Moving Toward Federalism: The Louisiana Purchase and the 2016 Election

With the Looking to the Founders series running its natural course, it seemed appropriate to move to the next stage of American History. Not that there was a lack of material, but a realization that the 2016 presidential election is going to be an all out brawl over the concept of federalism.

Looking at the origins of federalism can help us understand many of the problems we still have today, and sometimes, just sometimes, we might actually find some common ground when we have an honest introspection of our own history.

By 1812, only 10 of the 56 signers of the Declaration of Independence were still alive. A new breed of politicians were running the country, often with very different ideas of which direction the still young, but tested Republic would take. As these politicians gradually, yet not without opposition, moved toward federalism, there had to be a natural starting point for the vast expansion of the federal government’s power.

That first huge step was. . .

The Louisiana Purchase

Thomas Jefferson and his motivations for purchasing the Louisiana Territory from France were discussed in one of the first Looking to the Founders articles, with heavy emphasis placed on the fact that Jefferson’s political ideas evolved over time.

A younger Jefferson would have never pounced on Napoleon’s offer of more than just New Orleans, and even the older Jefferson worried how history would see him for taking such a great risk on credit.

The gamble paid off, but it left a legacy that couldn’t be underestimated — a legacy that we still face in 2015, including:

Early in his career, Jefferson hated banks and believed that debt would be the ruination of the new Republic:

“I own it to be my opinion, that good will arise from the destruction of our credit. I see nothing else which can restrain our disposition to luxury, and to the change of those manners which alone can preserve republican government. As it is impossible to prevent credit, the best way would be to cure its ill effects by giving an instantaneous recovery to the creditor. This would be reducing purchases on credit to purchases for ready money. A man would then see a prison painted on everything he wished, but had not ready money to pay for.” — Jefferson to Archibald Stuart, 1786

This quote is often used by various political ilks to “prove” that Jefferson was against debt-driven spending, but there was a big difference between what Jefferson wrote and what he did (which isn’t too uncommon with modern politicians).

There is no doubt that the Louisiana Purchase was one of the all-time greatest “best buys” in American history, but it did set into motion the belief and practice that the government could keep spending, even with an already existing enormous debt load.

When Jefferson took office, the federal debt was a little over 10 times the annual federal budget (currently it is a little over 5 times the federal budget) at $83 million. The Revolution had still not been paid off, and quite frankly, the new Republic wasn’t very good at bringing in tax revenue.

Even burdened with this debt, Jefferson still took the leap of faith to spend the $15 million for Louisiana.

In fairness, Jefferson was aggressive to drive down the debt, leaving office with just over $57 million — but that was still a huge debt to budget ratio.

From that point, it wouldn’t be until Andrew Jackson that another president would see a significant dip (or at least a steady downward trend) in the national debt.

From what started as a plan to open up the Ohio River and Tennessee to the Gulf Coast by purchasing New Orleans, the total removal of European influence in the Western Hemisphere was put into play.

The European powers were using colonial gains as bartering chips at treaty negotiations; the conquests and wars in Europe would have almost certainly spread into North America had we not taken this stance.

It would take another 50 years for the modern mainland to take its shape, but the overriding opinion was that the Western Hemisphere, particularly North America, was going to be our sphere of influence.

This point ties into the last — that once the government has “conquered” or bought all of these territories, what is done with the land?

In the original territories won during the Revolution, people afterwards moved into the rugged, new lands, formed communities, formed state bodies, then chose to join in with the federal government.

With the vast new lands acquired by federal government, the causation of statehood became somewhat backwards.

Huge land grants were offered to both businesses and citizens, territories were established as existing protectorates of the United States, then, when the state was “functional” enough and the politics were right, Congress admitted them as part of the Union.

Most states west of the Mississippi followed this pattern (with possibly Texas and California being the notable exceptions).

What this did is change the dynamic of statehood.

In previous states, ultimate power came from the fact that the state existed first, then gave some of its power to the federal government.

In these newer states, the federal government was the source of power from the beginning.

Federalism: 2016 and Beyond

Much of the red state/blue state divide is over the role of the federal government, and the nature of modern federalism.

These arguments often wrangle over the budget of the federal government, and more importantly, what this money is spent on.

The current federal budget for 2015 was requested at $3.90 trillion, with the military, Social Security, Medicare, and Medicaid making up two-thirds of the entire budget.

Therein lies the problem, and sadly, politicians on both sides of the aisle can usually agree on this, they just have different ways of wanting to accomplish something different — the federal government is protecting physical and economic security with these programs, not creating future security or economic opportunity for our citizens.

We have trillion-dollar planes that don’t fly right, twice as many aircraft carriers as the rest of the world combined, and the world’s largest functional nuclear deterrent (much of Russia’s is in mothball status) — and yet we still can’t protect our citizens from cyber attacks, growing radical terrorism, and the ever growing number of other different asymmetric threats.

On the economic side, we have a social safety net that is buckling under the weight of an aging population, a system that is perpetually underfunded due to political expedience, and a growing resentment among Millennials and Gen Xers about having to pay the bill.

Neither party has ever been good at consistently paying down debt -- it just isn't politically expedient to ever raise taxes or do without.
David Yee, IVN Independent Author
And this still isn’t even addressing the fact that unlike the Louisiana Purchase, these are not programs that will create future prosperity that builds on itself. Even though the federal government gave most of the Louisiana Purchase away, it still profited enormously through the program by expanding the economy and tax base.

Sadly, all of this comes to a boil when we have a crumbling infrastructure, highlighted recently by the American Society of Civil Engineers, who rated America’s infrastructure on 16 different categories, giving America an overall “D+” grade.

By some estimates, it could cost almost $300 billion a year, almost one-half of the defense budget, to get our infrastructure back into shape.

And real infrastructure projects have real effects on the economy, with the S&P estimating that each $1 spent by the federal government on infrastructure grows the GDP by $1.15-1.25.

But where is the money going to come from? Cutting spending? Neither party wants to cut programs near and dear to their hearts, and cutting “small programs” is only a grandstanding tactic.

At this point, both parties would be goosey about massively expanding the debt with a new high-ticket line item — but therein lies the dilemma of federalism.

Neither party has ever been good at consistently paying down debt — it just isn’t politically expedient to ever raise taxes or do without.

But with this bad of a track record, do we take the big gamble now, THEN aggressively, and honestly, drive down this debt with sound fiscal policies?

This question alone will encompass much of the economic debate in the 2016 election, as both parties jockey in position to win over the voters with their economic ideas for the upcoming term.