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White House Burning

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White House Burning

The Founding Fathers, Our National Debt, and Why It Matters to You

Knopf,

15 min read
10 take-aways
Text available

What's inside?

Venture inside the White House for historical perspectives and present-day prescriptions on debt and deficits.

Editorial Rating

8

Qualities

  • Innovative

Recommendation

The Founding Fathers might listen to today’s political harangues about the United States’ debt and deficits with bemusement. Not much has changed in the more than 200 years of America’s existence, except that the absolute numbers are a lot bigger than they were in 1776. Throughout US history, prudent and productive borrowing has advanced the nation’s economic progress. Today’s challenge – a growing number of retirees supported by fewer workers – offers a new twist to an old problem. Yet good remedies (a couple of which, like Congressional trims to George W. Bush’s tax cuts, have taken place since the book came out) exist to keep the US out of the financial abyss, say professors Simon Johnson and James Kwak, the co-authors of 13 Bankers. While always politically neutral, getAbstract recommends their levelheaded, rigorous explanation of what the US’s debt and deficits really mean.

Summary

A History of Debt and Deficits

The US was born “a fiscal basket case.” Burdened with debt, the new nation defaulted on its principal and interest payments during its first years as a state. It could barely provide for its troops, who prevailed over the British during the Revolutionary War only thanks to loans from France. The US couldn’t persuade other nations to lend it money, and internal squabbles between domestic political groups hamstrung its capacity to impose taxes.

Espousing themes that echo today, the Federalists and the Democratic-Republicans disagreed over the size, authority and taxing power of the federal government. Alexander Hamilton – a Federalist and the US’s first Treasury secretary – believed that a nation’s good credit standing was a lever for expansion, and that borrowing in times of need was appropriate and smart. Hamilton learned the lessons of Britain’s rise to power: England’s fiscal sophistication gave it the muscle to raise taxes when needed. Because it always repaid its loans, other countries regarded England as a good credit risk.

The new United States resembled France economically. With its slipshod system of tax imposition and collection...

About the Authors

MIT professor Simon Johnson, a former chief economist of the International Monetary Fund, and University of Connecticut Law School Professor James Kwak previously wrote 13 Bankers.

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