One of the most talked-about topics of the past week has been the Treasury Department's announcement that former President Andrew Jackson's image will no longer appear on the front of the $20 bill. Starting in 2030 (or, one hopes, much sooner than that), the face of Harriet Tubman will instead be reproduced on the front of the twenty.
Understandably, most of the commentary on the issue has revolved around questions of race and American history. The Democratic Party has recently been involved in a reassessment of its icons, with the long tradition of "Jefferson-Jackson Day" political events coming under special scrutiny. Jefferson's slave ownership and related matters are troubling, while his defenders claim that his views were more complicated and need to be evaluated in their time. (I take no view on that issue here, because I have not read enough of the relevant history to form an opinion.)
But Jackson's history is much more straightforward and lacking in nuance: He was not only a slave owner but a vicious bigot who carried out genocidal purges of Native Americans (the Trail of Tears being Jackson's brainchild). Which means that the current political analogies between Jackson and his defenders is too obvious to ignore. As Paul Krugman noted in his NYT column today, Jackson was "a populist who campaigned against elites but was also, unfortunately, very much a racist, arguably an advocate of what we would nowadays call white supremacy. Hmm. Does that make you think about any currently prominent political figures?"
Krugman goes on to discuss the historical significance of keeping Alexander Hamilton's portrait on the $10 bill, which makes for very interesting reading. Here, I want to focus on the economic side of Andrew Jackson's views. As many commentators have noted, Jackson was a particularly poor choice to be celebrated within our modern currency system, because he hated paper money and was fully committed to gold and silver as the only "real money."
Anti-paper-currency populism has a long history in this country. It is an odd and uneven history, of course, given William Jennings Bryan's famous "Cross of Gold" speech in 1896, although even that speech was merely a call to use silver as well as gold to back U.S. currency. Still, the Ron/Rand Paul anti-Fed types (now fully supported on this issue by Ted Cruz ) are the obvious heirs to Jackson's retrograde economic views -- and, in far too many cases, to 21st-century versions of his other views.
The people who hate today's Fed use many of the same arguments that Jackson used against the Second Bank of the United States, which he shut down during his presidency. That decision was economically disastrous and was followed by a financial panic immediately after Jackson left office. ("Panic" was the 19th century term for a severe economic depression.) It was not possible to develop a modern economy without a modern, non-metallic financial system, but Jackson did his worst to hold back history.
Yesterday, a reporter from PolitiFact contacted me with a surprising question. Is Ben Carson correct, she asked, that "Andrew Jackson was the last president who actually balanced the federal budget, where we had no national debt"? I had seen Carson on "The Daily Show with Trevor Noah" earlier this week, so I knew that he has been trying to stay in the public eye. I had not known that he was jumping to Jackson's defense, but I guess I should not have been surprised, given everything we know about Carson.
In any case, the PolitiFact reporter sent me a link to a website that is run by the Treasury Department, "TreasuryDirect." I am quite familiar with that website, because it is the go-to source for data on federal debt. What I had not known was that the site also includes a page with some brief historical commentary regarding the national debt in the 19th century. There, we learn that Jackson indeed was the only president whose term included a time when the national debt was zero.
Even so, the reporter published a column late in the day yesterday that correctly refers to Carson's statement as "accurate but needs added context, which is our definition of Mostly True." The added context included some statements that I provided in an email. Indeed, the main PolitiFact page that provides a link to the column about Carson describes the statement as "Mostly True" but (calling me an "expert," which will make my mother happy) quoted me as saying that Jackson's debt repayment was a "one-time gimmick."
My larger point was that what modern Republicans think of as a huge achievement, paying off the national debt, was not only a gimmick but an object lesson in why people should not be so obsessed with the debt.
Before expanding on that point, I must take a moment here to note that debt obsession is not limited to people like Carson, or even to Republican politicians more generally. The TreasuryDirect narrative itself includes this: "The Jackson administration ended with the country almost completely out of debt!" Note the exclamation point: Wasn't it great, the author seems to say, that the country once had no debt at all?!
No, it was not great. The TreasuryDirect page confusingly jumps between 1835 and 1837 in its description of events, but the bottom line is that Jackson's big achievement was the direct result of "liquidat[ing] the Second Bank of the United States, returning the government’s original investment plus a profit. This resulted in a huge government surplus of funds."
In my response to the PolitiFact reporter, I offered this analogy: "What Jackson did was the equivalent of a CEO selling all of the company's computers to pay off the company's debt. No CEO would view zero debt as a sensible goal in the first place, but even one who did want to make that happen would know not to do something so utterly ridiculous."
Everyone knows that the government -- or any business, family, or other economic entity -- can sell assets for cash, but once assets are gone, they are gone. That is why I called Jackson's move a one-time gimmick: You cannot liquidate the same asset every year and use the money to pay for the government's operations on an ongoing basis. You could sell the Statue of Liberty ... once. For a lot of money, perhaps, but not more than once. Swapping non-cash assets for cash does not increase the country's net worth.
But Jackson's move was even worse than simply selling assets. The particular asset that he liquidated was, after all, the Second Bank of the United States. The only way to try to turn that gimmick into a long-term financial plan would be to create and then liquidate a central bank every year. Guess how well that would work? Moreover, for Fed haters, the point is not to revive and kill the central bank every year, because the only way the Fed has any market value is by having actual power, which is exactly what the gold bugs hate most.
As the PolitiFact article points out, the national debt did become positive again immediately after Jackson's gimmick. That is because Jackson did not even do what fiscal conservatives claim that everyone should do: set up the government to run a balanced budget every year after the debt reaches zero. (Carson, like many people who like to rant about the government, clearly does not understand the difference between deficits and debt.)
Applauding Jackson's one-shot move thus amounts to saying that it is good policy to bet the nation's monetary future on "a barbarous relic" -- gold -- which is crazy on its own, but also that he was fiscally smart because he papered over deficits by liquidating a huge government asset without changing the underlying spending and taxing patterns of the country.
As I say in the PolitiFact article, it is actually a very good thing that the country did start borrowing again. The history of the Industrial Revolution in the United States, after all, is written in debt. Both governments and businesses borrowed heavily -- from foreign sources -- to build roads, canals, railroads, factories, dams, bridges, and everything else that turned the U.S. into an economic power.
What worries me is that the article then says that I argued "that it is not always desirable to bring debt down to zero." No, it is never desirable to bring debt down to zero. The one time the federal government did so, monetary and fiscal chaos inevitably followed. Doing so today would be even worse, yet that is exactly what many Republicans, from the most establishment figures to Tea Partiers to Donald Trump, say we must do. (I say "many" because some do seem to want to balance the budget without paying down the debt, which is still a bad idea, but better than the pay-it-all-down obsession.)
The knee-jerk defense of Andrew Jackson from current conservatives probably is driven mostly by their automatic defensiveness about anything to do with racism. Yet a closer look at Jackson's economic ideas shows that he was the forerunner of the worst policy impulses in today's Republican Party.