We are about three weeks away from the next Republican candidates’ debate, but I’m still stuck on one item from the last debate. Toward the end, the moderators cited a Treasury Department proposal to replace the image of Alexander Hamilton on the ten-dollar bill with that of a woman, and asked the candidates which woman they would choose for that honor. When Senator Cruz’s turn came, he prefaced his answer by saying he would prefer to keep Hamilton on the ten, and instead replace the portrait of Andrew Jackson on the twenty.
Sen. Cruz’s defense of Hamilton seemed bizarre, given his stated positions on a variety of issues. Hamilton, after all, believed in a strong Federal government and a strong central bank (the type of bank that Jackson killed). He was the architect of the Compromise of 1790, under which Congress assumed the Revolutionary War debt of the states, rescheduling them where necessary – a bailout, if you will.
Hamilton also believed in a strong national economic policy. In his 1791 Report on Manufactures, he advocated major public infrastructure investments, along with other measures explicitly intended to promote the development of a manufacturing economy. In arguing both for assuming the states’ debts and for setting up a strong central bank, Hamilton urged Congress to make a credible commitment to make timely payment of principal and interest on the public debt. This “funded debt,” Hamilton felt, could serve as a monetary base in an economy desperately short on hard currency. The idea was that banks would hold the Government debt, issuing bank notes against them. Those bank notes would then circulate as currency. Senator Cruz surely knows that our current Federal Reserve System operates on just this principle, and for that reason a default on US Treasury debt could undermine our entire monetary and banking system.
I may not understand Senator Cruz’s positions correctly, but Hamilton’s federalism, along with his advocacy of industrial policy, strong banks, and the use of public debt as a monetary base – and the onus that places on Congress to defend the soundness of that debt – seem at odds with my impression of the Senator’s philosophy.