Wednesday, 2 January 2013

At the brink of the Fiscal Cliff

So the US House of Representatives went to the brink of the fiscal cliff, peered over and wisely decided this was not the moment for a great step forward. 

Averting disaster by compromise only became possible because, for a brief moment at least, its opponents were able to wear down the stubborn resistance of a group viscerally opposed to any tax increase, the Tea Party. It draws its name from the insurgents who, rather than pay the tax Britain had imposed on tea, dressed as Indians and invaded three ships in Boston in 1773 to empty the chests they contained into the harbour. Their action came to be known as the Boston Tea Party.

The modern Tea Party supporters see themselves as heirs of those rebels. The claim only shows how little they understand the history to which they appeal.

The reality is that they are the heirs of the other side in that dispute. It wasn’t between tax-loving Britain and tax-hating Americans: on the contrary, the Brits hated tax at least as much as the colonists. The problem was that they had wracked up huge debts, not least in fighting successful but massively expensive imperial wars; like most people who are keen on military spending, such as the modern-day Tea Party, they wanted their cake and they wanted to eat it, to enjoy the fruits of war without paying the taxes they entailed. So they came up with this brilliant wheeze of getting the Americans to pay instead.

Backfired, of course. Within ten years Britain had been forced to recognise US independence. In trying to dodge its own fiscal responsibilities, the British government had lost a prized possession. If only the Tea Party had enough sense of history it might see that it’s running the same risk – of cutting off its own nose, and that of most of its compatriots at the same time – if it doesn’t learn that sometimes you need to be ready to pay for things.

It’s not as though no-one can see that. Even within the Republican Party, people are beginning to speak out. I’m indebted to a Facebook friend who shared this comment of Jon Huntsman, briefly a candidate for the Republican nomination for president at the last election: ‘In my party, compromise cannot be seen as analogous to treason, which it has been recently.’

Jon Huntsman: closer to the spirit of the founding fathers...

Absolutely right. Again, if the Tea Party knew anything about its own country’s history, it would appreciate its tradition of seeking compromise. As early as in 1790, within a year of the formation of first George Washington administration, there was a dispute over the public finances and taxation.

At stake was whether the Federal government should take over – ‘assume’ – the debts of the states, as promoted by the Secretary of the Treasury, Alexander Hamilton, to establish the credit of the new nation on a more stable footing. A number of States had cleared much of their debt, notably Virginia and all the other Southern States apart from South Carolina. Why, they argued, should they be funding the debts of the feckless North East?

Leading the counter-attack against Hamilton was James Madison, a Virginian and leading ally of Thomas Jefferson, then Secretary of State, also from Virginia. As a result of Madison’s tireless campaigning, the Hamilton plan was stalled twice in Congress.

Shades of today? You bet. The parallels are extraordinary.

But here’s where the two stories diverge. Appealed to by Hamilton, Jefferson didn’t simply indulge the knee-jerk instinct to side with his ally Madison. Instead he hosted a dinner for the two men. Over that table, Hamilton and Madison worked out the details of one of the first great compromises of US history: Madison would not support the Hamilton bill in Congress, but he would stop organising against assumption of debt; in return, Hamilton would agree to shifting the national capital from its temporary home in New York, not to one of the great commercial centres of the North East, but to a patch of land on the Maryland-Virginia border, where it stands today; in addition, Virginia would be offered a deal on its remaining debts to sweeten the pill.

Jefferson, and then Madison, had subordinated their narrow sectional interests to the needs of society as a whole.

Compromises by their nature satisfy no-one. They’re messy and unappealing. But, wow, they’re preferable to national bankruptcy. Jefferson, Madison and Hamilton understood that.

Jon Huntsman understands that.

What’s with the Tea Party that stops them understanding it? Do they really think that politics is all about dressing up as Indian warriors, breaking into ships and throwing tea into a harbour? Will they learn that it sometimes requires statesmanship too?

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