Federalist 35
Further exploring the issue of the federal government’s “indefinite power of taxation,” Hamilton in Federalist 35 waded into some new waters. Hamilton demonstrated some chops in matters of political economy and a grasp of what we now understand to be basic “laws” of economics: an equilibrium between supply and demand; the effects of rates of taxation either too high or too low; the need to balance competing economic interests; and how economic interventions produce negative side-effects.
There are a couple of important things the reader needs to remember concerning Hamilton’s argument. Publius assumed that political actors would be mainly motivated by “interest,” and this was not something to be lamented. Democratic politics was to be a mechanism by which clashing interests canceled each other out, protecting liberty by weakening government. In an ideal polity all political actors might be motivated by virtue and the public weal, but such was not our lot or the lot of anyone. Virtue might be wished for, but interest could be counted on.
Nor would it be the case that “interest” was inherently suspect from a moral point of view. A woman who preferred the well-being of her own children to the well-being of other people’s children could hardly be thought a moral monster. Nor could a man who assiduously attended to his property while neglecting that of others be thought irrational. Hamilton understood that in economic life people responded to incentives that advanced their sense of their own well-being. Publius always sought to “take men as they are and not as we wish them to be.”
Interest, Publius believed, typically connected to place — both geographically and hierarchically — and also to the means by which one secured a livelihood. Federalist and Anti-federalist alike talked about how a good government would balance the interests of the different classes, by which they meant not primarily how much wealth one had but how one created it. Political creativity typically takes place in times of crisis or rapid change, and our Constitution was drafted at a time when humans were gradually moving away from an agrarian exchange economy to a trade-based cash economy, and those two modes of economic organization could co-exist only with great difficulty, if at all. In Federalist 35 Hamilton tipped his hand as to which interest he favored, just as the Anti-federalists largely favored the more traditional agrarian ones.
Hamilton identified four distinct economic interests: mechanics and manufacturers, merchants, the “learned” class,” and farmers. He assigned a central place to merchants since he regarded them as “the natural patron and friend” of all. Manufacturers and farmers might have competing interests, but both of them required merchants to get their goods to market, even if farmers were doing what was known as “subsistence plus” farming.
Of special interest is the existence of that “learned class.” Generally, this referred to those such as doctors, lawyers, scientists, ministers, teachers and so forth who did not earn their living by productive labor, typically meaning they had to receive a wage from others for their livelihood. Jefferson, in a letter written in 1814, made a further distinction: “The learned class may still be subdivided into two sections. 1. those who are destined for learned professions as a means of livelihood; and 2. the Wealthy who possessing independant fortunes may aspire to share in conducting the affairs of the nation, or to live with usefulness & respect in the private ranks of life.”
Hamilton saw a special role for this learned class in part because, not engaged in productive labor, it would “truly form no distinct interest in society,” and thus operate “disinterestedly.” This combination of disinterestedness and sufficient leisure that allowed for broad learning qualified them for governing the other classes. The other classes would rally around the learned because the learned would would “feel a neutrality to the rivalships” that otherwise marked tumultuous economic life. Able to be “an impartial arbiter,” members of the learned class alone would attend “to the general interests of society” as a whole rather than one of the parts and would thus become “indiscriminately the objects of the confidence” of all classes. Citizens would be well advised to place their confidence in “the man whose situation leads to extensive inquiry and information” rather than one whose learning “does not travel beyond the circle of his neighbors and acquaintances,” thus substituting credentials for personal knowledge. The founding generation’s near universal confidence that the “learned class” would never constitute an interest in its own right, much less rule accordingly, proved to be one of the most serious blind spots of the era, a mistake that has been driving divisions in American politics ever since.
What if the federal government could only raise revenues by imposing taxes on the importation of select objects? Who would decide which objects were to be taxed, and who would be advantaged and disadvantaged by such selection? Which states would become enriched and which impoverished as a result? Raising revenues solely by taxing specific objects would distort the markets for those objects, disrupting the supply and demand nexus and ultimately leading to the creation of a black market, thus government would not be able to derive any revenues at all.
Once the government’s “regular” revenue streams dried up it would be forced to adopt innovative schemes in a desperate effort to secure funds. As far back as Machiavelli political thinkers worried about how political necessities resulted in bad outcomes. Hamilton: “Necessity, especially in politics, often occasions false hopes, false reasonings, and a system of measures correspondingly erroneous.” He worried that without a stable revenue stream the government would resort to extreme measures.
Clashing interests trying to protect their wealth from each other and the government needed a place for resolution, and the Constitution designated the House of Representatives as that place. The Anti-federalists worried that given its size the House could never be a truly representative body. The relationship between constituent and representative would be too tenuous, too watered-down, too bereft of the personal knowing and accountability that was the central feature of republican politics. Debates over the proper size of the House and how representation worked occupied a good number of future essays, but Hamilton had to address the issue when discussing taxation for the simple reason that the House had sole authority over revenues.
Hamilton tried to resolve the issue by arguing that all farmers, regardless of the size of the farm, had the same interest in the scheme of taxation, and for that reason didn’t need that many representatives so long as those representatives stuck to their task of providing a counter-balance to the other interests in the House. Whether it’s five or five hundred, representatives advocating for the interests of their class will produce the same result.
But what if some classes are better represented, both in quantity and quality, or some not at all? (I’m setting aside the question of monied interests lobbying Congress, an eventuality to which the Anti-federalists were more keenly attuned than was Hamilton). Hamilton recognized the problem, but also believed it admitted of no solution: “It is said to be necessary, that all classes of citizens should have some of their own number in the representative body, in order that their feelings and interests may be the better understood and attended to. But we have seen that this will never happen under any arrangement that leaves the votes of the people free.”
On the one hand the House was supposed to be the arena where competing interests could hash out their differences; on the other hand, in a free society there was no way to organize the electorate to vote in such a way to insure that all interests would be equally represented. Thus Hamilton referred to two inter-related ideas: the need for a disinterested class but also the possibility of a form of rule outside the legislature.
As to the first, Hamilton repeated his conviction that a “learned class” could be counted on to rule disinterestedly. This principle of disinterest, embedded in the learned class, countered the tendency in democratic societies to be governed by “the momentary humors or dispositions which may happen to prevail in particular parts of the society.”* A “wise administration,” on the other hand, operating in a more narrow sphere, would attract those who, knowing they were dependent on the votes of their fellow citizens, would carefully study their views and allow them “the proper degree of influence upon his conduct.” There was an additional safety mechanism in that representatives and their posterity would be bound by the laws they passed and would thus tread carefully in making them.
Hamilton believed equally important would be the emergence within the system of someone who could take the bird’s-eye view of the nation as a whole, with all its variety and interests. Since Congress was in its nature a divided body with localized interests, only the executive would be see things at the proper distance. “There can be no doubt that in order to a judicious exercise of the power of taxation, it is necessary that the person in whose hands it should be acquainted with the general genius, habits, and modes of thinking of the people at large, and with the resources of the country. And this is all that can be reasonably meant by a knowledge of the interests and feelings of the people.”
Obviously the Constitution doesn’t place such authority in the hands of the President, but there can be no doubt that Hamilton’s goal was to increase executive power. Maybe not exactly Woodrow Wilson’s equal in terms of how he saw executive power, Hamilton was his forerunner. Wilson saw presidential power this way:
“A democracy, by reason of the very multitude of its voters and their infinite variety in capacity, environment, information, and circumstance, is peculiarly dependent upon its leaders. The real test of its excellence as a form of government is the training, the opportunities, the authority, the rewards which its constitutional arrangements afford those who seek to lead it faithfully and well. It does not get the full profit of its own characteristic principles and ideals unless it uses the best men in it, without regard to their blood or breeding. It cannot use them unless it calls them into service by adequate rewards of greatness and power. Its problem is to control its leaders and yet not hamper or humiliate them; to make them its servants and yet give them leave to be masters too, not in name merely but in fact, of the policy of a great nation—types of a power that comes by genius and not by favor.” [emphasis added.]That’s not too far from Hamilton.
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*Hamilton, like many thinkers, clearly borrows on the English notion of the “gentleman” and the role he plays in public affairs. By the end of the 19th century serious thinkers were exploring the question as to whether democracy could survive without the presence of “the gentleman.”
Director of the Ford Leadership Forum, Gerald R. Ford Presidential Foundation
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