How The Founding Fathers Taxed The Country (and/or I Would Seriously Have Ben Franklin’s Baby)

I’ve been too slow to post these last couple of days.  The Olberman fiasco is getting its dues, and I’ve nothing to add there.  DougJ and ABL have masterly handled the white bigot/self delusion-defeat theme, and so on.  Gotta be quick in this game.

So as we gird for the coming Wolverine v. Magneto duel with our putative tea swilling overlords, let me see if I can add something to the pot.  Nothing new, mind you, as my mind doesn’t always run that way, but something usefully old.

By way of back story (or throat-clearing) I’ve spent a lot of time over the last few years digging into odd doings in the seventeenth and eighteenth century. Mostly I’ve been concerned with Isaac Newton, and what you can learn about the scientific revolution as lived on the streets in the strange story of his life as a cop, in pursuit of a marvelously nasty scoundrel, a coiner named William Chaloner, who faked a fortune – roughly five million pounds in 21st century currency.

The Newton-Chaloner duel took place against the background of at the crucial moment when paper money appears as a real alternative to chunks of metal — and at which modern ideas about credit and finance first begin to take form.

Tracking that part of the story down, I kept tripping over Benjamin Franklin, well known as colonial America’s greatest scientist, of course — but who, it turns out, was also the most significant financial thinker of his place and time.

Franklin really got the concept of money.  He could write theory (or theoretical polemics);* he could make money – literally, as a hugely prolific printer of colonial paper he produced 2.5 million banknotes over thirty years of work; he invented some of the key anti-counterfeiting tools whose descendents are still in use today; and when the time came for revolution he, almost alone among the leaders of the insurrection,understood how they accomplished the seemingly impossible task of keeping an army in the field against a vastly richer and more powerful opponent.

Here’s the shorter:  in 1775, the Continental Congress authorized the first issue of Continental dollars. This was to be a true fiat currency, backed only by the faith and credit of the embryonic state.

Franklin actually opposed this – arguing instead that the notes should either pay interest or be borrowed back in loans that promised some return. But he was overruled, and then, as he predicted, each run of the printing presses pushed the currency lower – down to one fifth of its value in just three years, and effectively to nothing by 1780.**

By then, he’d noticed something.  In a letter in the spring of 1799 1779, Franklin wrote:

And indeed the whole is a Mistery even to the Politicians; how we have been able to continue a War four years without Money; & how we could pay with Paper that had no previously fix’d fund appropriated specifically to redeem it.

This great feat was done, Franklin explained, by masteful (if perhaps unconscious) manipulation of monetary policy:

This Currency as we manage it is a wonderful Machine. It performs its Office when we issue it; it pays & clothes Troops, & provides Victuals & Ammunition; and when we are oblig’d to issue a Quantity excessive, it pays itself off by depreciation. (Franklin to Samuel Cooper, April 22, 1779)

Franklin acknowledged the real cost to real people of what was, by the end, a true hyperinflation.  But, he said, in another letter, consider the results:

Wih this Paper, without Taxes for the first three Years, they fought & baffled one of the most powerful Nations of Europe. …

And yes,  people lost by it—or rather  people had to pay, one way or another, for what they collectively deemed important, securing their indepenence from Britain.  And, thus, Franklin argued, that “without taxes” line had to be rethought.  In fact, the Continental dollar’s fall should be understood…

…as a Tax, and perhaps the most equal of all Taxes, since it depreciated in the Hands of the Holders of the Money, and thereby taxed them in proportion to the Sums they hold and the Time they held it, which is generally in proportion to Mens Wealth. (Franklin to Thomas Ruston, October 9, 1780)

Which is to say that Benjamin Franklin, the greatest mind of the founding generation of the American experiment (yes, I rank him ahead of Jefferson), approved of sharply progressive taxation to pay for crucial functions of government. 

More particularly:  Franklin understood and approved of the idea that the inflationary tax created by the collapse of the infant American dollar not just did but should hit the rich harder than the poor.

It made sense, he argued that these wealthy men should bear a proportionately greater share of the cost of the war, not just or even primarily because they had more scratch to spare, but because they had the most to gain from independence.

The connection from revolutionary times to ours is obvious, right?

If not: over the last decade we’ve fought two wars and transferred an enormous amount of capital from the middle class to the rich – and the wealthiest among us, have not been asked (or rather, have refused) to make any even remotely proportional contribution to the nation’s security and long term fiscal health.

Franklin would have been appalled.  He knew, as plenty do still, that achieving great common purpose takes cash and commitment from the whole damn society.  When the wealthiest opt out, take their stacks of coins and go home, they may protect their short-term interests – but they kill, however fast or slow, whatever hopes we may have of advancing to that “more perfect union” he and his first imagined.

Let me give the last word to old Ben himself, or rather to young Ben, just twenty-three, dealing some snark to the Koch bro. teabaggers of his day all the way back in 1729:

… as we all know there are among us several Gentlemen of acute Parts and profound Learning, who are very much against any Addition to our Money, it were to be wished that they would favour the Country with their Sentiments on this Head in Print; which, supported with Truth and good Reasoning, may probably be very convincing. And this is to be desired the rather, because many People knowing the Abilities of those Gentlemen to manage a good Cause, are apt to construe their Silence in This, as an Argument of a bad One. Had any Thing of that Kind ever yet appeared, perhaps I should not have given the Publick this Trouble: But as those ingenious Gentlemen have not yet (and I doubt never will) think it worth their Concern to enlighten the Minds of their erring Countrymen in this Particular, I think it would be highly commendable in very one of us, more fully to bend our Minds to the Study of What is the true Interest of PENNSYLVANIA; whereby we may be enabled, not only to reason pertinently with one another; but, if Occasion requires, to transmit Home such clear Representations, as must inevitably convince our Superiors of the Reasonableness and Integrity of our Designs.

Preach it Ben!

[footnotes below the jump]

Images:  Continental 1/3 dollar note, 1776

Marinus Claesz van Reymerswaele, “Two tax collectors” 1540.

*If you’re interested, check out the least known of the American republic’s important founding documents, a pamphlet titled A Modest Enquiry into the Nature and Necessity of a Paper Currency. It was written in response to an economic crisis that threatened to take the Commonwealth of Pennsylvania down with it, and it is a masterly defense of paper money, of the role of the money supply in economic vitality or its lack, of the idea of financial policy at all.  Above all, it is a brutal, vicious, and delightful destruction of the venality, self-interest, and short-sighted greed of the richt:

The foregoing Paragraphs being well considered, we shall naturally be led to draw the following Conclusions with Regard to what Persons will probably be for or against Emitting a large Additional Sum of Paper Bills in this Province.…

… All those who are Possessors of large Sums of Money, and are disposed to purchase Land, which is attended with a great and sure Advantage in a growing Country as this is; I say, the Interest of all such Men will encline them to oppose a large Addition to our Money. Because their Wealth is now continually increasing by the large Interest they receive, which will enable them (if they can keep Land from rising) to purchase More some time hence than they can at present; and in the mean time all Trade being discouraged, not only those who borrow of them, but the Common People in general will be impoverished, and consequently obliged to sell More Land for less Money than they will do at present. And yet, after such Men are possessed of as much Land as they can purchase, it will then be their Interest to have Money made Plentiful, because that will immediately make Land rise in Value in their Hands. Now it ought not to be wondered at, if People from the Knowledge of a Man’s Interest do sometimes make a true Guess at his Designs; for, Interest, they say, will not Lie…..[and]

…All those who are any way Dependants on such Persons as are above mentioned, whether as holding Offices, as Tenants, or as Debtors, must at least appear to be against a large Addition; because if they do not, they must sensibly feel their present Interest hurt. And besides these, there are, doubtless, many well-meaning Gentlemen and Others, who, without any immediate private Interest of their own in View, are against making such an Addition, thro’ an Opinion they may have of the Honesty and sound Judgment of some of their Friends that oppose it (perhaps for the Ends aforesaid), without having given it any thorough Consideration themselves. And thus it is no Wonder if there is a powerful Party on that Side.

**The Continental (as the currency was known) had help on the way down.  In what’s probably the first instance of state-level financial warfare, Britain counterfeited Continentals in bulk – installing printing presses on warships in New York harbor, and producing dud notes in the home country and shipping them across the Atlantic.  The effort was successful enough to force Congress to withdraw a couple of issues from circulation, but even so, the primary driver of the hyperinflation was the relentless flow of the real articles.

74 replies
  1. 1
    licensed to kill time says:

    Obviously I haven’t had time to read your post yet but just wanted to say how very much I enjoy the illustrations and artwork you put in them :)

    Now, back to reading!

  2. 2
    joe from Lowell says:

    I know I should really read the whole thing before commenting, but the observation that the Founding Fathers paid for the American Revolution with fiat money is sending me into overwhelming spasms of joy.

  3. 3
    sven says:

    How dare these people betray the principles this great nation was founded on!

  4. 4
    Rincewind says:

    So, Neal Stephenson’s Jack “The Coiner” Shaftoe from The Baroque Cycle was actually modeled after a real person. I always wondered how much he was borrowing from actual history.

  5. 5
    Omnes Omnibus says:

    Tom, do you think that the teabaggers care about what Franklin actually said or what the Founders actually did? Come on, they are following the little morality play they wrote and staged in their heads. Franklin, Washington, Adams, Jefferson, and the rest are one dimensional figures in that play and historical accuracy, or even a nod to it, is simply not on the cards.

  6. 6
    Martin says:

    Don’t forget that Jefferson was a Marxist fuck. Writing to Madison:

    Legislators cannot invent too many devices for subdividing property, only taking care to let their subdivisions go hand in hand with the natural affections of the human mind. The descent of property of every kind therefore to all the children, or to all the brothers and sisters, or other relations in equal degree, is a politic measure, and a practicable one. Another means of silently lessening the inequality of property is to exempt all from taxation below a certain point, and to tax the higher portions of property in geometrical progression as they rise.
    Whenever there is in any country, uncultivated lands and unemployed poor, it is clear that the laws of property have been so far extended as to violate natural right. The earth is given as a commonstock for man to labour and live on. If for the encouragement of industry we allow it to be appropriated, we must take care that other employment be provided to those excluded from the appropriation. If we do not the fundamental right to labour the earth returns to the unemployed.

    Worked natural law in agreement with a geometric income tax structure. Take that teatards.

  7. 7
    Davis X. Machina says:

    Heh. Tom got bigfooted by the Landlord.

    Life, like comedy, is mostly timing….

  8. 8

    Interesting, but wouldn’t an “inflationary tax” be, by definition, a flat tax? A flat tax would, after all, still hit the rich more than the poor in terms of the total amount of the tax. But I don’t see how this is necessarily progressive.

  9. 9
    hankstone says:

    I believe that depreciation of currency results in proportional taxation, as Franklin notes, rather than “sharply progressive taxation” as stated by TL. Still, a very good idea. I would support proportional taxation provided ALL income/wealth were included.

  10. 10
    Jewish Steel says:

    Can we return to capitalizing certain Nouns?

    I think the Germans still do it.

  11. 11
    aimai says:

    Great Post, Tom. Can I say that I hope you will follow up your book on Newton–which I highly recommend to everyone here as one of the great pieces of science/money/detective writing of all time–with one on Franklin? I think he’d make a wonderful companion to your work on Newton.

    I’m reading some damned book on the various paper money scares of the early period in the US (can’t find it right now to give you the name but it focuses on a huge early “bank” here in Boston that printed its own money and laundered notes from other banks around the country) and its absolutely fascinating to realize (as you realize when reading about Newton’s work at the Mint) how little the idea of “money” was understood even as people were churning out various forms of it and using it every day. It was then, and clearly is now, a very mysterious, magical, substance.

    Something else that became clear as I read this book (sorry I can’t find it even by googling) is that early bank notes were often backed by illusory promisory notes to land in yet to be settled areas. Boom and bust cycles arose repeatedly as notes would be issued on the basis of these “holdings” in unsettled but marked land. When the government failed to actually secure the area and settlement didn’t occur the banks would go bust as there would be a run on their assets and the assets would prove to be non existent. Knowing when and whether the government would reneg on promises to open up an area to settlement, or to guarantee the surveyed land, would be the difference between getting out whole and losing your shirt. Same as it ever was.


  12. 12
    aimai says:

    Also, for the sci fi fans out there: anyone remember a story about the takeover of a helpless, pre-industrial planet by evil corporations that is brought to a swift end when the locals manage to form a government and create a “flat tax” of 100 percent on all real property–something that doesn’t effect them because the “value” of what they own is 0 and 100 times 0 is still 0 but the value of what the corporations own is huge?


  13. 13
    Brachiator says:

    Franklin really got the concept of money.

    Very interesting stuff. Before reading your post, I would have said that Alexander Hamilton was the founder who most understood the concept of money, but Franklin clearly has an excellent grasp of financial policy.

    By contrast, Jefferson and Madison were excellent political theorists and statesmen, but terrible economists when compared to either Hamilton or Franklin.

  14. 14
    robertdsc-PowerBook & 27 titles says:

    But what would McMegan say?!?

  15. 15
    Martin says:


    By contrast, Jefferson and Madison were excellent political theorists and statesmen, but terrible economists when compared to either Hamilton or Franklin.

    But they were Founders! They were without flaw, like Jesus.

  16. 16
    Anne Laurie says:


    “Whenever there is in any country, uncultivated lands and unemployed poor, it is clear that the laws of property have been so far extended as to violate natural right. The earth is given as a commonstock for man to labour and live on. If for the encouragement of industry we allow it to be appropriated, we must take care that other employment be provided to those excluded from the appropriation. If we do not the fundamental right to labour the earth returns to the unemployed… “

    … says the guy who kept slaves (including his own offspring whom he had explicitly promised manumission) because he couldn’t afford the lifestyle of a Virginian gentleman without turning his countrymen into beasts of burden on his not-so-commonstock property.

    Tangential to your post, Mr. Levenson, but Team Hamilton would cut you seriously dispute your awarding Franklin the “most significant financial thinker of his place and time” title. When I studied American history for the high school Regents Exam in New York City (1969/72), Hamilton and the mercantile class got a lot of attention. It rather surprised me, in my first freshman history class at a Midwestern university, how much more significantly Washington’s military career prior to the Revolution was treated. Of course, here in Massachusetts there’s a very Boston-centric view of How America Began. But the Great Romance of Thomas Jefferson, it seems to me, was part of the deliberate “Camelot” mythmaking around JFK’s administration — the solitary hero of noble background and unlimited talents from whom all good progressive ideas sprung. That’s why Beck’s cultists and the Texas conservaturnipheads are so virulently anti-Jefferson… it’s not the deism and the support of the French Revolution or even Tom’s screwing his Black servant (they didn’t mind Strom Thurmond), it’s just that Them Libruls Who Stiffed Poor RMN were big “Jeffersonians”, ergo, all true Talibangelicals and fReichtards must be anti-Jeffersonians.

  17. 17
    KG says:

    @Brachiator: Hamilton and Franklin are the two Founders that always stand out to me. I seriously doubt that they knew what the world would be, but they seem the two that would be most comfortable in the 21st century. Both abolitionists, both recognizing that we would never be a nation of yeomen farmers, that cities and trade were are future.

  18. 18
    Brachiator says:

    @Anne Laurie:

    Tangential to your post, Mr. Levenson, but Team Hamilton would cut you seriously dispute your awarding Franklin the “most significant financial thinker of his place and time” title. When I studied American history for the high school Regents Exam in New York City (1969/72), Hamilton and the mercantile class got a lot of attention.

    Hamilton rightly gets a lot of attention because he was responsible for setting the federal economic policy of the newly formed United States of America as its first Secretary of the Treasury. Here, he had to fought off the active interference of economically backwards thinkers like Jefferson and Madison. One of the best treatments of this dispute can be found in the wonderful work on American history, The Age of Federalism. I would be curious to learn of any influence that Franklin had on Hamilton’s thinking.

  19. 19
    Napoleon says:

    It wouldn’t be fair to call any of the American Revolutionaries indispensable since there was likely 10 -15 that were very important to the cause, but if there was it was Franklin.

    Good post.

  20. 20
    Brachiator says:


    But they were Founders! They were without flaw, like Jesus.

    It’s funny how a common theme of the history of the period is how Washington had to channel an administration and cabinet of geniuses (including Adams, Hamilton and Jefferson) who all held very divergent views of how the country should be run. But somehow, people like the Tea Party People or Antonin Mad Dog Scalia all like to push some phoney idea of near universal Original Intent held by the Perfect Founders.

  21. 21
    Napoleon says:


    I swear I read somewhere that Franklin had worked out future population numbers for the US that were very close to dead on.

  22. 22
    matoko_chan says:

    The problem is…….because of Salam-Douthat Stratification…neither the soi-disant ‘conservative’ leadership or the low-information ‘conservative’ base has the cognitive ability to grasp anything other than jesus-democracy sermonizing and sloganeering and identity politics.
    Conservatism has become selection for stupid.
    They actually believe bullshytt like this:

    Dr. Jim Manzi: “common sense and practical experience concerning the organization of human society.”

    Which are the exact ‘conservative’ failmemes that brought us the Econopalypse that Ate Americas Jobs and the ten years of meaningless,expensive, bloody failsauce that is the Epic Fail of the Manifest Destiny of JesusDemocracy in Iraq and A-stan.
    The only way these retards are getting another chance is the old white christian rubes are memetically engineered to be too stupid to get the scam. That is why they can believe cutting taxes for the rich solves America’s economic problems.
    We are all supply-siders now.

    Alsotoo, Science Guy, have you read Stephenson’s Baroque Cycle?

  23. 23
    R-Jud says:

    I don’t have the reference to hand– and I am also rather drunk– but didn’t Adam Bleeding Smith suggest that a progressive tax was the best thing for society, too?

    If so, how dare he betray capitalism! Commie!

    PS: Tom, I am in the middle of your book now and loving it.

  24. 24
    Napoleon says:


    Alexander Hamilton was the founder

    I don’t know what counts as a founder to you all but Hamilton was a 21 year old aid to Washington when the revolutionary war broke out.

  25. 25
    SRW1 says:

    @Jewish Steel:

    Can we return to capitalizing certain Nouns?

    I think the Germans still do it.

    No, the Germans capitalize ALL nouns.
    Deutsche Gründlichkeit!

  26. 26
    Delia says:


    This sounds like Rousseau to me. Who was the first to proclaim that property is theft. And comes with his own raft of hypocrisies. But is still lots of fun when it comes to fantasizing revolutions.

  27. 27
    Brachiator says:

    RE: Alexander Hamilton was the founder

    I don’t know what counts as a founder to you all but Hamilton was a 21 year old aid to Washington when the revolutionary war broke out.

    Hmm. How about this:

    Alexander Hamilton was the first United States Secretary of the Treasury, a Founding Father, economist, and political philosopher. Aide-de-camp to General George Washington during the American Revolutionary War, he was a leader of nationalist forces calling for a new Constitution; he was one of America’s first Constitutional lawyers, and wrote most of the Federalist Papers, a primary source for Constitutional interpretation. Hamilton was the primary author of the economic policies of the George Washington Administration, especially the funding of the state debts by the Federal government, the establishment of a national bank, a system of tariffs, and friendly trade relations with Britain. He created and dominated the Federalist Party, and was opposed by Thomas Jefferson and his Democratic-Republican Party. Jefferson denounced Hamilton as too loose with the Constitution, too favorable to monarchy and particularly to Britain, and too partial to the moneyed interests of the cities at home, but Hamilton’s policies were generally enacted.

    Of course, Franklin is no slouch either, seemingly having a hand in almost every significant event related to the origin of the United States:

    “In 1787, Franklin served as a delegate to the Philadelphia Convention. He held an honorary position and seldom engaged in debate. He is the only Founding Father who is a signatory of all four of the major documents of the founding of the United States: the Declaration of Independence, the Treaty of Paris, the Treaty of Alliance with France, and the United States Constitution.”

  28. 28
    jl says:

    Not sure whether Hamilton is officially considered a founder. He was young at the beginning of the Revolution but was already an active leader of the rebellion. He authored two famous pamphlet, A Full Vindication of the Measures of Congress and The Farmer Refuted, and a dozen or so other pamphlets, and managed to be in the middle of several riots at his college.

    Being Washington’s aide did not mean he washed his clothes and powdered his hair. I hope we are aware of that. The position was more like being a member of the general staff of a high ranking officer today.

    Before Hamilton was an aide, he was an officer who lead troops in several dangerous and chancey, but successful, actions in battle.

    So, I think Hamilton counts as a founder. And of course, he is a framer, which sometimes is lumped in with the founders.

  29. 29
    TCG says:

    Here is a Great Franklin Quote on taxes:

    The Remissness of our People in Paying Taxes is highly blameable; the Unwillingness to pay them is still more so. I see, in some Resolutions of Town Meetings, a Remonstrance against giving Congress a Power to take, as they call it, the People’s Money out of their Pockets, tho’ only to pay the Interest and Principal of Debts duly contracted. They seem to mistake the Point. Money, justly due from the People, is their Creditors’ Money, and no longer the Money of the People, who, if they withold it, should be compell’d to pay by some Law.
    All Property, indeed, except the Savage’s temporary Cabin, his Bow, his Matchcoat, and other little Acquisitions, absolutely necessary for his Subsistence, seems to me to be the Creature of public Convention. Hence the Public has the Right of Regulating Descents, and all other Conveyances of Property, and even of limiting the Quantity and the Uses of it. All the Property that is necessary to a Man, for the Conservation of the Individual and the Propagation of the Species, is his natural Right, which none can justly deprive him of: But all Property superfluous to such purposes is the Property of the Publick, who, by their Laws, have created it, and who may therefore by other Laws dispose of it, whenever the Welfare of the Publick shall demand such Disposition. He that does not like civil Society on these Terms, let him retire and live among Savages. He can have no right to the benefits of Society, who will not pay his Club towards the Support of it.

    In other words – Shut Up and Pay your Taxes or Move to France, Teabagger.

  30. 30
    morzer says:


    “Vorsprung durch Technik, as we say in Germany”.

    (Sorry, had to reference one of the best ads of the last 30 years).

  31. 31
    morzer says:


    What have the Romans ever done for us – Alexander Hamilton edition!

  32. 32
    Napoleon says:


    I think the outtake you quote proves my point. They lead with him being the first Secretary of the Treasury, but the US Treasury was founded 13 years after the Declaration of Independence was signed and 14 years after the Revolutionary War broke out. By the time the whole debate about the Constitution rolled around he was an important figure in the nation, but by that time the nation had already been founded. Somehow to me he has always been part of the next generation that followed the founders.

  33. 33
    jl says:

    I do not know how well Hamilton and Franklin’s monetary beliefs lined up in detail. But they both had an empirical approach to monetary economics, and felt theory should follow careful study of history and case studies of recent episodes.

    People may dismiss Franklin as an economist today because for much of his life he was heavily influenced by the physiocrats, and therefor had some odd notions, such as agriculture being the only source of value, and maybe some manufacturing, but trade and commerce and high finance were completely unproductive. He once wrote something to the effect that most of what we call business was a polite way of stealing. But Franklin’s ideas on money were very insightful.

    In some ways I think Jefferson was a better economist that Franklin in that he embraced Adam Smith’s work and was not a physiocrat.

    Jefferson’s ‘kink’ (as Jefferson himself might put it) was that in some ways he was unity of science crank who would, by analogy, translate some bit of Newtonian mechanics or the current theory of light into economic terms and say, well hey, that must be the way it works.

    IIRC, Washington tasked Hamilton and Jefferson with coming up with a plan for the first US currency. Jefferson’s one right idea was that it should be decimal, but beyond that he went off the rails. He figured money should have some objective value and then did what amounted to a crank study of the ‘objective value’ of different metals, and such and so forth. And proposed basing currency on that on analogy with current physics and chemistry of metals, using reasoning that I think charitably could be described as ‘odd and irrelevant’.

    Hamilton on the other hand, did a historical survey of currency systems, as I remember, from ancient China on up to the late eighteenth century.

    Fortunately for stable currency that would work, Washington preferred Hamilton’s approach.

  34. 34
    morzer says:


    The Founding Fathers of the United States were the political leaders who signed the Declaration of Independence in 1776 or otherwise took part in the American Revolution in winning American independence from Great Britain, or who participated in framing and adopting the United States Constitution in 1787-1788, or in putting the new government under the Constitution into effect. Within the large group known as “the founding fathers,” there are two key subsets, the Signers (who signed the Declaration of Independence in 1776) and the Framers (who were delegates to the Federal Convention and took part in framing or drafting the proposed Constitution of the United States). Most historians define the “founding fathers” to mean a larger group, including not only the Signers and the Framers but also all those who, whether as politicians or jurists or statesmen or soldiers or diplomats or ordinary citizens, took part in winning American independence and creating the United States of America.

    So sayeth Wikipedia:

  35. 35
    chrismealy says:

    I’m finishing up Galbraith’s “Money: Whence It Came, Where It Went” right now. It’s true, the revolution would have been impossible without fiat currency. Same for the French and Russian revolutions.

    Galbraith’s book is a hoot and full of surprises. You can get it used for $0.01 + shipping on Amazon. The only disappointment is that it was written in 1975.

  36. 36
    MikeBoyScout says:

    generally brilliant find Tom.

  37. 37
    Napoleon says:


    If a generally accepted definition includes the Framers, so be it. I personally would say it were the leaders of the revolution, or the last broad definition you give.

  38. 38
    jl says:

    My probably unrealistic opinion is that if we could reanimate Franklin and Hamilton, they could walk into a debate today, and after some needed woodshedding to catch up on the news, would feel mostly at home. I don’t think you could say that about any other of the founders.

    Main problem we libs would have to today with Franklin was that he did not believe in welfare of any kind. He wrote that the best way to cure poverty was to drive the poor out of it rather than make them comfortable living in it. He did approve of public works projects, and even things that the GOP would call useless make work projects, like cleaning the streets and repairing public property, if the work could be justified on its own merits. I don’t think he would take a Keynesian attitude towards it as a good idea for stimulating demand.

    Hamilton was a bit more modern and in his discussion of the English poor laws, he pointed out that social insurance for unemployed was a good idea. It made for a more mobile and resourceful pool of labor that would have an incentive to migrate to find useful employment, invest in training and education, and be willing to take other risks and chances to improve their situation. Hamilton, like Adam Smith, did not have a purely utilitarian and sour view of labor as merely a factor of production, and mindless and selfish consumption and leisure maximizing machine. Hamilton thought that laborers found happiness in exercising their energy and independence and accomplishment, and welfare benefits were not overly generous would produce social value.

  39. 39
    Mnemosyne says:


    I think it would have to include the Framers, because they’re really the ones who laid the groundwork for what the country is today. Almost nobody remembers the Articles of Confederation, but they were in force for 8 years between the end of the war and when the Constitution was ratified.

  40. 40
    jl says:

    And since this seems related to taxation, I will sign out with note that I have read economic histories of the US that claim that both Hamilton and Washington believed that taxation should be used for social engineering.

    Hamilton wanted integrate the regional economies of the early US, and thought that could be best be done by forcing monetization on local economies. If you had to pay money taxes, then you had to do something to make some money. And that would promote more integrated inter regional economies.

    That did not go down well with what Washington thought of as shiftless lazy potentially dangerous poor white trash out west (oops I meant stalwart pioneers) who liked to squat on land and violated property rights.

    They could not be left to barter livestock and whiskey among themselves, and live in a less civilized state than the Five Civilized Tribes.

    So, tax them shiftless small timers. That would get them off their inefficient asses, and make them productive citizens.

    Whiskey Rebellion ensued.

  41. 41
    Ken Lovell says:

    I agree with @7 – the effect of inflation is not progressive at all but proportional. Conservatives would howl with delight at a proposal to substitute proportional taxation for the current progressive arrangements.

    It’s muddled thinking like this about fundamental economic and financial concepts that makes the left hard to take seriously on economic matters.

  42. 42
    Jo says:

    Great article, thought about recommending to Beck but afraid blood would shoot out of his eyes.

  43. 43
    Jo says:

    Great article, thought about recommending to Beck but afraid blood would shoot out of his eyes.

  44. 44
    Brachiator says:


    My probably unrealistic opinion is that if we could reanimate Franklin and Hamilton, they could walk into a debate today, and after some needed woodshedding to catch up on the news, would feel mostly at home. I don’t think you could say that about any other of the founders.
    Main problem we libs would have to today with Franklin was that he did not believe in welfare of any kind.

    I think you make a fair point about Franklin and Hamilton being comfortable walking around today. However, this may also be true of any number of the other founders, who made that amazing mental jump from seeing themselves as subjects of the British crown to citizens of an independent nation without a king or formal aristocracy.

    Although Franklin did not believe in welfare, he left a number of his inventions to the commons, refusing to benefit directly from them. And his thinking about welfare obviously pre-dated the Industrial Revolution and the tremendous economic changes in society, as well as the slums that were an indirect result.

    And Franklin was far-seeing enough to do this, for the benefit of future generations:

    Franklin bequeathed £1,000 (about $4,400 at the time, or about $55,000 in 2010 dollars[citation needed]) each to the cities of Boston and Philadelphia, in trust to gather interest for 200 years. The trust began in 1785 when the French mathematician Charles-Joseph Mathon de la Cour, who admired Franklin greatly, wrote a friendly parody of Franklin’s “Poor Richard’s Almanack” called “Fortunate Richard.” The main character leaves a smallish amount of money in his will, five lots of 100 livres, to collect interest over one, two, three, four or five full centuries, with the resulting astronomical sums to be spent on impossibly elaborate utopian projects.
    Franklin, who was 79 years old at the time, wrote thanking him for a great idea and telling him that he had decided to leave a bequest of 1,000 pounds each to his native Boston and his adopted Philadelphia. As of 1990, more than $2,000,000 had accumulated in Franklin’s Philadelphia trust, which had loaned the money to local residents. From 1940 to 1990, the money was used mostly for mortgage loans. When the trust came due, Philadelphia decided to spend it on scholarships for local high school students. Franklin’s Boston trust fund accumulated almost $5,000,000 during that same time; at the end of its first 100 years a portion was allocated to help establish a trade school that became the Franklin Institute of Boston and the whole fund was later dedicated to supporting this institute.

    Not too shabby a return on his investment, or in his faith that the country would endure and prosper.

  45. 45
    Steeplejack says:


    Hey, find that book stat, because we may be needing that plan in real life soon.

  46. 46
    Steeplejack says:

    @robertdsc-PowerBook & 27 titles:

    LOL, because this got me thinking about who was the McMegan of the Founding Fathers. John Hancock? “I do write a damned fine hand, sir, if I say so myself, and I say the Declaration of Independence is the better for my signature. I pray thee, please pass the pink Himalayan salt snuff.”

  47. 47
    b-psycho says:

    Um…that’s nice, but doesn’t the existence of bank accounts that pay interest based on how much you have in them, not to mention the MASSIVE (and, I would argue, inherent) collusion between the largest financial players and the central bank kinda kill the whole inflation-as-roundabout-progressive-tax thing these days?

  48. 48
    Jewish Steel says:


    German Thoroughness?

    I’m a fan…mostly.

  49. 49
    MTiffany says:

    This was to be a true fiat currency, backed only by the faith and credit of the embryonic state.

    Wait a minute… Isn’t all currency ‘fiat’ currency, even the gold and silver kind?

  50. 50
    cleek says:


    and thereby taxed them in proportion to the Sums they hold and the Time they held it, which is generally in proportion to Mens Wealth. (Franklin to Thomas Ruston, October 9, 1780)


    Which is to say that Benjamin Franklin, the greatest mind of the founding generation of the American experiment (yes, I rank him ahead of Jefferson), approved of sharply progressive taxation to pay for crucial functions of government.

    explaineth, thee, how “in proportion” means “sharply progressive taxation” ?

    doesn’t “proportion” imply a fixed ratio, while “progressive” suggests a ratio that increases as a dependent value increases ?


  51. 51
    Tom Levenson says:

    Apologies to all for being absent from the thread. I’m actually at the NASW/CASW Science Writing 2010 meeting, and hence am obligated to fulfill my quota of serious drinking/schmoozing.

    But, just to catch one criticism of the post, let me risk a little semi-drunk blogging with a reply to comments 8 and 41 (also Cleek @ 50 — which posted as I was writing what follows.)

    @BillinChicago: @Ken Lovell: Thanks for reading, though I would say, Mr. Lovell, that you commit a fallacy in assuming that my purported error = the left is systematically wrong on economics; in fact, we are generally right and both the outcomes (stock market results, real economic growth) favor Democratic rather that Republican self-congratulation.

    But to the specific issue of how to characterize the impact of the hyperinflation as progressive or proportional: it’s a little more subtle than you seem to credit. On first blush, the claim of proportionality is correct: inflation (hyper or otherwise) affects every dollar in the same way, so the impact on the rich is in proportion to the number of dollars they hold.

    But the past is a different country, and rich and poor occupied overlapping but different monetary systems. The ones who suffered most from the hyperinflation were the ones who did or were compelled to accept Continentals for their services or their stock in trade. There were a number of parallel monetary systems – several colony-by-colony currencies persisted through the revolution, and specie continued to circulate as well.

    Which meant that there were a variety of exposures to the collapse of the national currency — but it also meant that those who existed in the least monetized section of the economy suffered the lowest inflation hit; those with mixed exposure had a moderated exposure, and those who dealt in large sums with the Continental Congress or in transactions denominated in Continentals experienced higher losses on the margin.

    Is that progressive taxation? Not exactly. But the broad outline of where the burden hit resembles modern progressive systems, where the marginal dollar of earnings is taxed at a higher rate than the first dollar.

    Should I have been more precise than I laid it out above? Maybe…but the point of the post was on Franklin’s appreciation of one of the principles that lie behind progressive tax systems: those who benefit most from the actions of government should pay accordingly.

  52. 52
    Steeplejack says:

    @Tom Levenson:

    That’s pretty good for semi-drunk blogging. And I, sir, know semi-drunk blogging.

  53. 53
  54. 54
    DPirate says:

    @b-psycho: I don’t think that is the point of the article? Of course those with money not needed for subsistence would exchange scrip for real property, and likely did in the form of slaves, gold, timber, land, etc, just as today, and while nice in theory, the poor would still get screwed. I think he was just using that as an example of Franklin’s thinking.

    What was new about it, though, I’m not sure. Couldn’t the same be said of forgery, clipping, etc, as inflationary means? What did the rich do when their coinage was debased prior to paper money? I’m guessing flight from coin, same as today.

  55. 55
    DPirate says:

    @cleek: I’d say a proportional tax was definitely progressive for the time. You know, there’s been Progress since then

  56. 56
    MobiusKlein says:

    @Tom Levenson: Wouldn’t hyperinflation (and merely high inflation) in modern times would have a very different profile than in colonial times?

    Nobody today lives outside the cash / money economy. The progressiveness of the ‘inflation tax’ would depend on how well one’s salary kept up with inflation. In today’s non-union workplace, I suspect incomes at the low end would not come close to the inflation rate. e.g. minimum wage laws could hardly keep up.

  57. 57
    Skippy-san says:

    One note-Franklin passed away in 1790. He could not have written a letter in 1799.

  58. 58

    I love these posts where I can read and just learn from the OP and from the subsequent comments.

  59. 59
    bobbyp says:


    Great post. You might also read up on the fascinating life led by John Law…economist, duelist, prisoner, con man, courtier, banker, and gambler extraordinaire.

  60. 60
    Tom Levenson says:

    @Skippy-san: Oops. Fix’d: 1779. Thanks for the crex.

    @bobbyp: John Law figures in what is most likely my next big project. Unbelievably cool figure.

  61. 61
    bobbyp says:

    The fact that economic elites abhor inflation above all else should give some here a clue about its “progressive taxation” properties. Inflation erodes financial wealth. Financial wealth is a socially recognized claim on future goods and services (i.e., real wealth). Financial wealth is held mostly by rich people.


  62. 62
    Xenos says:

    @aimai: That property-tax science fiction story rings a bell, but I can’t place it either. The closest I can come up with is Christopher Anvil’s Pandora books, where a relatively benevolent galactic civilization faces collapse when it conquers Earth and gets tied up in Ponzi schemes, land-title installment contracts with strict foreclosure provisions, late-night infomercials selling junk, and so on. There may have been a short story in that series that covered that sort of local property tax as a way to deal with corporate invasion…

  63. 63
    Tom Levenson says:

    @MobiusKlein: Yes; we live in very different times than did our early-modern ancestors.

    One caveat though — true hyperinflation wipes most folks out. Everyone without a secure hold on real assets and or access to hard currency is basically screwed. Not just the poor, but the middle class too, and large numbers of the more than middle.

  64. 64
    jl says:

    Regarding progressive versus flat taxes, I don’t think it is reasonable to try to determine what these founders would say about specific policies we have today.

    In the letter cited above Jefferson did say that where there were unemployed people and unemployed productive resources, especially land, then ‘laws of property have been so far extended as to violate natural right’. Elsewhere in the letter he seemed to advocate progressive taxation on wealth.

    Jefferson was hostile to income tax, especially a tax on labor or business income, since he saw income as a current reward to current efforts, and it would violate natural right to take that. However, he tended to view property, especially massive accumulations of real estate and financial wealth as usually inherited from past generations, and as Jefferson said ‘the earth belongs to the living’, hence that kind of wealth did not belong to any living person by natural right. So, therefore his recommendation of progressive taxation of wealth above a certain level.

    A wealth tax, as a periodic income stream taken from the owner would amount to hyper progressive income tax on the income or interest income from any wealth above a certain level. So this would amount to what we would consider a confiscatory tax on income from accumulated wealth above a certain level. He had the same idea on the estate tax: exempt a certain amount of wealth to account for desire to leave some wealth to children and the rest goes to the government. Except, he may have changed his mind later in life, when he inherited gigantic debts from a relative, and the net value of his estate was a huge negative sum.

    I think Franklin was talking loosely, since inflation would be a tax not only on money income but also money wealth. But Franklin, like Jefferson, did not believe that there was a natural right to property above and beyond that needed to obtain a minimum decent standard of living.

    Note that both Jefferson and Franklin talk more about wealth than income.

  65. 65
    c u n d gulag says:

    But, but, but… TEA Tax!
    And, and, and, the FF promised everyone PONIES!!!
    It’s in the ConsTEAtution!!!!!!!!!!!!!!!!

    On the serious side, Tom, a very interesting look at this rather long term issue.
    And I agree about Franklin. I think he was the smartest of all of the Founders. I’m sure he would have been a great General. Jefferson, on the other hand, whom I love, probably didn’t know enough about money to manage a WaWa.

  66. 66
    RoyalEw says:

    As suggested by earlier commenters, the currency depreciation Franklin spoke of was the equivalent of a flat tax, not a progressive one. If the $10 held by a man of modest means became $8, and the $1000 held by a wealthy man became $800, the rate of depreciation is constant and, therefore, the equivalent of a flat tax rate of 20%. A hypothetical progressive tax rate sliding from 0% to 10% could, on the other hand, leave the poor man with his $10 so he could buy necessities, while still obtaining tax revenue from the wealthy man, who wouldn’t need the taxed amount for necessities, of $200. So you’re reading and adulation of Franklin is a wee bit off, to say the least, and unless you want to join people like Forbes, Romney, Palin, Armey, the Koch brothers, etc. etc., you better look for a different example of enlightened taxation.

  67. 67
    turtle says:

    @Rincewind: Yeah, I was oddly disappointed when I found out that chapter of his adventures had actually happened, because there was no way the real WIlliam Chaloner could have been as entertaining as Jack Shaftoe.

    Now you’ve got me reminiscing about those books… (sigh) What we really need is for Eliza to show up and deal with the Republicans. You know she’d have them straightened out in a second :)

  68. 68
    Tom Levenson says:


    no way the real WIlliam Chaloner could have been as entertaining as Jack Shaftoe.

    Not so, IMHO. Chaloner was a fabulous scoundrel.

  69. 69
    Tom Levenson says:

    @RoyalEw: Not so, when you consider, as I and others pointed out, that the poor and the rich operated in overlapping but non-equivalent currency environments.

    See especially comment 64, which captures the nuance well. I’ll cop to an oversimplification — but the point is that Franklin saw it fitting that those who dealt most in “national” transactions should pay the largest share of the cost of the war.

  70. 70
    BroD says:

    @Jewish Steel:

    Yes but which Nouns should we capitalize?

  71. 71
    paul says:

    Monument by Lloyd Biggle Jr. And it’s not really clear whether the planetary civilization in question is pre-industrial or post-industrial. The tax is 1000% of assessed value, which is just fine for the locals, because the government grants them personal use of whatever they need. So it’s just profits and capital gains that go away.

    It’s really no surprise that the founders should have understood and approved of the various methods of progressive taxation (and that their are many ways to skin a fiscal cat). The british empire was at heart a mercantile endeavor, and so very much of what led to the revolution was essentially the home country’s practice of capitalism in the large, where any profit produced by labor or local capital in a colony could be extracted and sent back to a very few owners on the other side of the ocean.

  72. 72
    Dave says:

    There’s a difference, though, between a proportional tax on income and a proportional tax on savings. A proportional tax on savings would likely be fairly progressive, as the top percentiles tend to have a higher savings rate than the rest of the population.

    Inflation by printing would have the effect of both.

  73. 73
    SciVo says:

    @aimai: I don’t remember the author or the title, but I remember a lot more about it.

    A red-headed explorer ended up stranded on a paradisical water planet with an archipelago populated by Pacific islander type people. He was quite popular with the ladies, and by the time galactic society caught up with that planet, about a third of the population were his descendents. He’d presciently put forth several strategies for them to enact when that happened:

    1. Having a formal government that demanded recognition under galactic law, since they knew how from him. This avoided the problem of the colonizers making the laws.

    2. Committing nonviolent civil disobedience, like quietly obstructing construction of the mega hotels with sit-ins.
    This got the colonizers to pay attention to the laws.

    3. Establishing confiscatory property taxes. The same % value tax on a grass hut is trivial for its inhabitants to pay versus that on a luxury hotel. This got them to concede to the natives’ demands for protections for the environment and their traditional way of life.

    I think it was in some sci-fi mag. Sorry I can’t remember more.


  74. 74

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