Bill Clinton, Hamiltonian
The stupendous popularity of the musical Hamilton provides an opportunity to reassess the Hamiltonian political tradition, and determine which recent American politicians might be called Hamiltonians. While the major American political divide, since at least the 1930s, has been between conservatives and progressives, as we understand them, the previous divide, between Hamiltonians and Jeffersonians, has never completely vanished. Conservatism and progressivism can each take both Hamiltonian and Jeffersonian forms. The policies of the progressive centrist Bill Clinton, while they were not always Hamiltonian, do mesh in many ways with Hamilton’s. This is especially true in the economic realm: Clinton’s approaches to fiscal policy, trade, finance, technology and work were quite Hamiltonian.
Clinton’s first budget, which kept tight limits on federal spending while raising taxes on the rich, was passed in part to appease bond markets and Alan Greenspan’s Federal Reserve. His long-term pursuit of a balanced budget was also meant in part to maintain business confidence in America. This is quite similar to Hamilton’s faith in private enterprise, paired with limited but significant governmental action, as the driver of growth. While Hamilton famously defended the utility of a national debt, a position that may seem opposed to Clinton’s insistence on fiscal discipline, many people forget his full sentiments on the matter: “A national debt, if it is not excessive, will be to us a national blessing” (emphasis added).
Hamilton’s advocacy of industrial policy, including temporary tariffs to protect some nascent industries, would seem the opposite of Clinton’s embrace of free trade. But the two approaches are not as far apart as they might appear. Both policies were favorable to American industries deemed vital by the government at the time: an embryonic manufacturing sector in the late 18th century, well-established sectors (like agribusinesses seeking to increase exports and auto companies seeking low-cost labor) in the late 20th. And both were resisted by Jeffersonian political forces: Jefferson himself wanted America to stay agrarian rather than industrialize, while organized labor, long an embodiment of Jefferson-Jackson populism in the Democratic Party, fiercely opposed Clinton on trade.
What is more, the circumstances of their times were extremely different. Hamilton’s America was very young and largely rural, vulnerable to the predations of European powers. It needed to build up its industrial base to ensure its economic and political independence from much stronger countries. National security was a key element of this. This was a time when even a famous free trader like Adam Smith was willing to make a security exception to free trade — Smith defended tariffs on products like sailcloth, needed for the Royal Navy’s warships. Clinton, by contrast, presided over America’s brief post-Cold War period of global hegemony. Early in his administration the country looked vulnerable to economic competition from Germany and Japan. But as the 1990s went on, and America emerged as the undisputed dominant world power, free trade looked more and more like America’s best approach (whether this is still the case today is debatable).
Since the Great Recession of 2008–2009, Clinton’s deregulation of American finance has been frequently blamed as a major cause of the financial crisis. While the extent to which Clinton’s actions, relative to those of other presidents, triggered the disaster, is not clear, three laws he signed helped increase concentration in the financial sector and make risky speculation by enlarged banks more common. The Riegle-Neal Interstate Banking and Branching Efficiency Act made it easier for banks to open branches in multiple states. The Gramm-Leach-Bliley Financial Services Modernization Act repealed the separation of commercial and investment banking. And the Commodity Futures Modernization Act codified the belief that trading in derivatives should not be regulated. Together, these laws helped produce an atmosphere in which big banks made reckless bets on a housing bubble, bets that, when the bubble burst, would have led to a second Great Depression had the government not bailed them out.
None of this means, however, that financial concentration is inherently bad. While Hamilton would have been appalled by Wall Street’s behavior in the 2000s, he shared Clinton’s confidence in a strong, concentrated financial system. By assuming the states’ debts from the Revolutionary War and creating the First Bank of the United States, Hamilton intended to give the young nation a reliable source of investment in its latent economic potential. America’s vast natural resources and its people’s entrepreneurial instincts could not be fully exploited without confident investors, public and private. This system was severely tested in the Panic of 1792, which was caused largely by the corrupt behavior of Hamilton’s former assistant, William Duer, and resolved by quick intervention by Hamilton himself. Nevertheless, as Michael Lind makes clear in Land of Promise: An Economic History of the United States, the Hamiltonian commitment to a strong financial sector, including cooperation between government and private finance for the sake of widespread prosperity, has been vital throughout American history to the country’s economic growth. (I should note that Lind would probably disagree vehemently with my description of Bill Clinton as an economic Hamiltonian.)
Hamilton wanted America to rival Britain as an industrial power, to embrace the then-new technologies of the Industrial Revolution. Likewise, Clinton saw a “light touch” approach to the burgeoning telecommunications industry as the best way to expand Internet access across America, and to empower as many Americans as possible to benefit from the digital economy. Both men embraced the high technology of their times — steam-powered machines in one era, computers and cables in another — as vital to economic growth.
Hamilton’s elitism may have been “subservient to his nationalism,” as political scientist Samuel Beer put it, but he was still an elitist, happy to see those who succeeded in the economic sphere hold strong sway over economic policy. Clinton’s confidence in big business as a key engine of American prosperity was quite similar, even if his Southern folksiness and his old-style Democratic populist attitude when confronting Newt Gingrich were markedly different from Hamilton’s overt elitism. Both men tended to believe that what was good for big business was good for America, and in both the 1790s and the 1990s, that belief was frequently (though not always) justified.
Finally, Clinton’s embrace of welfare reform, part of a policy of promoting and rewarding work, is also Hamiltonian in at least some ways. Hamilton was comfortable with children working in factories, a position that may seem harsh to modern eyes, but which was not different from the common practice at the time of older children working on farms or in shops (as Hamilton himself did in his early teens). This was of a piece with his preference for industry (both in the sense of sectors like manufacturing and in the sense of hard work), in sharp contrast to Jefferson’s vision of America as a rural idyll.
Similarly, Clinton’s signing of a bill ending Aid to Families with Dependent Children was condemned by many on the left as a harsh rejection of the traditional Democratic commitment to the poor. But decisions made earlier in his administration ensured that ending the old welfare system helped the poor, rather than hurting them. His first budget, the same one that kept spending down and raised taxes on the rich, also included a big expansion of the earned income tax credit. Created in 1975, expanded multiple times since, and frequently praised by Democrats and Republicans alike, the EITC rewards low-income people for working, and is one of the most important anti-poverty measures in the United States. Due in part to the EITC’s incentive to work, the 1990s were marked by a significant decline in both the number and the percentage of Americans living in poverty.
This is not an exhaustive survey of comparisons between Hamiltonian and Clintonian policies. In addition to Land of Promise, I highly recommend Ron Chernow’s by-now famous biography of Hamilton to anyone interested in making their own judgments. The political debates of Hamilton’s time are very relevant to our own, and by comparing the favored policies of Hamilton and his contemporaries to the solutions generally promoted by politicians today, we can better hope to assess the likely results of what our leaders offer us.