A History of the American People

get anything at all. The rest of the domestic debt, and the whole of the foreign debt, was fully
funded, being rescheduled as long-term securities payable in gold.
Hamilton also had the federal government, as part of his scheme, shoulder the burden of the
debts of the states, on the same terms. This was denounced as unfair, because some states had
already paid their debts, and the less provident ones seemed to profit from their tardiness. But
that could not he helped; the all-important object was to get rid of the burden of debt once and
for all and start afresh with sound credit. That was also Hamilton's reply to those who said the
scheme was expensive. So it was-but not in the long run. The United States was already a rich
country. It was probably already, in per-capita terms, the richest country in the world, even
though Britain was emerging as the world's first great industrial power. Being rich, it could
afford to pay to restore its creditworthiness, which meant that in future America could borrow
cheaply and easily on world markets to finance its expansion. Congress took Hamilton's word for
it, the scheme was adopted, and events proved him right. In 1791, when the plan came into
effect, American dept per capita (adjusted to 1980s dollars) was $197, a figure it was not to reach
again until during the Civil War. By 1804 it had fallen to $120 and in 1811 to $49. As a result,
when America wanted to borrow $11.25 million in 1803, to finance the Louisiana Purchase, and
thus double the size of the country, it had no trouble at all in raising the money, at highly
favorable rates. By then, of course, poor Hamilton was a back number (he was killed in 1804).
But he had made the United States solvent and financially respected, and set it on the greatest arc
of growth in history.
The debt-funding was the first of Hamilton's policies to be put forward because it was the
most urgent. But he followed it with three other reports to Congress, on the excise, on a national
bank, and on manufactures. To raise money to fund the debt and pay the expenses of the federal
government, he had already imposed, in 1789, an import tariff on thirty commodities, averaging
8 percent ad valorem and a 5 percent rate on all other goods. Added to this, he proposed in 1791,
and Congress agreed, to an excise tax, chiefly on whiskey. This was a dangerous move. The
frontiersmen, all of whom made whiskey, and who treated it as a kind of currency-almost their
only cash-saw this as an attack on their very existence. They did not see why they should pay
taxes anyway, since they regarded their intermittent warfare with the Indians, fought on behalf of
all, as discharging their duties to the nation in full. They were armed, aggressive, and self-
righteous-most of them were poor too-and they hated the Excise Act just as much as their fathers
had hated the Stamp Act. Violence and refusal to pay began in 1791 and became habitual. In July
1794 law officers tried to summon sixty notorious tax-evaders to trial at the federal court in
Philadelphia. The result was a riot: the mob burned the chief tax-collector's home and killed a
United States soldier. There were open threats to leave the Union. Governor Mifflin of
Pennsylvania refused to send in the militia, as Hamilton had requested. The Treasury Secretary,
backed by the President, decided to treat the violence as treason-rebellion, and Mifflin's behavior
as a defiance of federal law and a challenge to the new constitutional order. Hamilton demanded,
and the President agreed, that 15,000 militiamen from not only Pennsylvania but Maryland,
Virginia, and New Jersey, be called up and deployed. Under the command of General Henry
Lee, and with Hamilton breathing fire and slaughter in attendance, 12,900 men-a larger force
than Washington had ever commanded-marched across the Alleghenies in the autumn. The
rebels, faced with such an enormous army, naturally melted away, and Hamilton had great
difficulty in rounding up a score of insurgents for punishment. According to Jefferson, who
poured scorn on the entire proceedings, this was a case of the Rebellion that could never be Found.' Tworingleaders' were convicted of treason, but Washington spared them from hanging.