Elsie Smith, Wells Fargo Bank, United States discussed on Planet Money
This message comes from. Npr sponsor wells fargo as a season. Small business owner unique checking that fits your complex individual business needs wells fargo small business checking offers greater efficiency and control over daily finances so you can focus on running your business plus access to advanced online banking tools and local bankers dedicated to understanding your financial needs all so you can bank without missing a beat more at wellsfargo dot com wells fargo bank. Na member fdic first up really basic question. What exactly is the national debt. It's keeping up. Think of it as one thing because it's actually a bunch of promises it's millions and millions of specific promises that the government has made to specific people. The government spends more than it takes in just about every year that is called a deficit. A yearly deficit and the government boroughs the difference from international financiers people who know the government inside and out people like this person my name is elsie smith and i am seven and three quarters. I happen to know elsie smith. She's a friend of mine and in fact she is your daughter robert. Yeah but that's not important right now. What she is a creditor of the us government. Listen to what she discovered in my drawer. United states saving bonds fifty dollars. What did you learn the government money to keep it safe you. That's absolutely right. You did load it to them to keep it safe and they used your money to buy things like maybe a rivet on a fighter plane or something. That's a regret little thing that holds the plane together is back. Wow our international. Financiers are so fickle. You know it's funny. Even at seven years old she somehow. And i didn't tell us she somehow managed to look at this thing to savings bond and understand what is most fundamental about government debt. It's safe it's completely safe the. Us has never back on. Its promise she could get that fifty dollars tomorrow with interest back if i let her so to understand. What the debt is you. Gotta add up all the l. of the world all the retirement funds and central banks with lots and lots of treasury bills or savings bonds in their drawers. And even if you don't have a bond in your drawer you have effectively the money to the government somewhere like. Maybe it's your checking account or your savings account that guaranteed interest that you get. It's probably treasury bonds by government debt. And we're always hearing about how china holds over a trillion dollars of us bonds. Japan many many governments around the world. And when you add up all those promises all those different people and institutions at the us government has said. Hey we're going to pay you back. That is the national debt today. We're going to explain how we got into this mess. Where all this debt came from what happened when we tried to pay it off and who came up with this whole debt ceiling idea in the first place now turns out. We've been fighting about the debt since the united states was born. Okay we're gonna accuse some old timey music here in fairly well by the davidson fairly well. Elder smith okay. We're back in revolutionary war. Days has if you couldn't tell from that spot on impression this when the first debate over the national debt started and it's important to remember that the us debt wasn't something that just happened automatically. In fact the united states is very first few days maybe conscious decision to have a debt to issue these bonds and promised to pay it back. I spoke with robert e right. He's a professor of political economy at augustan college in south dakota what really happened is we fought fought a long and bloody revolution against the world's greatest superpower and racked up Eighty million dollars in debt. Doing so couldn't we've said sorry folks it's a revolution We're wiping out of the debt. We could have but thankfully we didn't and we didn't because of a man named alexander hamilton. He was the secretary of treasury the very first one and he argued that the united states faced a fundamental choice. If we don't take responsibility for the debt all those farmers that lent us money and the soldiers. We didn't pay in the french who lent us money. The rest of the world won't trust us. They won't lend us money. We won't be able to trade. We'll be stuck. The united states will be stuck living off whatever we grow here in our farms and back then the. Us didn't grow that much. We brought much of our consumables from europe. You know the hbo series. John adams did a great job of depicting hamilton's argument. The future prosperity this nation rests chiefly in trade trade depends among other things on the willingness of other nations to lend us money. Now would you propose to establish international. I would be too and karen national debt the greater the debt greater the credit two hundred recommended the president the congress adopt all the debts incurred by the individual states during the war through a national bank. The idea being that if the states gold's money then other nations will feel more inclined to lend it to now. Hamilton who was pro debt was fighting with thomas jefferson because thomas jefferson had a very different view. He felt that debt was extremely dangerous. And when you hear the speech that jefferson gave or at least the actor playing him in that. Hbo series gave. It's a speech. I feel like with very little change could be given today. The states are indebted to a central authority increases the power of the central government of exactly i fear. Revolution will have been in vain for virginia farmers to be held in hawk to new york stock. Jobber who in turn is an hawk to a london banker opportunities for avarice and corruption would certainly prove irresistible and this fight between northeast bankers and the rest of the country. This has been going on for two hundred years. It's going on today now. Hamilton one out. Initially the united states accepted its debt. It promised to pay but professor robert rights says that most politicians at the time they felt much more like jefferson. Okay fine hamilton will pay off our old debt but let's not make a habit out of this so what the battle was really about was How quickly to pay off the debt. Now whether to pay it off or not. And i have to get full disclosure here. I spoke with professor right and he told me that he gave his son a unique name. He named his son alexander. Hamilton was right. Oh come really dearly. you're really did. And in fact his son came the other day he told me and said shouldn't be accent. Hamilton is right because in his view. Of course hamilton is right forever. Wow so for the first forty years or so of the republic. We lived in hamilton's world. The nation had a debt manageable debt banks and bankers and the northeast flourished. We did trade with europe and everybody trusted us. The country grew and pretty soon. Us debt debt issued by the us government was seen as one of the safest investments in the world. This was alexander. Hamilton dream until one president dared to pay it off so q our next chapter in the amazing life story of the us debt. January eighth eighteen thirty. Can we put on character again. Picture all the big political names in washington. Dc have gathered to celebrate the president andrew jackson. It was the anniversary of his win. The battle of new orleans. It was bigger news that night. A senator stood up and he raised his glasses. Said gentlemen the national.