The Whiskey Rebellion
The Whiskey Rebellion, if covered at all in the early history of the United States, is generally described as a “revolt” carried out by western (Pennsylvania) settlers in response to the excise tax imposed on whiskey, more or less implied to be a “sin tax.” The economic disparities that formed the basis for the settlers’ grievances are generally overlooked. William Hogeland’s book is an attempt to cover the events that transpired during the revolt, actually evolving into a serious attempt to secede from the fledgling United States, and to place into context the background for the rebellion. Hogeland’s understanding of the economics of the period, and his ability to convey that knowledge to the general reader, represents a significant contribution for the casual historian.
Alexander Hamilton, de facto chief of staff for General George Washington during the Revolutionary War and a man of rare courage during combat, was appointed by Washington as secretary of the Treasury in 1789, following establishment of a government defined by the Constitution. Among the challenges facing the new government was the war debt.
The conclusion of the war had left the federal government owing some twelve million dollars to foreign governments, with an additional forty-four million in domestic debt plus approximately twenty-five million in debt owed by individual states. The primary source of income for the United States (about 90 percent) during these years came from tariffs. Tariffs, however, were problematic in that larger states such as New York or Pennsylvania imposed their own policies with respect to trade. Furthermore, state legislatures generally responded to the problem with the printing of paper currency, thus creating inflation and reducing the value of the “paper” held by the creditors.
The original Articles of Confederation limited the ability of a federal government to address these problems. Among the changes imposed by the Constitution, which was approved in 1787, was the ability of the federal government to establish certain fiscal policies for the states. The government could impose tariffs for the states. More important, the new government had the ability to establish excise taxes on domestic products, including locally produced products such as whiskey.
The primary creditors for the debt were led by Robert Morris. Morris and his associates had purchased a significant proportion of the bonds that had financed the revolution and government costs in the ensuing years. They wished to see a return on their loans. Morris’s Report on Public Credit, released in 1781, called for the federal government to assume the debt and arrange both for funding of that debt (payment of interest), as well as eventual repayment of principal. In theory, the proposal would ensure a continued investment of capital by the wealthy in the government. The weakness of the federal government relative to that of the states precluded such an arrangement.
The ability of the federal government under the Constitution to establish internal taxes provided a possible solution. In January, 1790, Treasury Secretary Hamilton, in a document also titled Report on Public Credit, proposed that, first, the federal government would redeem the securities owed by the earlier government as established by the Articles of Confederation, with funding of the debt in part through the imposition of excise taxes. Second, the federal government would also assume the state debts, much of which consisted of payment to officers and soldiers for their service. The proposal was similar to that suggested earlier in that decade by Morris.
The actual bill passed by Congress in March, 1791, was titled “An Act Repealing, after the Last Day of June Next, the Duties Heretofore Laid Upon Distilled Spirits Imported from Aboard, and Laying Others in their Stead, and Also Upon Spirits Distilled within the United States and for Appropriating the Same.” What the bill meant was that the distillation of whiskey would be subjected to taxation, the first federal tax on a domestic product. Further, a means to collect that tax was included in the bill. The bill was proposed specifically to address the funding of the debt resulting from the federal government’s having assumed the debts from individual states. That assumption had resulted in a deficit of some $830,000. Hamilton’s estimate was that the whiskey tax would raise...
(The entire section is 1821 words.)