Paul Johnson has written more than two dozen works of history, including a History of the Jews, Modern Times: The World from the twenties to the Eighties and Intellectuals. His awards include the Francis Boyer Public Policy and the Krug Award for Excellence literature. He is presently at work on a history of the American people.
A paradox now faces the United States, one that is glaringly apparent to a regular visitor like myself. A majority of its inhabitants are enjoying a material prosperity unprecedented in history. Yet it is nonetheless riven by ferocious self-doubt and self criticism, and even by a sense of failure and doom. That paradox is rooted deep in American history. For the United States, from its earliest origins in the first decade of the 17th century, has been an uneasy blend of practicality and utopianism, created, on the one hand, by sensible, moderate men of the world, and on the other by extremists and fanatics, who saw visions and sought to realize them at any cost. Satisfaction in its huge material achievements, therefore, has always been undermined by a nagging sense that the Garden of Eden, the Godly kingdom the pioneers and pilgrims set out to build, has somehow eluded their progeny. Americans tend to fix their gaze not on what has been done, but on what has been left undone.
At the bottom of it all lies a particular religious faith. America was a religious creation. The militant English Protestants of the 16th century thought of the English as "the Chosen People,” the New Israel. When King Charles I refused to build the New Jerusalem in England, the Puritans, and other religious extremists , decided to create it in the Americas. There, a new elect would arise and build what John Winthrop termed "a City upon a Hill," to serve as a beacon of enlightenment to all the nations of the world.
These early settlers really believed in their Godly mission, as their letters, diaries and even their legal enactments abundantly testified. The early constitutional documents such as the Mayflower Compact itself, the 1639 Fundamental Orders of Connecticut and the 1641 Massachusetts Body of Liberties, are redolent with this sense of divine and humanitarian mission, the belief that what was being designed would be unique in moral and material moral history. They were even more ambitious than the early radicals of the French Revolution in 1789 because they felt that their foundation was not merely of secular and worldly significance but was also to be a halfway house to eternity and the heavenly kingdom. When Thomas Prince wrote his early-18th-century history of New England, he began with "Genesis," the creation story, believing that the founding of America opened the culminating phase in God's divine plan for the world. The Americans had taken the place of the Israelites fleeing "Egypt," that is Europe, to settle the Promised Land. Even a severely practical man like Benjamin Franklin proposed in the 1770s that the seal of the newly created United States should show Moses leading the children of Israel across the Red Sea. And, amid all the horrors of the Civil War, Abraham Lincoln could still wryly refer to the Americans as "the almost-chosen people."
Those who settled these lands in the early 19th century could scarcely believe their good fortune. One wrote: "After the first year, I never saw any scarcity of provisions." Another: "No weeds or grass sprang up on such ground the first year and the corn needed no attention with plough or hoe. Provisions in abundance was the rule." In 1819, from the new township of Franklin, the Missouri Intelligencer offered a spring toast: "Boon's Lick - two years since, a wilderness. Now - rich in corn and cattle!"
Moreover, such land was available at prices lower than at any other time in history. Land, which in Europe had to be fought for or painfully acquired, piece by piece, over generations, was available in the United States even to the poor. The Land Ordinance of 1785 offered public lands to farmers in 640-acre (one square mile) lots at a dollar an acre. The lots were later reduced in size to facilitate settlement by poorer men, and by 1800 a man could buy a farm for as little as $100, which, wages being so high, he could easily save in two years' work as a laborer. Under different laws, public lands varied in price from $2 an acre to as little as 12 cents, and under the Homestead Act of 1862 and the Timber Culture Act of 1873, a citizen got 160 acres absolutely free if he agreed to live on and cultivate them. A peasant from Europe, where he and his progeny could never hope to own anything other than a vegetable patch, could become a prosperous freeholding farmer in a decade or less. Nothing like this had ever happened before-or since. It gave to the United States a sense of exaltation, a deep, warm feeling that Divine Providence was smiling on it and its people. And that in turn raised expectations of still more bounty.
There was, however, a serpent in this Garden of Eden: a necessary serpent, perhaps, but deadly nonetheless. Debt. Many of the original settlers in all 13 states that came into existence before the Revolution had financed their purchases of land and tools by debt. For a poor man to acquire debt in Europe was difficult, usually impossible; no one would lend him money as he had no collateral. In America it was easy, because he had the security of his labor and, above all, a limitless future. Land purchase by debt, speculation on credit, were thus written into the title deeds of the new nation. It was inevitable, and it was fully justified by the speed at which the land was settled and debt, in most cases, discharged. But acquiring debt, borrowing against the future, became a national characteristic: Indebtedness was not only not shameful it was almost, in a sense, patriotic, and once independence was gained, financial institutions, above all a plethora of banks, came into being to serve this marked American prosperity.
The state abetted the process. The Harrison Land Law of 1800, for instance, sold the public 320-acre farms but required only a quarter of the purchase price down. The rest was paid out of harvest profits over four years. Much of congressional land legislation provided for credit - the Desert Land Act of 1877, for instance, offered farms in huge areas of the West for as little as 25 cents an acre down, provided only the purchaser promised to irrigate. Congress also encouraged company debt by, for instance, providing land free to railroads that could borrow enough money from the banks to lay down track. America's 19th-century pursuit of her "manifest destiny," both in land settlement and in the communications revolution that made it possible, was essentially launched on credit.
Behind this willingness to shoulder debt was the profoundly felt sense of America's cofounders that Almighty God had intended it that way: that Canaan, God's Country, the Promised Land, had been given to the Chosen People to be enjoyed in the here-and-now, and that it was permitted to go into the red provided only that each member of the elect had the industry and self-discipline to work his way out of it. And that is precisely what the vast majority always did. That was what America was about. The Declaration of Independence laid down what no other political document in the whole of history had yet claimed, that men were "endowed by their Creator" with the right not only to "Life" and "Liberty" but the pursuit of Happiness. By this last, what the Founding Fathers had in mind was the acquisition, by honest effort, of property, which they saw as the precondition of human felicity. Without widely dispersed property, true individual independence, and so a sound Republic, was impossible. Hence it was the business of the General Government, as indeed of the states, each in its way, to create the conditions for this process. The Supreme Court, under John Marshall, set up a property-based structure of federal law; and much of the politics of the 19th century - President Andrew Jackson's creation of the Democratic Party, for instance - had as its aim the provision of cheap credit so that poor men could acquire property, the key to happiness.
But if America set its sights on the extremist vision of utopia on earth and used debt to get there, it was also careful to construct a federal framework, within which individuals pursued happiness, designed to be provident and frugal. As I say, there were two kinds of men who created America. There were the visionaries, the extremists, the fanatics, who saw America in religious terms, who executed the ungodly and burned witches and who, by preaching the doctrine of the Promised Land, raised the expectations of ordinary Americans to the heights. But there were also the practical men, the moderates, raised in the tradition of the English Parliament with its give-and-take, compromising approach, and the old Common Law. These were the men who put together the nuts and bolts of the individual states, gave them law and government and commerce, and in due course drafted the Constitution and implemented it. Men like Richard Henry Lee, John Adams, Thomas Jefferson, Roger Sherman and Robert Livingston -succeeded in due course by other sensible men like Henry Clay and Thomas Hart Benton, Martin Van Buren and De Witt Clinton. The extremists supplied the vision, but it was the moderates who brought it into existence.
An excellent way of examining the course of American history, as it develops under the impulse of the extremists and the guiding hand of the moderates, is to look at the national debt. Pursuing the Ideal of independence in the 1770s - a utopian vision as it must then have seemed to many, and dynamized by radical views of human rights - the Founding Fathers not only created the national debt but led the new nation into the worst inflation in its history: By 1780 the $240 million of paper "Continentals" it had issued were almost worthless. America was extricated from this mess by the financial genius of the archetype practical, moderate statesman, Alexander Hamilton, the first Secretary of the Treasury. His ingenious funding plan, based as it had to be on the notion that the federal government must be frugal, not only restored America's credit but attracted foreign capital, so that by 1803 the nation had no trouble borrowing the money to finance the Louisiana Purchase. Thereafter, Washington, run for the most part by sensible men, kept the purse strings tight to the point where President Jackson, in 1835, while pushing for individual cheap credit, had reduced the debt - which in 1791, when Hamilton's plan first came into being, stood at $75 million, or 40% of GNP - to virtually zero satisfactory. This state of affairs has never been achieved by any other power, before or since.
"Thereafter, the debt rose in accordance with national emergencies, and was reduced by moderate, sensible men when they had passed. By the end of the Civil War - a bloody and expensive episode made inevitable by extremist, fanatical strain in American life – it had risen to over $2.76 billion. Twenty-eight years later it had been reduced to only a third of amount, though the GNP had more than doubled in the meantime. This prudent management continued. The debt rose to $25 billion at the end of the First World War, and was then prudently reduced by about a third during the prosperous 1920s. As a result of the Great Depression, when deficit financing become inevitable to get the country at work again, it rose once more, standing at $48 billion in 1939. With the Second World War it rose still further, this time astronomically, to $271 billion by 1946. But again the dictates of prudence began to operate. Between 1946, its high point, and 1975, the national debt was reduced by more than half. Expressed in terms of 1991 dollars, the debt fell from $13,381 per capital at the end of the war to $6,349 per capita in 1975.
That was satisfactory, conforming to the pattern of 200 years of sound federal government. But then, in the late 1970s, a curious thing happened. Without an emergency, without a world war, without even the excuse of a severe recession, the national debt began to rise again, first slowly, then more rapidly. By the end of President Reagan's first term, it stood (still in 1991 dollars) at over $8,600 per capita. By the end of his second term it was nearly $12,000 per capita, well on its way to the post-World War II peak. Since then it has reached a historic high.
Why is this? Why, for the first time in its independent existence, has the nation abandoned the fundamental prudence with which it has hitherto conducted its financial affairs? A number of figures, compiled by Davidson, and William Rees-Mogg in their book The Great Reckoning, show the deterioration, at least in statistical terms, in the 60 or so years since 1929, when the nation was on the brink of the greatest financial crisis in its history. These figures help to explain the deficit. In1929, government had few long-term unfunded liabilities: By 1990 it had $14 trillion. In 1929 government - federal, state and local - was small, employing less than 10% of the work force. By the 1980s it was enormous, and employed 21.2% of the work force. In 1929, transfer payments were largely confined to former government employees. By 1990 they embraced a huge segment of the nation. Government involvement in every aspect of national life has increased almost immeasurably.
All these factors explain why, although in 1989 government took 36.8% of personal incomes in taxes, it was still adding massively every year to its enormous debt. That meant a growing proportion of its revenues were devoted, year by year, simply to servicing the debt, and in turn (since its expenditures were not substantially reduced) that meant added pressure either to raise taxes or to expand the deficit and so increase the debt still further.
Why has the nation got itself into this fix? I suggest that the underlying reason lies in the continuing conflict between extremists and moderates in American society, between those seeking to build utopia and those who believe the object of government is merely to create an equitable framework in which industrious men and women can prosper. The extremist utopian elements have lost the fundamentalist religious impulse that was their original dynamic in the 17th century. They have, in fact, become secularized. What they have embraced instead is the secularized utopianism of the 20th century: the belief that society can be made comfortable, safe, healthy and secure for all, irrespective of merit or effort, and that the agency in this process is the state. This secular utopia has not been realized, any more than the religious-inspired Zion of the Pilgrim Fathers was realized. And sensible people will argue that it never can be. But the continuing effort to realize it, now going back a whole generation, has proved enormously and increasingly expensive. Religious utopias involve burning witches and forcing children to go to church twice or even thrice on Sunday; but they do not cost money. Secular utopias cost the earth.
Moreover, pursuing the secular utopia has led to a dangerous malfunction in the practice of the separation of powers, which lies at the heart of the U.S. Constitution. By and large, the secular utopians have captured Congress, while the moderates have continued to occupy the White House and so the agencies of government. High-spending congressmen, pursuing aims that by their nature are ultimately unrealizable, have proved popular with voters locally, and so have acquired strong security of tenure. That explains the continued domination of Congress, especially the House, by Democrats. And that in turn means that it has proved impossible for federal governments, no matter how determined - and they have not been very determined - to reduce transfer payments and utopian elements in domestic spending.
At the same time, the electorate as a whole, voting nationally, has expressed its concern at the country's drift into financial profligacy by sending to the White House candidates pledged to do something about it, or at least advocating programs that will not make it substantially worse. In practice, this has led to dichotomy: Democratic Congresses, unwilling cut domestic spending, and Republican administrations, unwilling to raise taxes. Thus the federal polity of the United States is under the conflicting control of both extremists and moderates, of utopians and pragmatists, both blaming the other for what is, at bottom, a profoundly immoral procedure - spending money by borrowing against the future. The result is deficit and the mounting debt.
Now this public debt comes on top volume of private debt, which itself is increasing. As I have argued, the United States was created by the judicious use of private credit. But this was balanced by a strict regimen probity. That has now been abandoned, and there is no longer a balancing factor. All is debt, and an enormous burden is being shifted onto the shoulders of future generations.
My belief is that the American people, as an entity, have a strong, deep-rooted moral sense, and a clear view of what is right and what is wrong, especially in money dealings. In some respects, notably in regular church attendance, they are still the most religious people on earth. For that reason, they are well aware of the improvident manner in which debt is being accumulated. They know it is wrong as well as foolish. As individuals they feel powerless to do anything. As collective voters they are divided. So the wrong is not righted. The folly continues. They are, in consequence, profoundly uneasy. Surrounded, as most of them seem to be, by unprecedented prosperity, by material acquisitions no earlier generations have enjoyed anywhere, they sense there is something false and unsubstantial in the glitter. Hence their pettish mood, which often takes the unreasonable for, of sniping and bellyaching in the midst of plenty.
But this unreasonableness may in the end prove a blessing. A returning sense of wrongdoing often takes irrational forms but is none the less welcome. There is a famous Victorian painting showing a beautiful woman, who is in “living in sin," suddenly profoundly disturbed by the strains of a tune her lover is picking out on the piano, which recalls her childhood innocence. The work is called "The Awakening Conscience." That is what is currently inflicting itself on America - an awakened conscience – and it may be the first step towards a remedy.
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