Federalist 44
Reviewing the Constitutional debates impresses one with the level of argument engaged by both sides. Members of both parties were serious students of history and political theory, demonstrating that a common education doesn’t necessarily produce agreement. What’s most striking about the arguments of that day is how comprehensive, detailed, and thorough they were.
In Federalist #44 Madison concluded his overview of the specific powers of the federal government, keeping his attention exclusively on the legislative branch as it was, to his mind, both the most representative but also the most dangerous branch of government. Because it was the most representative it was where the bulk of power had to reside, but because of that it was also the most dangerous to liberty. The powers most dangerous to liberty were also the ones requiring the most restraints. Madison suggested that different powers posed different threat levels, and so broke down Congressional powers into constituent parts and suggested that a good number of them were inconsequential, non-controversial, or absolutely essential. These he dealt with summarily throughout the papers.
Some of the powers he entertained in debate now seem to us incontrovertible. Of course, we think, the federal government should have exclusive treaty-making authority and ability to coin money. When one considers, however, that the whole European Union was predicated on the idea that political consolidation could be accomplished through the adoption of a common currency we realize that these powers might not be so benign after all, even if time and use has given them the sheen of self-evidence.
Some of the powers of the new government were also possessed by the former one. Madison saw no need to argue for them if they were already contained in The Articles of Confederation, such as treaty-making power and prohibitions against states issuing letters of marque (government authorization of war-making power to private agents — such as using the organization Blackwater to fight drug cartels or Iraqis). Prohibitions against bills of attainder (declarations of guilt without a trial) or issuing writs of habeus corpus (detaining people without cause) were simply parts of the common law and were widely accepted.
At the time most states were issuing their own currency. Madison showed off his subtlety when dealing with the idea of a common currency, including the prohibition against bills of credit. Typically money was coined and was considered as “specie”; that is, it was made out of a precious metal and the value of the coin was determined by the value of the metal. Bills of credit referred to the use of paper currency, and since paper has no inherent value the value of the currency was determined by fiat and had no fixed amount. It could be manipulated to be either more or less that its prior value, such manipulation being a problem in the state legislatures of the time. Ongoing debates over the gold standard, especially intense in the 1890s and leading to William Jennings Bryan’s “Cross of Gold” speech (and the inspiration for The Wizard of Oz) demonstrate that fiat currency allows governments to manipulate values to benefit either creditors or debtors. Current efforts to devalue the US dollar relate to trade deficits and debt held by foreign governments.
Madison made an interesting observation when considering the Constitution’s prohibition on the states issuing bills of credit: he connected it directly to the idea of justice. The connection may not be obvious until one considers how much of our lives are planned and organized around the idea of money holding its value. The three main functions of money are to operate as a medium of exchange, to be a unit of accounting, and to be a holder of value. Paper money may have been successful as regards the first two functions, but it was failing on the last one. Creditors could go bankrupt if debtors were allowed to pay back loans in devalued currency, and the uncertainty created would dry up all streams of credit and thus grind the economy to a halt. It would be unjust to pay someone back a fraction of what you actually owed them because you managed to use political power to devalue the currency.
In other words, paper currency carried with it chronic threats of inflation and deflation and would be easily subject to political manipulations that would benefit one side or the other. This is why populist revolts in America have always occurred during times of currency manipulation and/or high inflation. Remember, any time there are significant alterations in markets there will be winners and losers, and rich people may benefit from inflation while poor people are irreparably harmed. This too is a question of justice.
It goes beyond that. Madison argued that a stable currency was essential in maintaining all social relations.
“The loss which America has sustained since the peace, from the pestilent effects of paper money on the necessary confidence between man and man, on the necessary confidence in the public councils, on the industry and morals of the people, and on the character of republican government, constitutes an enormous debt against the States chargeable with this unadvised measure, which must long remain unsatisfied; or rather an accumulation of guilt, which can be expiated no otherwise than by a voluntary sacrifice on the altar of justice, of the power which has been the instrument of it. They have seen with regret and indignation that sudden changes and legislative interferences, in cases affecting personal rights, become jobs in the hands of enterprising and influential speculators, and snares to the more-industrious and less informed part of the community.”
I want to note three important parts to Madison’s argument and how money connects to “the necessary confidence between man and man” and in “the public councils.” First, it corrupts republican government because people will use the instruments of government to pursue their own economic interests. The republican virtues of liberality and honor and magnanimity, but also frugality, would give way to the vices of greed and selfishness. Secondly, monetary manipulation would corrupt “the industry and morals of the people.” Consider, for example, if you’re making $25 an hour, which means that your $200 of buying power is enough to feed your family for the week. But inflation is so rapid that by the end of the week you would need $1000 to feed your family. If this rate of inflation would continue you would conclude after awhile that there’s no point in working because your labor will be rendered as valueless as the currency you’re getting paid with. Indolence tends to bring with it other vices, such as intemperate indulging of mind-altering substances. Third, monetary instability tends to favor financial speculators and stock-jobbers who can figure out how to profit off the instability. Think, for example, of how characters such as Michael Burry and Steve Eisman and John Paulson made billions of dollars as a result of shorting the housing market during the 2008 crash. People without access to their kind of expertise and insider-knowledge will have their homes taken away while financial speculators get rich quick. This too is a matter of justice. It’s a matter of good order to determine which kinds of economic actors you give the most opportunity to: financial speculators or workers and producers.
In his last class of legislative powers, which Madison coyly treated as not terribly consequential, he placed the “necessary and proper clause.” He also finished the essay by looking at the Supremacy clause. Madison treatment of them as relatively benign was reflected in his pejorative reference to the critics of those clauses, arguing that “few parts of the Constitution have been assailed with more intemperance than this; yet on a fair investigation of it, no part can appear more completely invulnerable.” He further accused the critics of “an indiscreet zeal” for denouncing the Constitution.
I’ve already touched on these two clauses and how they fueled controversy over the Constitution. Again, in retrospect they may appear to us as self-evidently correct, which is what Madison would have us believe. Both of them, however, go to the fundamental matters of the nature of the confederation as well as the extent of government power. Since liberty was at stake, critics balked at what they perceived to be the most significant threats to it, especially if not enough guardrails were put in place.
Given the complexity of the argument over these two clauses and their subsequent history, as well as the length of today’s essay, I am going to defer discussion until next week’s essay.
Director of the Ford Leadership Forum, Gerald R. Ford Presidential Foundation
Related Essays
