The Great Debate

Zero U.S. debt wasn’t so great the first time around

By Chadwick Matlin
The opinions expressed are his own. 

At this rate, we’re going to have more debt-reduction proposals than we have trillions in debt. There was Simpson-Bowles, the Gang of Six (Pt. 1), Obama’s $4 trillion gambit, Coburn’s $9 trillion slash, Cut-Cap-and-Balance, and the Gang of Six (Pt. 2), Obama and Boehner’s near-deal, and as of this week Reid and Boehner’s dueling plans. But even the most austere of these proposals would have left us more than $5 trillion in debt, and the one likely to pass—if one passes, that is—will likely still leave us with more than $10 trillion of obligations. Somewhere, Andrew Jackson is shaking his skeletal head, pissed that a bunch of profligate Americans have soiled his legacy.

As president, Jackson was responsible for the first and only time the country stood at a true Debt Zero. The debt was $58.4 million when he first took office in 1829; six years later, as he would announce in his 1835 State of the Union, the country was finally in the black, with $440,000 in the bank. All it took to get there was a maniacal devotion to small government, the forced removal of tens of thousands of Native Americans, and tariffs so high the union nearly broke apart. The kind of thing that’s easily replicable in 2011.

So while we’re counting down the days until the U.S. bursts through the ceiling like a Roald Dahl character, let’s dwell on a different timeline: Andrew Jackson’s. It’ll remind you that Debt Zero doesn’t happen overnight.

1795: For Jackson, debt became his white whale from an early age. Before he went to battle and burnished his Old Hickory* legacy, he was a lawyer and real-estate man, and a rich one at that. When Jackson was 32, he sold 68,000 acres of land to a guy named David Allison. But Allison didn’t have the most stable of financial lives, and soon ended up declaring bankruptcy and rotting in a debtors prison, where he’d die in 1798. Jackson, meanwhile, was left in a lurch, having used the promise of Allison’s money to start buying supplies for a trading post he was starting. According to John Steele Gordon’s surprisingly readable history of U.S. debt, Hamilton’s Blessing, Jackson would spend the next 15 years sorting it all out.

1824: When Jackson first unsuccessfully campaigned for president he did it on a platform that would make Tea Partiers blush. He framed the federal debt as an almost-spiritual affliction, calling it “a national curse.” As Jon Meacham writes in, American Lion, his Pulitzer-winning biography of Jackson: “To him debt was dangerous, for debt put power in the hands of creditors—and if power was in the hands of creditors, it could not be in the hands of the people, where Jackson believed it belonged.”

Writing history – the Panic of 2008

John Kemp Great Debate– John Kemp is a Reuters columnist. The views expressed are his own –

Economic history is the only field of human endeavor where the past changes as much if not more than the present and the future. Policymakers and practitioners struggle to define and write a “narrative” of the past as a means to control how policy responds to current and future problems.

The debate now over financial reform is a case in point. Even though the banking system has only just emerged from the most severe shock since the 1930s, the battle over how to define the events of the last 18 months, and what they should mean for investors and regulators in future, is already well underway.