Saturday, February 7, 2009

NYT: Distillation without representation

The New York Times reviews a new book, Whiskey Rebels, a "historical thriller" about the Whiskey Rebellion here.

If you like the idea of “sin” taxes as a way for the government to raise revenue, be aware that Alexander Hamilton got there first. In Federalist No. 12, he called for taxing drinkers to help finance the new federal government. A levy on spirits importation, he argued, would also be of benefit “to the morals, and to the health of the society” by curbing the “national extravagance” of consuming ­spirits. Sound familiar?

As history relates, the scheme backfired badly when Hamilton pushed it through in modified form as an excise. Plausible enough on its surface (no one, after all, is obliged to drink liquor), the tax in practice laid oppressive burdens on the settlers of the western frontier, for whom whiskey was the one solidly profitable article of production, grain itself not being economical to ship east over the mountains. And the same frontier was the section of the new nation where ready money to pay the tax was scarcest. The resulting turmoil, which has come to be known as the Whiskey Rebellion, set aflame the Appalachian region until, in 1794, George Washington marched an army into western Pennsylvania to put it down. The widely evaded tax had collected little revenue, and Congress eventually repealed it.

Despite its title, David Liss’s latest historical thriller uses the frontier revolt only as a springboard to its real story, the emergence of Hamiltonian finance capitalism back east. As Treasury secretary, in the words of one of the characters in “The Whiskey Rebels,” Hamilton “had single-handedly transformed the country from a republican beacon for mankind into a paradise for speculators.” Such at least were the views of the Jeffersonians, who bitterly opposed Hamilton’s fledgling Bank of the United States and felt vindicated when his restoration of public credit (via repayment of state war debt) led to a bubble of speculation in government securities that was to culminate in the Panic of 1792. Of the financiers laid low in that panic, the most prominent was a high-rolling New Yorker (and, briefly, aide to Hamilton at the Treasury Department) named William Duer, whose double-­dealings stank badly even by the relaxed ethical standards of that day.

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