National Debt on Automatic Pilot to More Growth

A letter by President George W. Bush, signed and dated July 4, 2001, sold for $16,730 at an April 2007 Heritage auction.

By Jim O’Neal

In May 2001 – just 126 days after President George W. Bush took office – Congress passed his massive tax proposal. The Bush tax cuts had been reduced to $1.3 trillion from the $1.65 trillion submitted, but it was still a significant achievement from any historical perspective. It had taken Ronald Reagan two months longer to win approval of his tax cut and that was 20 years earlier.

George W. Bush

Bush was characteristically enthusiastic about this, but it had come with a serious loss in political capital. Senator James Jeffords, a moderate from Vermont, announced his withdrawal from the Republican Party, tipping control of the Senate to the Democrats, the first time in history that had occurred as the result of a senator switching parties. In this instance, it was from Republican to Independent, but the practical effect was the same. Several months later (after the terrorist attacks on the World Trade Center and the Pentagon), there was a loud chorus of calls to reverse the tax cuts to pay for higher anticipated spending.

Bush had a counter-proposal: Cut taxes even more!

Fiscal conservatives were worried that there would be the normal increase in the size and power of the federal government, lamenting that this was a constant instinctive companion of hot wars. James Madison’s warning that “A crisis is the rallying cry of the tyrant” was cited against centralization that would foster liberal ideas about the role of government and even more dependency on the federal system.

Ex-President Bill Clinton chimed in to say that he regretted not using the budget surplus (really only a forecast) to pay off the Social Security trust fund deficit. Neither he nor his former vice president had dispelled the myth about a “lock box” or explained the federal building in Virginia that had been built exclusively to hold government IOUs to Social Security. In reality, they were simply worthless pieces of scrip, stored in unlocked filing cabinets. The only changes that had ever occurred with Social Security funds were whether they were included in a “unified budget” or not. They had never been kept separate from other revenues the federal government received.

But this was Washington, D.C., where, short of a revolution or civil war, change comes in small increments. Past differences, like family arguments, linger in the air like the dust that descends from the attic. All of the huge surpluses totally disappeared with the simple change in the forecast and have never been discussed since.

Back at the Treasury Department of 15th Street, a statue to Alexander Hamilton commemorates the nation’s first Treasury Secretary, a fitting honor to the man who created our fiscal foundation. But on the other side stands Albert Gallatin, President Thomas Jefferson’s Treasury Secretary, who struggled to pay off Hamilton’s debts and shrink the bloated bureaucracy he built.

Hamilton also fared better than his onetime friend and foe, James Madison. The “Father of the Constitution” had no statue, no monument, no lasting tribute until 1981, when the new wing of the Library of Congress was named for him. This was a drought that was only matched by John Adams, the Revolutionary War hero and ardent nationalist. It was only after a laudatory biography by David McCulloch in 2001 that Congress commissioned a memorial to the nation’s second president.

Since the Bush tax cut and the new forecast, the national debt has ballooned to $20 trillion as 9/11, wars in Iraq and Afghanistan, and the 2008 financial meltdown produced a steady stream of budget deficits in both the Bush and Barack Obama administrations. The Donald Trump administration is poised to approve tax reform, amid arguments on the stimulative effect on the economy and who will benefit. In typical Washington fashion, there is no discussion over the fact that the national debt is inexorably on automatic pilot to $25 trillion, irrespective of tax reform. But this is Washington, where your money (and all they can borrow) is spent almost with no effort.

“Just charge it.”

Intelligent Collector blogger JIM O’NEAL is an avid collector and history buff. He is president and CEO of Frito-Lay International [retired] and earlier served as chair and CEO of PepsiCo Restaurants International [KFC Pizza Hut and Taco Bell].

Harvard-Educated Adams Cracked Down on Non-Citizens, Free Speech

An 1805-dated oil on canvas portrait of John Adams, attributed to William Dunlap, sold for $35,000 at a May 2017 Heritage auction.

By Jim O’Neal

When Barack Obama was sworn in on Jan. 20, 2009, he became the eighth president to have graduated from Harvard, which has educated more U.S. presidents than any other university. Yale is second with five, with George W. Bush counting for both Yale and Harvard (where he earned an MBA).

The first of the “Harvard Presidents” goes all the way back to 1796, when John Adams narrowly defeated Thomas Jefferson 71 to 68 in the electoral vote count. It was the only election in history in which a president and a vice president were elected from opposing parties.

However, Jefferson bounced back four years later in a bitter campaign characterized by malicious personal attacks. Alexander Hamilton played a pivotal role in sabotaging President Adams’ attempt to win a second term by publishing a pamphlet that charged Adams was “emotionally unstable, given to impulsive decisions, unable to co-exist with his closest advisers, and was generally unfit to be president.”

When all the votes were counted in 1800, Adams actually ended up third behind both Jefferson and Aaron Burr (who eventually became vice president). John and Abigail Adams took the loss very emotionally and it alienated their relationship with Jefferson for 20-plus years. Adams departed the White House before dawn on Inauguration Day, skipped the entire inauguration ceremony and headed home to Massachusetts. The two men ultimately reconciled near the end of their lives (both died on July 4, 1826).

Adams had been an experienced executive-office politician after serving eight years as vice president for George Washington. However, his four years as president were controversial. It started when the Federalist-dominated Congress passed four bills, collectively called the Alien and Sedition Acts, which President Adams signed into law in 1798. The Naturalization Act made it harder for immigrants to become citizens, and the Alien Friends Act allowed the president to imprison and deport non-citizens deemed dangerous or from a hostile nation (Alien Enemy Act). And finally, the Sedition Act made it a crime to make false statements that were critical of the federal government.

Collectively, these bills invested President Adams with sweeping authority to deport resident non-citizens he considered dangerous; they criminalized free speech, forbidding anyone to “write, print, utter or publish … any false, scandalous and malicious writing or writing against the government of the United States … or either House of Congress of the United States … with intent to defame … or bring them into contempt or dispute … or to excite against them or either of them … the hatred of the good people of the United States.”

Editors were arrested and tried for publishing pieces the Adams administration deemed seditious. Editors were not the only targets. Matthew Lyon, a Vermont Congressman, was charged with sedition for a letter he wrote to the Vermont Journal denouncing Adams’ power grab. After he was indicted, tried and convicted, Lyon was sentenced to four months in prison and fined $1,000.

For Vice President Jefferson, the Alien and Sedition Acts were a cause of despair and wonderment. “What person, who remembers the times we have seen, could believe that within such a short time, not only the spirit of liberty, but the common principles of passive obedience would be trampled on and violated.” He suspected that Adams was conspiring to establish monarchy again.

It would not be the last time Americans would sacrifice civil liberties for the sake of national security. More on this later.

Intelligent Collector blogger JIM O’NEAL is an avid collector and history buff. He is president and CEO of Frito-Lay International [retired] and earlier served as chair and CEO of PepsiCo Restaurants International [KFC Pizza Hut and Taco Bell].