During the American Revolution, the Continental Congress ran up huge debts. Some of these debts were shifted over to the states, which also did not have the funds to pay them off. It gets complicated, but speculators bought up much of the I.O.U.s, considered worthless by most people. (The phrase “Not worth a Continental” stems from this period.)
In 1790 Alexander Hamilton, then head of the Treasury Department, issued his “First Report on the Public Credit.” Hamilton proposed that all the bond holders be paid off in full. Keep in mind that many of the people who held the bonds had bought them for pennies on the dollar. Jefferson and Madison both opposed full payment, arguing that many of the people who held the bonds did not deserve the reimbursement.
Hamilton argued that paying off the full amount would set a precedent. He also said that the national government should also accept state I.O.U.s, since creditors would then give their loyalty and support to the national government. Hamilton won the argument, and from that day forward, the credit of the U.S. has been rock solid.
Which brings us to Trump. He has proposed that a way to solve the national debt is to get creditors to accept less than full payment. Republicans are always talking about running government like a business, and this is how Trump, who has declared numerous bankruptcies, has run his businesses. Stiff the creditors. Screw the people to whom money is owned. Wreck the reputation the U.S. has built since the days of Alexander Hamilton.
There are times I secretly hope Trump wins. The Republican mantra has been “Run government like a business.” OK, go ahead. Make American great again. Do it.
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