very least, made progress towards perfection. They are means, and powerful means, by which the excellences of republican government may be retained and its imperfections lessened or avoided.

Hamilton then goes on to quote the French social commentator Charles-Louis de Secondat, baron de La Brède et de Montesquieu, generally known as Montesquieu, who lived during the Enlightenment wand who articulated the theory of separation of powers which is a governance model for the state where it is divided into branches, each with separate and independent powers such that no branch has more power than the others, that is the basis of many of the constitutions in today’s republics and democracies.

This is because Montesquieu was one of the first enlightened thinkers to state that it is very probable that mankind would have been obliged at length to live constantly under the government of a single person, had they not contrived a kind of constitution that has all the internal advantages of a republican, together with the external force of a monarchical government. I mean a CONFEDERATE REPUBLIC. Furthermore, the assemblage of societies that constitute a new one, capable of increasing, by means of new associations, till they arrive to such a degree of power as to be able to provide for the security of the united body is able to withstand an external force and may support itself without any internal corruptions. As a result, the form of
this society prevents all manner of inconveniences.

Furthermore, as noted by Hamilton, since the proposed constitution made the states constituent parts of the national sovereignty, this fully corresponds, in every rational import of the terms, with the idea of a federal government, we have a FIRM Union that should serve as a safeguard against domestic faction and insurrection.

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