Note: Last winter, I began a series of posts about The Federalist. My first series of posts concluded in March, with a post on Federalist 11. This is the beginning of the second series of posts.
Most of us learned in school that the American colonies separated from Great Britain over the issue of "taxation without representation." In the 1760s, Britain found itself with a large debt because of the French and Indian War (1754-1763), which was fought in the American colonies. It was reasoned that, because the war was fought for the colonists' defense, the colonists should contribute to paying off the debt. So a series of taxes were levied through the passage of the Sugar Act (1764), the Stamp Act (1765), and the Townsend Acts (1767), which taxed everything form sugar to newspapers and playing cards to tea. These taxes led to open rebellion in the colonies.
Alexander Hamilton knew how difficult it was to collect taxes, especially when there was so little money in circulation. But after the Revolution, states found themselves in the same position that Britain had been in after the French and Indian War—burdened with an enormous war debt. Hamilton realized that it was crucial to raise revenue to pay off the debt, and he argued that the best means of raising revenue was through a tariff on imported goods. To make collection of a tariff practicable, it would be necessary to have a federal authority capable of patrolling the Atlantic coastline and collecting the tariff. If America were to remain a collection of loosely confederated states, it would be impossible to organize an effective system to regulate trade and collect import duties. Illicit trade across the porous state borders would be "a matter of little difficulty," and there would be no coordinated effort among the states to police the Atlantic coast.
Federalist 12 is a kind of prospectus of Hamilton's vision for the Treasury Department that he would head under the administration of the first President of the United States. He would establish a national tariff, and create a customs agency to collect the tariff and a Coast Guard (beginning with a fleet of coastal patrol ships known as "revenue cutters") to insure that no imports slipped into the country untaxed. The first national tariff was signed into law on July 4, 1789—the date was chosen deliberately, since Hamilton believed that the United States could only be truly independent if it possessed an independent source of revenue.
Hamilton also floats the idea of an excise tax on "ardent spirits," a tax that would both raise revenues and discourage the consumption of alcohol, which Hamilton considered harmful to national morals. Such a tax was in fact passed in 1791, and eventually led to the Whiskey Rebellion of 1794 in western Pennsylvania.
In Federalist 13, Hamilton argues that it would be more economical to create and maintain a single national government than it would be to create and maintain separate central governments for two or three separate confederacies. He imagines the thirteen states uniting into three separate confederacies comprising the four northern states, the four middle states, and the five southern states. Each confederacy would require a central government nearly as large as the central government required by a union of all thirteen states. Why duplicate the effort and expense of creating a national government?
Hamilton wanted to bind all three regions, and thirteen states, into a single union, but he was aware of how easily the states could be divided into separate confederacies—north and south—based upon shared interests. He writes: "If we attend carefully to geographical and commercial considerations, in conjunction with the habits and prejudices of the different states, we will be led to conclude, that, in case of disunion, they will most naturally league themselves under two governments." Hamilton foresaw the persistent division and tension between North and South. And, unfortunately, the tax policy he favored—the imposition of a protective tariff—deepened that division by protecting and encouraging Northern industry and weighing heavily upon Southern agricultural exports. Thus, in the 1830s, South Carolina threatened succession not over slavery, but over the so-called "Tariff of Abominations."
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