Our Constitutional Commitment to Economic Progress

By Nancy Spannaus

Sept. 16—The American Constitution, which celebrates its 230th anniversary Sept. 17, is under vicious assault today, but not just for the reasons most people think. Yes, the Bill of Rights is being violated wholesale, especially by the agencies allegedly set up to protect our security. Equally shredded is the separation of powers, as shown by Congress ceding its Constitutional right and responsibility for the declaration of war to the Executive branch. But I would argue that the most critical violation is the abandonment, or virtual trashing, of our Constitutional commitment to economic progress, as expressed in the too-often-overlooked Preamble to this venerable document.

The Signing of the Constitution, an oil by Thomas Rossiter. ( Courtesy of the New York Historical Society)

“We the People of the United States, in order to form a more perfect Union, establish justice, ensure domestic tranquility, provide for the common defense, promote the general welfare, and secure the blessings of liberty for ourselves and our posterity, do ordain and establish this Constitution for the United States of America.”

That Preamble was not just a felicitious turn of phrase to those Founding Fathers who fought to bring about the establishment of our Constitutional republic. The goals which it set out for the nation defined its very purpose, and the elaboration of the powers of the various sections of our government which followed was intended to outline the means to those ends.  The Preamble called for “a more perfect union” and “domestic tranquility” because the confederation of sovereign colonies was literally disintegrating in (British-aided) internecine warfare. Unable to pay its veterans or its debt, rent by trade war among the states, and under virtual embargo by Great Britain, the victorious Confederation was on the verge of collapse.

The Constitution called for the promotion of the General Welfare not only in the Preamble, but also in Article One, section 8, as if to underline the importance of Federal government action to improve conditions of life for the people. And, uniquely among world constitutions, the Preamble called for the securing of the blessings of liberty not only for the current population of the country, but for “posterity”—thus demanding that the Federal government provide for the future in the actions it takes today.

In other words, contrary to the all-too-common view that the Constitution was meant to protect the American population from a tyrannical Federal authority, the Constitution was actually established to create a Federal authority with the power to do good for the population, for without that central authority, the nation would be destroyed.

President George Washington and Treasury Secretary Alexander Hamilton were the Founding Fathers most committed to this perspective. While the Revolutionary War was still raging, both began to concern themselves with the need to set up national institutions which could deal with the economic devastation being caused not only by the war, but by the social and sectional rivalries which often threatened to paralyze the war effort. The key, in Hamilton’s view, was to establish a National Bank, and banking system, that could provide credit for the sustenance and advancement of the nation’s people. But, to have a national bank, one first needed to have a Nation—not just a bunch of squabbling mini-states. The creation of the Constitution, which Hamilton probably did more than any other individual to bring into existence, was thus absolutely essential.

It goes without saying that not all the participants in the Constitutional Convention, or the special state conventions which voted on ratification, agreed with Hamilton’s positive perspective. But they understood that bringing together the states under this Constitution (which explicitly states in Article VI that “This Constitution, and the laws of the United States which shall be made in pursuance thereof; and all treaties made, or which shall be made, under the authority of the United States, shall be the supreme law of the land”—emphasis added) was essential to the nation’s survival. Many participants saw it as an enterprise of world-historical significance.

As Hamilton put it in the first Federalist paper: “It has been frequently remarked that it seems to have been reserved to the people of this country, by their conduct and example, to decide the important question, whether societies of men are really capable or not of establishing good government from reflection and choice, or whether they are forever destined to depend for their political constitutions on accident and force.” Gouverneur Morris, a Hamilton ally who is credited with the final drafting of the document, is reported to have commented that he came to the Constitutional Convention not as a representative of his state (he was a delegate from Pennsylvania), but as an “American,” and   “in some degree as a representative of the whole human race.”

The Constitution and the National Bank

First National Bank

The issue of whether the Constitution established the power of the Federal government to take positive action to promote the general welfare through economic measures came to a head almost immediately, with Hamilton’s proposal to establish the Bank of the United States. The primary purpose of that bank, the Treasury Secretary stressed, was to use the Federal debt as the means of establishing a financial institution that would issue credit into the economy, and thus expand industry, commerce, and agriculture—i.e. create prosperity for the nation as a whole. It would also create a national currency, facilitate the collection of taxes, and provide aid to the Federal government when necessary.

Secretary of State Thomas Jefferson and his allies (House Speaker James Madison and Attorney General Edmund Randolph) objected. They claimed that the Federal government could not establish a corporation, because the Constitution didn’t explicitly say it could, and that the government could function without it. Behind their objections, was clearly the fear that the creation of the bank would increase the power of the Federal government—and they wanted more power to remain with the state governments. Jefferson had been lukewarm, or worse, as far as supporting the Constitution to begin with. To the extent he understood Washington and Hamilton’s conception of the economic development of the country, he didn’t agree.

In order to establish the Bank, which had been approved by Congress, Hamilton was compelled to argue for its constitutionality, in order to counter Jefferson and Randolph’s efforts to convince the President to veto the bill. The Treasury Secretary summarized his argument as follows:

Now it appears to the Secretary of the Treasury, that this general principle is inherent in the very definition of Government and essential to every step of the progress to be made by that of the United States, namely–that every power vested in a Government is in its nature sovereign, and includes by force of the term, a right to employ all the means requisite, and fairly applicable to the attainment of the ends of such power; and which are not precluded by restrictions and exception specified in the constitution, or not immoral, or not contrary to the essential ends of political society. [emphasis in the original]

In elaborating his argument, Hamilton tied it specifically to the aims outlined in the Preamble. Referencing the Constitutional clause which refers to all means that are “necessary and proper” to carrying out its powers, Hamilton countered Jefferson’s assertion that necessary be defined as “absolutely essential” as follows:

This restrictive interpretation of the word necessary is also contrary to this sound maxim of construction; namely, that the powers contained in a constitution of government, especially those which concern the generation administration of the affairs of a country, its finances, trade, defence etc. ought to be construed liberally, in advancement of the public good. [emphasis in original]

A boat on the C&O Canal in the 1910 period. (National Park Service)

Later on in the document, Hamilton directly addressed the question of the general welfare, noting that

The welfare of the community is the only legitimate end for which money can be raised on the community.  Congress can be considered as under only one restriction, which does not apply to other government. They cannot rightfully apply the money they raise to any purpose merely or purely local…. The constitutional test of a right application must always be, whether it be for a purpose of general or local nature. If the former, there can be no want of constitutional power. The quality of the object, as how far it will really promote or not the welfare of the union, must be a matter of conscientious discretion. And the arguments for or against a measure in this light, must be arguments concerning expediency or inexpediency, not constitutional right. Whatever relates to the general order of finances, to the general interests of trade etc. being general objects are constitutional ones for the application of money. [emphasis in original]

President Washington agreed with Hamilton, and the Bank of the United States came into being. For 20 years it played a positive role in securing the nation (although much less so under Jefferson’s Secretary of the Treasury Albert Gallatin), and the defeat of its re-charter in 1811 had disastrous effects during the War of 1812. Follow-up institutions in its tradition—the Second Bank of the United States, President Lincoln’s greenback credit system, and FDR’s Reconstruction Finance Corporation–have provided the credit for the greatest spurts in economic growth and “general welfare” in the nation’s history.

The Constitution stands for progress

Since FDR’s death, the United States has increasingly turned its back on the requirement that the Federal government take positive action to implement the full panoply of commitments set out in Preamble of our Constitution. Hamilton’s arguments for Constitutional action on behalf of the general welfare have been all but buried in the fraudulent assertions that “the government which governs least governs best.” It was President Franklin Roosevelt who stressed that a weak government simply meant the ceding of power to “private autocratic powers.”

The construction of the Bonneville Dam during FDR’s Presidency. (courtesy of Wikipedia)

He put it this way in his acceptance speech before the 1936 Democratic Party Convention:

For too many of us the political equality we once had won was meaningless in the face of economic inequality. A small group had concentrated into their own hands an almost complete control over other people’s property, other people’s money, other people’s labor—other people’s lives. For too many of us life was no longer free; liberty no longer real; men could no longer follow the pursuit of happiness.

Against economic tyranny such as this, the American citizen could appeal only to the organized power of Government. The collapse of 1929 showed up the despotism for what it was. The election of 1932 was the people’s mandate to end it. Under that mandate it is being ended.

The royalists of the economic order have conceded that political freedom was the business of the Government, but they have maintained that economic slavery was nobody’s business. They granted that the Government could protect the citizen in his right to vote, but they denied that the Government could do anything to protect the citizen in his right to work and his right to live.

Today we stand committed to the proposition that freedom is no half-and-half affair. If the average citizen is guaranteed equal opportunity in the polling place, he must have equal opportunity in the market place.

These economic royalists complain that we seek to overthrow the institutions of America. What they really complain of is that we seek to take away their power. Our allegiance to American institutions requires the overthrow of this kind of power. In vain they seek to hide behind the Flag and the Constitution. In their blindness they forget what the Flag and the Constitution stand for. Now, as always, they stand for democracy, not tyranny; for freedom, not subjection; and against a dictatorship by mob rule and the over-privileged alike.

Perhaps it is only in times of crisis—such as the United States faced in FDR’s time, as in the period in which the Constitution was founded–that our citizenry (and Congress) will discover the positive role which our Federal government was crafted to play. One would hope that such a realization, and the consequent implementation of American System economic policies so urgently needed, would occur before the nation faces an even larger catastrophe than that we suffer today.

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