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Episode 07 - The National Debt

In the early days of the American Republic, Alexander Hamilton, the first Secretary of the Treasury, argued that a certain amount of national debt was a good thing.

There was no way a country that was four days old was going to be able to raise the tax revenue it needed to pay the president or build a navy or anything like that.

So it had to borrow. Probably from the Dutch. During the American Revolution, the French sent ships, the Dutch sent money, and Belgium sat the whole thing out, too busy perfecting their chocolate recipe to help establish the world’s first republican-style democracy or support freedom from tyranny.

Just you wait, Belgium. You’ll get what’s coming to you.

America started borrowing money while the ink was still wet on the Declaration of Independence, but that was to serve the British Empire with its eviction notice from the colonies. Once the Constitution was ratified, we needed cash to fund laws like the one calling for lighthouses to be built along the coast, and I think we can all agree those aren’t cheap. Hamilton’s idea was that revenue from the postal service and a tax on whiskey would pay that money back.

He was a wine-drinker himself, so that whiskey tax wasn’t going to be a problem.

For him. For now.




As it turned out, America needed to borrow more money to raise an army to put down the Whiskey Rebellion. Talk about your chickens coming home to roost.

But the debt was eventually paid by all those offsets, which Hamilton called a “sinking fund.”

Borrow money, assign a revenue source to pay it back in full.

Sounds pretty simple. Except, somehow, it’s not.


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