The Whiskey Rebellion Series

The debt to American investors, which lay at the heart of the drama, took the form of interest-bearing notes issued chaotically by the Congress and various state legislatures to raise cash for the war. Those creditors kept reminding Congress that their investment in the war had been patriotic and should be rewarded as such. The Congress, representing sovereign states, had no power to tax anyone. Every state was therefore supposed to levy taxes to retire a proportionate amount of Continental paper. 

The colonies had been suffering a thirty-year economic slide, which was now a full-on depression. People in the countryside were desperate. States couldn’t collect taxes and were already failing to make agreed-upon requisitions of funds to Congress. So Congress printed more and more of its poorly supported paper. As early as 1776, everybody knew Continental paper would depreciate deeply, and by 1780 the Congress had to stop printing it. The bills soon traded at a rate of $125 in paper to $1 in coin. After passing out of circulation, they sold to long-shot gamblers at five hundred to one.

Creditors wondered how Congress could reliably fund such bills. Robert Morris showed them how. He was fat; his financial presence was fatter. He owned ships and warehouses and ran his own networking of trading partners, connecting Philadelphia to New Orleans, Europe, and the West Indies; soon he’d be investing in the China trade. He hadn’t favored American independence, but given a fait accompli, Morris would find opportunities. Exploiting the potential of a war economy, he hoped to unleash high finance, turn America into a commercial empire, and make the merchant class fabulously rich.

In Morris’s view, Congress wasn’t collecting the necessary taxes from the mass of ordinary people. He therefore became intent on imposing on all people, throughout the states, direct federal taxes, payable by the people to Congress – in coin. These taxes would be collected not by weak state governments but by a powerful cadre of federal officers. Once people were inured to direct federal taxation, Morris told Hamilton, cash poll taxes, cash land taxes, and cash excise taxes would soon follow. To ensure payment to the creditors, Morris intended to open, as he put it, the purses of the people. That those purses were almost always empty of the metal he wanted did not faze him.

Another part of the Morris plan, critical to enabling Hamilton’s later projects, was to swell the federal debt to massive proportions. A sufficiently huge debt, Morris believed, would force the Congress to pass federal taxes. So Morris began defining the purpose of the war as sustaining the war debt. Only extending the military conflict, he said, could hold the country together long enough for the government to grow strong and the people resigned to paying national taxes.

Morris enlisted young Hamilton to get the war effort focused on what Morris saw as its main purpose: paying interest to the bondholding class. Here was the origin of Hamilton’s whiskey tax of 1791. Here too was the origin of a resistance movement – typified by the tar and feathering – that would treat the whisky tax as the last, intolerable stroke in a long flogging. The conflict that Alexander Hamilton was taking up in the confederation Congress, and which he would pursue with increasing intensity to its climax in the 1790s, was really a conflict between creditors and debtors.