Heather Cox Richardson:

From CAFE and the Vox Media Podcast Network, this is Now & Then. I’m Heather Cox Richardson.

Joanne Freeman:

And I’m Joanne Freeman.

Heather Cox Richardson:

As you may know, our CAFE colleague, Elie Honig has launched Up Against The Mob, a six episode series about his time taking on the mafia as chief of organized crime at the Southern district of New York.

Joanne Freeman:

Three episodes are available now and new episodes come out each Wednesday. Listen to Elie discuss the exciting, disturbing, and sometimes bizarre world of the mafia as he sits down with cops, undercover agents, defense lawyers, mobsters turned cooperators. Subscribe to Up Against The Mob and check out the first three episodes today. And Heather, I really did mean it when I said in the past, we should do a Mob episode because imagine how fun it would be to look at Al Capone and the rise of Las Vegas and John Gotti. And we could talk about mob movies.

Heather Cox Richardson:

Oh, man. Although that being said, I have seen the first Godfather. I think, there’s a horse involved.

Joanne Freeman:

Okay, we’ve got one. There’s one movie.

Heather Cox Richardson:

But we’re going to talk about something more exciting today, right?

Joanne Freeman:

We are going to talk about something more exciting, something as ever timely. Really timely, because not only is it in the news and being talked about, but there’s a deadline looming today. We’re going to talk about debt. Now obviously media sources, online, cable TV, newspapers, and everyone else is talking a lot about this issue right now. The debt ceiling is what a lot of people are talking about. But this issue obviously is as old as the United States is. Debt has always been an issue. Some of what we’re going to be talking about today is debt and what it has meant in one way or another to American history and to what America thinks of itself.

But as we launch into this discussion, we want to make one distinction really clear, which in some way is or another, right now people are blurring over sometimes for partisan impact. And that is we feel the need to make the point that spending and a government shutdown is not the same thing as the debt ceiling. Those are not the same things. Basically it’s worth noting that a government shutdown, which I know many people are also talking about right now, a government shutdown is the result of lawmakers disagreeing over how much they want to spend on future bills. So government shutdowns are forward looking.

Debates over the debt ceiling are essentially arguments over whether the government should be paying for the spending they’ve already authorized. So debt ceiling debates are basically backward looking. They’re two different things, and nowadays we do see now and again, some conflation of future spending with debt ceiling discussions. “I don’t want to vote for the debt ceiling suspension,” someone might say, “Because I don’t want to let those Democrats spend more money.” They’re not the same thing. When you’re talking about the debt ceiling, you’re talking about what we basically already authorized.

Heather Cox Richardson:

And when you’re talking about spending, you’re talking about the budget. The two are tending to get conflated even though they’re very different. Although both of them have one very important thing in common. I was saying to Joanne, before we did this episode, I’m always worried when I say to people, I want to talk about the debt or I want to talk about tariffs or I want to talk about taxes because there’s a tendency of people to glaze over and say, “How long do I have to humor her before we talk about something else?”

And the answer to me is that these are phenomenally interesting topics because while they’re seemingly kind of dry, because they sound like they’re all just about numbers on a page, they are in fact, the way that Americans discuss what kind of a nation they want to have and who should pay for that nation. So as we look at the history of the debt in America and of spending and paying off that debt in America, what we are really talking about is what kind of a nation do we want to have and how do we make sure that people are invested in creating that kind of a nation?

Joanne Freeman:

Invested in multiple meanings of the word.

Heather Cox Richardson:

Yeah. The meaning of words is going to be very important, but in part there’s a little bit of a joke behind this because every time we do one of these meetings to say, “What are we going to do?” People have all these great topics, “We’re going to do the mob or we’re going to do movies, or we’re going to do whatever.” And I’m like, “I want to do the debt. I want to do taxes. I want to do whatever.” And one of the reasons that I have done that to the degree I have is because every time I say I want to do the debt, I look with giant eyes at the person sitting across the table from me who studies Hamilton.

And the ability to actually sit here and talk to somebody who comes as close to knowing Hamilton, as it is possible to know Hamilton, all these many centuries later is an opportunity that somebody like me who cares much about the debt cannot pass up. So this time around, we had a whole list of things to talk about and we had to choose something. I said, “Oh, those are all good, but can’t we talk about the debt?” So here we are talking about the debt.

Joanne Freeman:

Here we are.

Heather Cox Richardson:

So take it away, Joanne. Let’s go through Hamilton and what he was up to and why do we care?

Joanne Freeman:

Okay. The thing about Alexander Hamilton, when he became the nation’s first Secretary of the Treasury is he inherited basically financial chaos. The revolutionary war had left the individual states with a vast amount of debt. There was no real national infrastructure, as far as finances went really, that still had to be organized on a pretty fundamental level. And Hamilton not very long after he was made Secretary of the Treasury was asked by Congress to in some way or another manage the national debt, manage public credit. And it’s one of the things that he’s most famous for doing other than dying in a duel, which is the other thing he’s most famous for doing.

But as far as his actual accomplishments go, it was his way of thinking about the nation and deploying the debt as a way to shape the nation and shape the government into what he wanted it to be that he’s best known for. The states, all had individual differing amounts as to debt leftover from the revolutionary war. Some of the states had done a good job of paying off those debts. Other states had not done as good a job.

Some states had very good records of what had been spent and paid, other states had very poor records. So when you’re talking about what to do about revolutionary war debt, not only is this an issue that has something to do with power that states have versus power that the national government might have, but it also has to do with each state contesting with others. And in the end, with Northern states having a bigger debt, Southern states, having paid off some of their debt and that being built into this competition, and a lot of strife about what to do with the revolutionary war debt.

Heather Cox Richardson:

So you’ve got states having different opinions about what should happen to that debt. Some of them have paid their debts off, some have not. And then you have the issue with the federal government and Hamilton manages to use the federal government and the debt in such a way that he launches the country as a unit in a new kind of way. And the story of how he does that fascinates me.

Joanne Freeman:

The fundamental insight behind what he does is he says, “You know what, people right now debt is between creditors and states and debtors and states. It’s all on a state level. If he can have the national government assume responsibility for the state debts left over from the revolution, debt payment will be something that’s on a national level. People will be looking to the national government as the authority on this issue. And that by definition, that will give authority and strength and credibility to the national government, even above and beyond what it’ll do in uniting the states behind this shared effort to pay those debts back.

Heather Cox Richardson:

But it also makes rich people want the government to succeed. If you hold the debt of say, Massachusetts, you care that the Massachusetts government is going to go ahead and succeed. But if all of a sudden your money depends on the federal government succeeding, all of a sudden you have a much greater interest in making sure that federal government succeeds. It’s really brilliant.

Joanne Freeman:

It is brilliant. And what’s interesting is people nowadays in our Hamilton musical world that we live in, people don’t want to hear anything seemingly negative about Hamilton. So when you say he very deliberately courted the wealthy and well born to support the government, people always say, “No, he didn’t do that.” But course he did that. Those are the people he wanted to support the government in one way or another. Their financial support, their intellectual support of this new government mattered enormously. So yeah. He very much wanted them and using investment in many senses of the word to invest in this new government. He says really early on in a statement why he thinks the debt is important.

I’m just going to read this really long run on sentence, but just to give you a sense of everything that he wraps up in the debt and why it’s important. He starts out by saying that the United States debt is “the price of Liberty”. So it’s what we have paid to win independence. And the reason it’s important is now is the “to promote the increasing respectability of their American name. To answer the calls of justice. To restore landed property to its due value. To furnish new resources, both to agriculture and commerce. To cement more closely the union of the states. To add to their security against foreign attack.” To establish public order on the basis of an upright and liberal policy.”

These are the great and invaluable ends to be secured by a proper and adequate provision at the present period for the support of public credit. So he’s laying it out right there, all of those things where we started and what you started by saying, Heather, “All of those things are bound up with how America deals with debt and how America deals with its finances.”

Heather Cox Richardson:

And how important it is for America, both to have people trust it to follow through on its debt. And also to have people literally invested with money in the country. And honestly, I did not deliberately set this up. But who doesn’t like the debt?

Joanne Freeman:

Sure you didn’t set this up.

Heather Cox Richardson:

I really didn’t. Honestly, I didn’t.

Joanne Freeman:

Right. So Hamilton, and it’s Jefferson. Anyone out there who listens to the podcast knows that if Heather is asking that kind of a question, we’re talking about Thomas Jefferson. That Jefferson indeed does not buy into Hamilton’s thoughts about debt. Hamilton says rather famously. So what he says in full is a national debt, if it is not excessive will be to us a national blessing. It will be a powerful cement of our union. Well, people take that out of context and Jefferson is one of them who says, “Debt is a blessing? How does that make sense? That doesn’t make sense at all. I think we should pay it all off.”

Debt is something that money men are going to be deploying and it’s going to foster corruption and they’ll be gasp, insider trading in Congress for example. There are all of these negative things that will happen once you allow debt to be deployed in this way, used in this way by the government. So, yeah, Jefferson is not very happy about Hamilton’s policy towards debt for the precise reason that Hamilton’s deploying it is to strengthen the national government.

Heather Cox Richardson:

Is it fair to say that Jefferson wanted to go ahead and weaken the debt in part to go at head and sever the ties of wealthy men like himself from the federal government to return more power to the states?

Joanne Freeman:

Well, that’s a good question. I mean, over time he becomes, it’s interesting when you look at his letters over time, he becomes really outspoken in his distrust of northerners and Southern boy should no longer go to those Northern schools. They’re getting dangerous Northern ideas. I do think that he’s thinking as always about human farmers and about agrarian interests, and he thinks that the United States should be a place that deals with getting agrarian goods sent to all of the factories that can remain in Europe. And so all of that indebtedness and industry and all of that can stay far away from whatever’s happening here. So he does have… Get us right back to where we started a fundamentally different vision of what the United States should be.

Hamilton in a sense has a real old world vision in which he thinks, “Yeah, industry is good and we need a stronger government for a whole bunch of reasons. And if we’re going to stand up on the world stage, we need a stronger government. So we’re talking about debt, but we are fundamentally talking about their clashing views about what the United States should be.

Heather Cox Richardson:

So Jefferson tries to get rid of the debt in part, doesn’t he?

Joanne Freeman:

Well, he does a variety of different things. He tries to cut down the size of government. He eliminates diplomatic positions overseas. The person who actually pays off the entire national debt is Andrew Jackson.

Heather Cox Richardson:

He is determined to make sure that the government does not go into hawk to the financiers of especially Philadelphia.

Joanne Freeman:

Exactly. The money men and the bank people and all of that. His common man supposed interest means that he is the anti-national bank guy. And he says in 1834, when he has eliminated the national debt for, I believe the only time in American history. Free from public debt at peace with the world. The present may be hailed as the epic in our history, which shall be best calculated to give stability to our Republic and secure the blessings of freedom to our citizens. And then a couple years later, we have a huge crash, the financial crash.

Heather Cox Richardson:

Well, and the other thing that’s so interesting about that though, is that part of the reason that you want to get rid of the debt in that period is that you don’t want the federal government to have the kind of power that it have in order to mess around with the policies of human enslavement. So there is that real atomization. And I think that matters for where we’re going with the rest of this conversation, because what’s going to change the American approach to the debt yet again is the Lincoln administration, which has the huge problem on its hands of the succession crisis in 1861 on and virtually no money to fight it.

At the time the war breaks out, there are four financial instruments that Lincoln has access to, and many of them are coming due and he is in real trouble. So he actually asked the Secretary of the Treasury Salmon P. Chase for a list of what his options are for paying for the war. And like I say, it’s only few pages, long handwritten where Chase is like, “Well, we basically have a problem.” So the first thing that they do when the war breaks out is for chase to go ahead and try and raise money from New York bankers.

And the New York bankers are iffy about backing the war for the United States in any case, because so many of their ties come through the cotton industry in the south. In addition to the fact that they’re nervous about backing away from their Southern contacts, they are also unwilling to back the United States, because it doesn’t look initially as if the United States is going to win that war. And so they go ahead and they do loan money to Chase, but they do so at an enormous discount.

And one of the things that is interesting about that happening is that the American people take a look at the fact that the New York bankers have just made, if you will, a killing on their buying of bonds from the us government to keep it afloat as the war breaks out. The American people get very angry at the bankers and a lot of the banking legislation that we’re going to get during the Civil War is going to be a reaction to that. Well this is our country, not the banker’s country.

And one of the things we get from that is beginning in 1862, in order to issue debt that is going to underpin the United States armies, the Secretary of the Treasury Salmon Chase to earns to Jay Cooke who’s a Philadelphia banker and who rather than holding Chase off and being a nuisance to him. Jay Cooke has been doing corrupt things like picking up the shopping bills of Salmon Chase’s daughter. And we always hear that story about how Mary Todd Lincoln is this spend thrift and how embarrassed the Lincoln is that he has to cover her deaths when she redecorate the White House. Well, she is doing that because Salmon Chase’s daughter, Kate has gone ahead and refurbished their house in Washington, D.C. to be the center of polite society, knowing full well that if everybody gathers in Salmon P. Chase’s house. He’s going to be the presidential nominee in 1864.

So Mary Lincoln has to compete with Kate Chase in the White House while Salmon Chase lets all those bills get picked up by Jay Cooke, Lincoln has to pick him up himself and that’s the root of that story. But in ’62, Chase turns to Jay Cooke to go ahead and sell bonds directly to the American people. And that is such a key moment in the war, and in the way people think about the country, because literally what Cooke does is he gets Chase to agree to him, being able to take a cut of the amount he sells. And he uses that money partly to get rich, but also partly to get salesmen.

And he says, “I’m going to advertise. I’m going to have salesmen all over this country.” And he does. He sends salesman into the mines out west. He sends them behind the troops going into the south. He sends them into cities. He has special moments where women can buy bonds where there won’t be men around. So they don’t have to be embarrassed about it. And he gets the American people to invest in the US government and they do it deliberately.

Joanne Freeman:

But here’s my question, what is the pitch? All of these sales people going all over the place. What is it that they’re pitching to get people to buy?

Heather Cox Richardson:

First of all, they’re pitching, do you stand behind the men? Do you stand behind the boys who are there in the front? And you’re standing in so many ways. It’s your son. You’re maybe working in the factories of the fields to cover for what your son can’t do, because he is out on the front lines. It is a way to demonstrate that you believe in the country, but then there’s the second related point to that and that is that it is a vote of faith. It is saying, “I’m going to take my money and I’m going to put it in this government.” The same way, by the way, that people are doing in the Confederacy and that’s not going to pay off very well.

And then of course he does all sorts of commercial things. Like he gets cities to have rivalries, who’s going to buy more bonds. And he gets rivalries going on in different towns. Is your organization going to buy more bonds than the other organization, but really he is getting regular Americans to invest in government of the people, by the people, and for the people.

Heather Cox Richardson:

Precisely, to invest in what the government or the nation quote-unquote should be. Do you believe in our cause and if you do, you will vest in it. And there’s another piece of it though, that we’re going to have to talk about when we go forward into the present. And that is with the extraordinary costs of the Civil War, the government has to grapple with, how do you pay for stuff? Literally, how do for stuff? So we’re talking about borrowing today, but the elephant in the room and yes, I know I’m tired, but I did that really deliberately because these are all Republicans.

In this period is they raise money with taxes. This is when they invent American federal taxation. This is when they invent the income tax and they decide that they’re going to pay off the extraordinarily rapidly mounting national debt, not entirely, but in part through taxation because they see that also as being an investment in the country. You are literally putting up money to keep the country going. To invest in a certain kind of government, a government that believes and equality rather than a government that protects human enslavement to concentrate wealth among people at the very top of the scale.

So there’s a really wonderful moment when Congress is talking about the debt and they’re talking about how to pay the debt and they’re talking about taxes. And Justin Smith Morrill who is one of the great, I’m sorry, I love this stuff. Can you tell, I love this stuff?

Joanne Freeman:

I can. This is one of those moments that I do not every episode, but almost the sheer joy that I am seeing on your face. People cannot see it. I can witness it.

Heather Cox Richardson:

Well, it’s just like you were talking about these movies that I’ve never heard of and you were really excited and I’m like, “Yeah, okay.” And then that’s how I am about Justin Smith Morrill. He stands up on the floor of Congress and some of the Democrats who have joined the union, but they still believe in not having a government that does anything and not having a debt and all that. He stands up and he says that the government has the right to demand. He uses the word demand 99% of a man’s property for an urgent necessity. He says when the nation requires it, and I quote, “the property of the people belongs to the government.”

Joanne Freeman:

Wow. And what’s the response to that?

Heather Cox Richardson:

Isn’t that great? They pass the law.

Joanne Freeman:

It’s amazing.

Heather Cox Richardson:

They pass the law. We go ahead and we get H.R.312 which establishes our first major federal taxation. There’s some before that too, but that’s the 1862 law that establishes really the big parameters of this new form of funding of the government. So that raises the next question and that’s what happens to the debt after the Civil War, when the Democrats come back into the union, because one of the tricks to the federal debt during the war is that the interest on it was paid in gold. Not all of it, most of it. And they do that really deliberately to get the rich guys to put their money into it. Because there are plenty of places you can put your money during the war that’s going to make a lot of money. You can invest in horseshoes. You can invest in slickers. You can invest in candy. You can invest in the things that people are taking to the battlefields.

And so in order to get at people instead to put their money into bonds and to actually feel like this is a good investment, the Congress goes ahead and it guarantees that most of the bonds are going to have their interest paid in gold while after the war, the Democrats look at this and they say, “Wait a minute, workers are being paid in greenbacks.” And greenbacks depreciate. So literally workers are being taxed to pay for the repayment of these bonds in gold at a depreciated currency. So they’re getting whacked twice over and the Democrats come forward and they say, “You know what we want to do? We want to go ahead and take the laws that establish the payment of that interest in gold and have that interest paid instead in greenbacks.”

And this is a fascinating moment in American history because it is at this moment, remember I just said that before the war, the bankers were affiliated often with the Southern planters and they were often Democrats. The bankers, especially in New York were often Democrats. This is the period where Republicans look at this and they’re like, “What are you doing? You can’t do this. You can’t go ahead and destroy the federal credit.” And this is the beginning of the moment where Democrats begin to be painted in American political mythology as being bad with money. So they go ahead and in the writing of… This is a big fight in the midterm election of 1866 and in the writing of the 14th Amendment, which is ratified in 1868. Congress goes ahead in the fourth section and they write this…

Joanne Freeman:

“The Validity of the public debt of the United States authorized by law, including debts incurred for payment of pensions and bounties for services and suppressing in selection or rebellion shall not be questioned, but neither the United States, nor any state shall assume or pay any debt or obligation incurred in aid of insurrection or rebellion against the United States or any claim for the loss or emancipation of any slave, but all such debts, obligations, and claims shall be held illegal and void.” And of course the part that jumps out of there is that first part, the validity of the public debt of the United States authorized by law shall not be questioned.

Heather Cox Richardson:

And that goes right back to what Hamilton was up to.

Joanne Freeman:

Exactly.

Heather Cox Richardson:

The idea that so long as you protect your debt, you’re going to be able to keep the country going. And that’s precisely why there is the second sentence there, which says, “But if you’re a southerner, you are out of luck because we’re going to take all that debt in which you invested and we’re going to say it is illegal and void.” And this is a big enough deal that when they go ahead and do the things that they need to do to come back into the union, a number of the Southern states try to wiggle around this by making exceptions to it, by to go ahead and at least protect some of their debt. And this is again, you get all the stories after the war of Southern debt becoming useless. This is what they’re talking about.

So we have once again, during the Civil War, this period where the union uses debt and the taxes to pay debt as a way of creating a certain kind of government. A government that protects equality, and it stands against the Confederacy and its attempt to destroy that.

Joanne Freeman:

Worth noting that in that conversation, like it’s possible to do at the present. It’s possible to submerge the fact that that’s what’s really being debated about and mask that with discussion of debt and taxation and payment as though this is just a matter of money when basically as we’re going to keep reiterating throughout this episode, it’s so much bigger than that. It’s about the nation as a whole.

Heather Cox Richardson:

And what the nation is going to become. One of the reasons that I get excited about debt is because, and I’m excited about the moment we’re in right now in America as a historian is because all this was on the table in 1879, not over the debt, but over spending. So one of those moments where now we’re going to look at spending again, and the reason that I want to pull this up, even though it’s not related directly to the debt, but rather to the budget is because in 1879, Democrats had retaken control of the House and Senate for the first time, since the Civil War and when they did so, because of the fact they were now in power, what happened was the Speaker of the House, put back into positions of power, a number of former Confederates.

So literally, there were Confederate generals who were now directing committees in the House of Representatives and in the Senate. And the newspapers in the north are horrified because these same people who were literally trying to kill off the United States government are now running the committees in Congress. And there’s a big to do about that, but what really jumps out is that the former Confederates get the bit in their teeth if you will, and they figured that them being elected to Congress, even though they were elected largely because there was an economic depression right then, and that people blamed the Republicans for it, there’s also some scandals.

Even though that’s why they’re elected, they believe they have been elected to get rid of that government that Lincoln set up to roll everything right back to the years before the war. To get rid of equality, to get rid of the internal improvements the Republicans have put in place, to go ahead and get rid of that government of the people, by the people, and for the people. So what they do is they continually five times they put four appropriations bills for the upcoming year that will require the Republican president Rutherford B. Hayes to go ahead and get rid of all the troops that remain in the south that are protecting black rights, including the right to vote.

And to his credit and to the credit of the Republicans, they recognize that this is as big an attack on the survival of the United States government as a physical attack. They literally say both in public and in letters to each other, “If this is not revolution, I don’t understand what revolution is.” This looks exactly like what they did in 1861. They’re going to destroy the government from within, and there’s this amazing story from the New York Times where a reporter claims to have talked to one of the former Confederate who’s now in Congress. And the guy says, “Gee, we made a real mistake in 1861 going ahead and fighting on the battlefield because we really should have done is just defunded the government because if you defund the government, you can’t do anything.”

Heather Cox Richardson:

And once we have de he funded the government, basically we have turned the clock back to 1860 and gotten exactly what we wanted and no blood would’ve been spilled on our side and we wouldn’t have destroyed our region. And Hayes sees this and his key ally in Congress, the minority leader in the House of Representatives, James Garfield, who was of course a military leader during the war, refused to go ahead and sign those appropriations bills. He vetoes five of those bills and at the end of the day, the Democrats backed down. But key to I think, the story and also the larger story of the fight about America was on the table right then.

Americans who really had probably not heard of James Garfield until this happens, I mean, it looked as if the Democrats were shoe-ins for the 1880 election after winning the House in the Senate and after many, many years of Republican rule. Americans elect James Garfield president, and he becomes president on a platform that says, “I am a Laconian Republican, and we are going to create a nation that is represented by the declaration of independence and that protects equality.” He’s the most Laconian Republican that we’ve got in that era. He runs and he wins, thanks to this fight over what kind of a nation we’re going to have.

Joanne Freeman:

So they recognized that at the time.

Heather Cox Richardson:

They absolutely recognized that at the time and that sets up now where we are in the 21st, but also the 20th century, because at the heart of the fight we’re in now, which we will unpack is the fight that really rose in the 1980s again, over what kind of a country America was going to be. See, isn’t the debt more interesting than you thought it was?

Joanne Freeman:

I never said it wasn’t interesting.

Heather Cox Richardson:

You thought it. I could tell you thought it. Just because Charlton Heston didn’t do something on the debt.

Joanne Freeman:

Harrumph. That is what I have to say to that.

Heather Cox Richardson:

Oh, oh, oh. I’m so sorry. Now I have to do this. Is there a movie about the debt?

Joanne Freeman:

Wow. I’m sure there is.

Heather Cox Richardson:

Don’t you think we should write a musical about the American debt?

Joanne Freeman:

I’m not throwing away my stocks.

Heather Cox Richardson:

And then we could do the sequel, Tariffs.

Joanne Freeman:

That’s our next act.

Heather Cox Richardson:

All right. So let’s do the 20th century and where this goes, because of course we protect the budget and the funding of the government for a certain kind of government in 1879.

Joanne Freeman:

And pledge a statement to equality and about what kind of society we’re going to have.

Heather Cox Richardson:

And now the debt is going to make a resurgence as an important part of this argument over what America should be during World War I, right?

Joanne Freeman:

Right, 1917. So right. The idea of a debt ceiling is brought about in 1917. And of course what’s interesting is we started out talking about the revolution. We segue into the Civil War. Now we’re talking about World War I. It’s obviously no accident that when you’re having these major moments in which debt and budget are being debated, it is at moments where you really have to focus in a concrete way because of the cost of wars.

Heather Cox Richardson:

Yeah. And it’s not an option to be like, “Nevermind. We’ll talk about whether or not we’re actually going to fund the United States government next year.” So one the issues during World War I is the need to spend a lot of money really quickly. And one of the ways that the government had in the past to raise money was by passing individual bills saying, “Yes, we’re going to raise this much money and this is how we’re going to do it. And this is what the instruments are going to look like or here’s this kind.” And a lot of people aren’t actually aware that there are lot of different financial instruments that the government uses to raise money and some of them are extraordinarily confusing that they use at different periods.

So in 1917, the Congress gets together and says, “Now this is just ridiculous. We can’t sit here and do a piece meal. We’re going to raise this kind of money here and this kind of money here. Let’s just tell the government that it can go ahead and raise money up to a certain amount and they can figure out how to do it.” And so in 1917, they do it with this idea of the debt ceilings. “Go ahead, do whatever you want up to this amount and then we’ll talk again, and see if we should raise it more.” This continues to give us control over the purse strings, but it doesn’t make us sit there on your shoulders telling you, “Yes, you should do this through postage stamps and no, you should do this one through an issue of bonds that pay 3% interest.”

Joanne Freeman:

So we have the mechanism put into place in 1917 to create basically, the debt ceiling. That idea is solidified in 1939 and together what those things do is create in the idea of a debt ceiling, a tool that can be really conveniently, easily and powerfully deployed for partisan purpose to basically hold the government hostage in order to get what you want to get your vision of the nation put into play, to basically defeat the other party’s vision of the nation. So you’ve created basically a hostage taking toolkit.

Heather Cox Richardson:

And that hostage taking toolkit has been deployed really since the 1980s in a really particular way, because we’ve been talking about the debt and appropriations as ways to impose a certain vision of America. And since the 1980s, we have had on the side of the Republicans, a vision of America that in fact, doesn’t have an active government, doesn’t have a government that does the many things that people like Lincoln and the Republicans in the 19th century wanted it to. And so they begun to deploy, first of all, the idea of debt ceilings, and also the idea of government shutdowns in order to go ahead and force cuts in the actions that the government actually does.

Joanne Freeman:

One of the interesting things about this then given that the Republicans are often using this hostage technique, is that bound up with visions of what the nation should be is also a way of playing the political game. It’s a different way of engaging in politics, this sort of hostage technique.

Heather Cox Richardson:

But it’s a hostage technique that cuts to the very heart of the survival of the country. And so the shutdowns that really jump out are the one in the mid 1990s, between November, 1995 and January of 1996, when House Speaker, Newt Gingrich, a Republican shut down the government for 28 days. And it’s really the first one. There had been other quasi shutdowns before that since the mid 1970s, but they didn’t really take with the public in this because there was always a sense that there was going to be money coming in. So very few public positions actually had to stop in that period. But the 1990s shut down, things really shut down.

And it was over the Speaker of the House, Gingrich, trying to force Bill Clinton to sign onto a budget that slashed Medicare, public health, the environment and education. And he was able to put that kind of pressure on Clinton because he said, “Unless you go ahead and sign onto this budget, we’re not going to raise the debt ceiling”

Joanne Freeman:

So it’s a kind of hardball politics, but just as you just said, Heather, it cuts right down to the quick. It’s saying, you can’t get the nation to be what you want it to be. We want it to be what we want it to be, and we’re going to hold it hostage until we get it. And the reason we can do that is because of the core centrality, the importance of the question of American debt and our ability to pay back what we’ve already authorized being spent. It’s an issue when you think about debt and when we started thinking about this episode, this was one of the things I was thinking about, which is what does debt really mean to a nation?

Obviously, it’s a fiscal issue. There’s a moral component to it. It has to do with things like credit and trust. It has to do with the character of a country. And obviously, it also has to do with ways of conducting politics. And as we’re watching now in our current political moment, how we conduct our politics says a lot about what kind of a nation we are trying to have this nation be.

Heather Cox Richardson:

Well, and speaking of the political angle of that, it is worth pointing at out that the Congress has raised the debt ceiling more than 100 times since it first went into effect. It did it 18 times under Ronald Reagan and it did it three times under former president Donald Trump, most recently in 2019, in which case it went ahead and suspended the debt limit until right now, which is why we’re dealing with this debt limit right now. And during that time, during the Trump administration, the Republicans added about $7.8 trillion to what is now our 28 trillion national debt.

Joanne Freeman:

Senate Minority Leader McConnell has voted to raise or suspend the debt sailing 32 times in his career, including three times under Trump.

Heather Cox Richardson:

So that brings us back to the present. And what is at stake here in the maneuvering that’s going on? Because the Republicans now are refusing to vote for a package of the debt ceiling together with a continuing resolution to fund the US government through December 3rd. So the Democrats put two things together and they put together the funding of the government, these two separate things, the funding of the government to stop a government shutdown which would involve what are considered non-essential services, being furloughed during that period of time.

So they put that together with an increase in the debt ceiling, and they did that really deliberately because they wanted to make the point that the Republicans had added 7.8 trillion to the debt and that’s debt that has been added. And now what’s at stake is are we going to pay that debt? Well, in fact, the Republicans want to spin this moment as, “Look, see the Democrats are spending more money yet again.” And they’re conflating those two things.

Joanne Freeman:

Right. Precisely. It’s a dishonest combination of things that are not the same thing. And you have treasury secretaries, in this kind of moment, and it’s not the first time we’ve had a moment where national credit has been toyed with in this way, just in recent years. I do and this says, I suppose more about me than it should. Obviously, I do think about Hamilton spinning in his grave somewhere because more than anything else, national credit, national honor, and the fate of the nation had to be considered above all else.

Now, Treasury Secretary, Janet Yellen is making that same point about the disaster that can result if we default on the money that we’ve already authorized to be spent, which is not the same thing as worrying about, fretting about or cutting back on money that we haven’t yet spent. As she said recently, she said that defaulting on our debt, allowing the debt ceiling to expire basically, and not be suspended, could trigger a spike in interest rates, a steep drop in stock prices and other financial turmoil. Our current economic recovery would reverse into recession with billions of dollars of growth and millions of jobs lost.

Heather Cox Richardson:

And Moody’s Analytics, which is a financial services firm actually warned that if the US defaults, which would happen for the first time in our history, it would cost up to six million jobs, create an unemployment rate of nearly 9% and wipe out nearly $15 trillion worth of household wealth. So we’re talking about this like numbers, but what we talking about is America and the role of finance and debt in the construction of a certain kind of country. A certain kind of country that we belong to and that we support.

Joanne Freeman:

And its place on the world stage, because this doesn’t happen in a vacuum. What we’re doing here obviously will affect finance around world and will shape what other countries think of us and our reliability as a nation.

Heather Cox Richardson:

So on the one hand, the Republican Party under then Senate Majority Leader, Mitch McConnell from Kentucky was perfectly happy to take on about two trillion dollars in debt to go ahead and cut taxes that went to corporate wealth and to people at the top of the scale. And to pass some coronavirus relief measures before the 2020 election. And yet on the other hand is turning around and saying, “When it comes time to meet those obligations, and when it comes time to go ahead and invest in the economy in the ways that Lincoln did, no, we don’t want any part of that and will go into default before we go ahead and do that.”

The real elephant in the room here is that we’re talking about raising the debt to borrow, and you have people like Ted Cruz and Mitch McConnell insisting that they don’t want to go ahead and fund what they consider this out of control spending by the Democrats. We could always do what the Republicans did during the Civil War, which is pay for it with taxes. It’s an interesting moment that the Republicans are both saying, “We want to have the money to do these things, but you may not raise taxes to pay for it, and you may not borrow to pay for it.” And you look at the end of the day and you think, “Well, you really can’t have all these things at the same time.”

And yet in many ways, that’s what the whole Republican experiment was predicated on in the 1980s. That you could have everything and never pay for it so long as you kept borrowing. But if only one party controls whether or not we’re going to be able to borrow, then what you’ve done is precisely what Joanne keeps saying, taken a hostage and created the kind of country you want solely by control the purse strings quite as the former Confederates tried to do in 1879.

Joanne Freeman:

In a sense, this brings us back to the beginning when the country started. This was seen as the crucial issue that was going to determine if the national experiment and government that was getting underway could float, because this would affect what the American people thought about the government. It would affect the government’s fate. It would affect national security. What foreign nations thought about us? As Hamilton actually said at one point, “Credit is an tire thing, wound one branch, and you wound the whole.”

We are back at a moment when all of these potentially dire outcomes are at play. It’s a form of hostage taking that makes it seem as though, as you just said, Heather, what we’re doing is talking about numbers, but we are not talking about just numbers. Even though there might be so some intangibility to the idea of national credit and indebtedness, those are huge issues with huge questions attached to them that in one way or another will shape the future of the American nation.