Segment from Hamilton

Are You Ready . . . For A Cabinet Meeting?

Historian Brian Murphy breaks down Alexander Hamilton’s controversial plan for the U.S. Treasury and how Hamilton became the father of the modern financial system.

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BRIAN: Of course, each of these opposing versions of Alexander Hamilton says as much about the era in which they were constructed as they do about the real-life Hamilton. From the evil backer of Wall Street during the New Deal, to multicultural voice in 21st century America. All of these Hamiltons draw from real aspects of his life, but they represent slivers of a very complicated individual.

RISA: So today on the show we’ll be exploring Alexander Hamilton’s life and legacies. We’ll look at how being a low-born immigrant from the West Indies shaped his politics and reputation. We’ll also explore how his infamous death helped foster myths about the culture of dueling. And we’ll check in with America’s classrooms about how the musical’s compelling raps are inspiring new enthusiasm for history.

We’re going to turn now to what is perhaps Hamilton’s most enduring legacy– monetary policy. In Hamilton’s first term as Treasury Secretary, the new nation faced a serious problem. By 1790 the United States was broke. After an expensive Revolutionary War, the federal government owed millions of dollars to foreign and domestic creditors. Many of the states were also deeply in debt. This put the new government in a precarious position.

BRIAN MURPHY: The concern, and it’s a very real one throughout the 1790s, is that different states have an even commitments to the long-term durability and their own membership in the federal union.

RISA: This is historian Brian Murphy.

BRIAN MURPHY: And it’s a potential source of instability.

RISA: As Treasury Secretary, Alexander Hamilton stepped forward with a plan. In Hamilton the musical, discussions about how to pay off these debts take the form of a rap battle.

GEORGE WASHINGTON: Ladies and gentlemen, you could have been anywhere in the world tonight, but you’re here with us in New York City. Are you ready for a cabinet meeting, huh?

RISA: Actual cabinet meetings were less dope, but no less combative. While the real Hamilton didn’t freestyle, he was a prolific and persuasive writer. And he used his pen to promote his plan.

BRIAN MURPHY: Hamilton is good at producing reports. Even at the stage of early America where the size of the federal government is very small, Hamilton has this understanding that reports and official paper flows matter.

RISA: So he was the original bureaucrat.

BRIAN MURPHY: Yeah, in some ways he is.

RISA: Hamilton drafted a three-pronged plan to shore up the nation’s finances. He presented it in a series of reports to Washington’s cabinet. The first report was 40,000 words long– a fact noted by the Broadway musical’s Thomas Jefferson.

THOMAS JEFFERSON: (RAPPING) This financial plan is an outrageous demand, and it’s too many damn pages for any man to understand.

BRIAN MURPHY: It’s very long. I assign it to students, and I give them like a week to read it. I get nothing but complaints and bellyaching about how long the thing is, and I tell them that they have longer to read it than Hamilton ostensibly had to write it.

RISA: Hamilton argued that the federal government should assume all of the states’ debts. This was a great deal for New York– Hamilton’s home state– which came out of the war with huge debts. It wasn’t so great for Virginia, which was more or less solvent. As Jefferson puts it in the musical–

THOMAS JEFFERSON: (RAPPING) But Hamilton forgets, his plan would have the government assume states’ debts. Now place your bets as to who that benefits– the very seat of government where Hamilton sits.


THOMAS JEFFERSON: (RAPPING) Oh, if the shoe fits, wear it. If New York’s in debt, why should Virginia bear it?

RISA: Would you call this the first American bailout?

BRIAN MURPHY: The more businessy way to describe this would be “debt restructuring.” But sure, for the purpose of this, we can call it– as long as we’re not passing, you know, bad judgment on New Yorkers– sure, let’s call it a bailout.

RISA: Hamilton wanted the federal government to take that debt, bundle it, and sell it as bonds to European countries. To him, it was a win-win situation.

BRIAN MURPHY: Hamilton believes that if foreign nations end up being creditor countries the United States, that they’ll be more invested in the long-term survival of the United States.

ALEXANDER HAMILTON: (RAPPING) If we assume the debts, the Union gets a new line of credit, a financial diuretic. How do you not get it? If we’re aggressive and competitive, the Union gets a boost. You’d rather give it a sedative.

RISA: Now, Thomas Jefferson saw things a little differently. He pointed out that America’s most obvious creditor would be America’s archenemy.

BRIAN MURPHY: What Hamilton wants, and what the goal here is, is to re-establish trade with Britain. Some are going to be OK with that and think that’s great. But if you’re opposed to it, one of the big reasons you’re going to be opposed to it is because, you know, they just finished a war with this country. And now we’re going to be best friends and trading partners with them again, and put them in a position where if they have American debt, they’re going to have leverage over American foreign affairs. And so once again, we become this client state of this sprawling monarchical empire.

ED: But Hamilton didn’t stop there. The second prong of his financial plan was even more controversial– the establishment of a national bank.

BRIAN MURPHY: Hamilton comes to the cabinet with a history of having been involved in banking in an official way since 1784.

ED: Back then, Hamilton’s father-in-law had commissioned him to start the Bank of New York. This experience meant that Hamilton understood the financial and political clout of banks in a way that the other Founding Fathers simply did not. And he wanted that kind of power to fortify the federal government. All he had to do was to look at the nearest available model. And you guessed what it was– the British Empire.

BRIAN MURPHY: You know, the Bank of England is the thing that enables the British government to fight the war for as long as it did, and to fight wars throughout the 18th century, and to have a navy, and to have an army, and to have an empire, and do all the big state things that the British Empire does. And Hamilton would like to see a lot more of that in the United States.

ED: Naturally, this also didn’t sit well with Jefferson. He saw it as yet another example of Hamilton cozying up with the enemy.

BRIAN MURPHY: I’m a UVA guy, so I feel like I can say this. I don’t think that Jefferson entirely understands what a bank does. But I don’t think Jefferson understands banks in the way that Hamilton does, and it leaves him somewhat unprepared to mount an effective opposition to what Hamilton is laying out.

ED: Hamilton understood how banks could be useful for ordinary citizens who didn’t want to carry around pockets full of gold coins. He also argued that banks could help merchants write contracts, and IOUs, and establish new businesses. These businesses would stimulate the American economy.

BRIAN MURPHY: The fancy term for this is “intermediation.” But that’s ultimately why banks are benefiting even people who don’t have an account with a bank, or haven’t participated in banking directly. Once they’re living in a more banked economy, there’s more potential for growth in that economy.

ED: The final prong of Hamilton’s financial plan was tariffs, to protect America’s infant industries from cheaper foreign imports. Of course, Jefferson wasn’t a fan of this plan, either.

THOMAS JEFFERSON: (RAPPING) Look. When Britain taxed our tea, we got frisky. Imagine what’s going to happen when you try to tax our whiskey.

ED: But Hamilton had Jefferson’s number.

ALEXANDER HAMILTON: (RAPPING) A civics lesson from a slaver, hey neighbor, your debts are paid, ’cause we don’t pay for labor. “We plant seeds in the South, we create.” Yeah, keep ranting, we know who’s really doing the planting.

ED: Despite their differences, Jefferson never offered an alternative to Hamilton’s financial plan.

BRIAN MURPHY: At one point, Jefferson writes a letter to Washington, like a memo, saying, I’m really worried about monarchy in the United States. It’s almost like Jefferson is still searching for a language of opposition. And then the first thing he reaches for is monarchy, to suggest that there’s something inherently un-American about the idea of having a bank and having a national credit system like Hamilton has proposed. As a policy matter, that’s not quite an answer.

ED: Murphy says this gave Hamilton the upper hand when it came time to hammer out a compromise with Jefferson and Madison.

AARON BURR: (RAPPING) Two Virginians and an immigrant walk into a room–

ENSEMBLE: Diametrically opposed, foes.

ED: They held an intimate dinner party and made a trade.

ENSEMBLE: Previously closed, bros.

AARON BURR: (RAPPING) The immigrant emerges with unprecedented financial power, a system we can shape however we want. The Virginians emerge with the nation’s capital. And here’s the piece de resistance.

ED: The story goes that Hamilton won the congressional votes for his financial plan by agreeing to Jefferson’s demand to put the country’s permanent capital in the South. Murphy says the stakes of that compromise weren’t as high as we might think. Hamilton’s plan was already well on its way to being passed without that dinner party.

BRIAN MURPHY: We would really like the founding generation to have been sounding an alarm about this, and done a lot of hand-wringing. And yeah, like some of them were, but there’s such a clamor and need for credit that people in that period were willing to set aside their ideological objections to banks, because the practical need that it would answer outweighed the theoretical risk that they posed.

ED: That practical need, as much as Hamilton’s political skills, helped him overcome opposition to his financial plan.

RISA: Which is not to say that the pushback disappeared, or that we should overlook Hamilton’s personal ambition in all of this. Just listen to the Broadway versions of Jefferson, Madison, and Burr.

JAMES MADISON: (RAPPING) So he’s doubled the size of the government. Wasn’t the trouble with much of our previous government size?

AARON BURR: Look in his eyes.

THOMAS JEFFERSON: See how he lies.

JAMES MADISON: Follow the scent of his enterprise.

THOMAS JEFFERSON: Centralizing national credit and making American credit competitive.

JAMES MADISON: If we don’t stop it, we aid and abet it.

THOMAS JEFFERSON: I have to resign.

RISA: In the long run, Hamilton’s financial plan has shaped the American economy, especially as the country moved away from Jefferson’s agrarian vision toward an economy based more on manufacturing and trade. It’s why Hamilton is considered the father of the modern financial system.

BRIAN MURPHY: I think the vision lasted. I think the scale is something that Hamilton couldn’t, I don’t think anybody could have ever contemplated. But a lot of the core ideas that Hamilton expressed in that Report on Public Credit are very much, very much alive today.

ED: Murphy says that whether you view that legacy as positive or negative, whether you think Hamilton was a hero or a villain, depends on your own financial situation. It also depends on how much you trust the scope and power of the financial sector.

BRIAN MURPHY: The idea that you’re going to create these institutions that have political influence, and that exercise an outsized role to play in elections and in politics, I think that’s exactly what Hamilton and his crew had in mind. And I think that to the extent that people issued a warning about that back in the 1790s, you know, they were right. They were completely right about what was at stake in that way.

RISA: Brian Murphy helped us tell that story. He’s a historian at Baruch College at the City University of New York, and author of Building the Empire State– Political Economy in Early America.

ED: Earlier we heard from Stephen Knott, professor of National Security Affairs at the Naval War College, and author of Alexander Hamilton and the persistence of Myth.