Do a Google image search for “John C. Calhoun,” and a matrix of dour, spectral faces will appear on your screen, each framed by an electric shock of white hair. The man in these images reminds me of nothing so much as some Romantic-era maestro from deep in central Europe, a kind of place harboring much culture and just as much terror. He has the look of penetrating insight with a touch of madness. But Calhoun was neither mad nor, I suspect, especially fond of music. He was instead a toxic political genius and the intellectual godfather of the Confederate States of America. For many generations, he was regularly included among a select set of dead white men—together with Andrew Jackson, Henry Clay, and Daniel Webster—who were regarded as practically on par with the founders. He was thought of as a kind of tragic great American, a man who wasted his prodigious legal and political talents on the defense of a barbaric institution.
Calhoun is rarely thought of as a monetary theorist, but his comments on monetary architecture and government spending are surprisingly relevant. Though nearly two centuries old, they hold a lesson about the politics of austerity today, as Republicans oppose needed federal investment in green technology and infrastructure, climate change mitigation, pandemic preparedness, affordable housing, equitable broadband access, and low-cost, high-quality education from pre-K to college. To realize these goals, which are both popular and urgently necessary, federal, state, and local governments will have to deploy the full scope of their fiscal and monetary capacities. We who support those goals can expect Republicans (and corporate Democrats) to blow a lot of smoke in our eyes, generating word cloud after word cloud dominated by “deficits,” “inflation,” and “pay-fors.” Calhoun can help clear the air. His ideas expose the conservative, hierarchical commitments that have always worked to thwart the promise of democratic governance.
Calhoun’s visage and evil brilliance lend themselves to storytelling. So does the irony of his political journey. Bursting onto the Washington scene in 1811, as a representative from South Carolina, Calhoun made a name for himself as a “nationalist” who believed in the vigorous use of the federal government to promote greater union and economic development among the states. President James Monroe soon appointed him secretary of war. The president’s Cabinet was much smaller then, and so Calhoun commanded a portfolio that ranged beyond defense. He had ambitious plans to turn the War Department into a huge government infrastructure agency, responsible for the construction of roads and canals throughout the country. At a time when winter rains turned American roads into impassable goop, and settlers west of the Appalachians threatened secession, few policies could be more important to national survival, he thought, than investment in infrastructure.
But though Calhoun was a nationalist, many of his Southern peers were not. The last thing they wanted was the federal government expanding its powers; it might then use those powers to undo slavery. North Carolina’s Nathaniel Macon spelled it all out in 1818, writing that “if Congress can make canals, they can with more propriety emancipate.” What did this mean exactly? Then, as now, there was a lot of debate about the extent of federal powers under the Constitution. Unlike today, however, the debate was still fresh and wide-open, and so the stakes were particularly high. Calhoun at this time was arguing for an expansive view that would allow his War Department to play a central role in the national economy. Macon was arguing that this was a slippery slope that would empower the North’s growing abolitionist movement. In the 1810s, Southern leaders remained split on these questions, but they were beginning to move toward Macon. In fact, Virginian James Madison had vetoed Calhoun’s earlier infrastructure bill, which Calhoun sponsored in his years in the House, to ensure the Constitution did not get interpreted too broadly.
We are getting closer to the ironic twist. Calhoun lost the infrastructure fight, went home to take the temperature of his constituents, and returned to Washington no longer a nationalist but a man of and for Southern slavery. In 1824, thanks to the oddities of the era’s presidential voting, he became vice president in the administration of John Quincy Adams. Like young Calhoun, young Adams was a noted nationalist. But Calhoun opposed him. Why? Adams intended to revive the infrastructure plans that Calhoun himself had developed, but he was a Northerner and an opponent of slavery (a tepid one at this point, it has to be said). Calhoun undermined the administration at every turn, throwing his support to Andrew Jackson, who trounced Adams in the 1828 election. Calhoun continued as vice president, but mere days after the election wrote the blueprint for South Carolina’s dry run for secession, in the infamous nullification affair. So, within little more than a decade, Calhoun the national politician for federal investment had died and been reborn as the great champion of the slaveocracy, and of federal narrowness and austerity.
Meanwhile, with the federal government on the sidelines, the state of New York took the lead on infrastructure. In 1817, just after Madison quashed Calhoun’s grand plans, New York broke ground on the Erie Canal system. In just a few short years it proved a smashing success, a magnificent feat of technological bravado and political populism. The canal eventually stretched from Albany to Buffalo, linking the Great Lakes to the Hudson River Valley and to New York City. Everywhere the canal touched, spectacular economic development followed. Best of all, the construction paid for itself. The state had issued bonds backed by canal tolls, which proved more than sufficient to cover interest payments. The whole thing worked like a charm.
Other states rushed to copy the Erie’s success, and New York itself began an ambitious system expansion. But then, disaster. Starting in 1837, the country was engulfed by a series of financial crises and an economic depression that lasted into the mid-1840s. Credit froze up, demand fell, unemployment rose. State revenues plummeted, together with canal traffic and property values, leaving many states unable to pay interest on their canal bonds. The result was a wave of fiscal retrenchment. States forswore public investment if it meant taking on debt, marking the origin of the balanced budget constitutionalism that continues to limit state responses to economic crises (and opportunities) today.
It was at this moment that Calhoun, by now a senator, started thinking seriously about money. Why, he wondered, had the financial system frozen up so disastrously? He had good reason to ask, because slavery’s breakneck expansion into the new cotton lands of Alabama, Mississippi, and Louisiana played a key role in bringing on the crisis. Cotton planters and slave dealers borrowed up to their eyeballs and found themselves caught out when cotton prices dipped and British bankers pulled the throttle on the flow of trans-Atlantic credit. Enslaved mothers and fathers, girls and boys, lovers and friends were sold by the thousands to satisfy debts. Their anguish probably troubled Calhoun very little, but the disorder in Southern society most definitely commanded his attention. What did he conclude?
Calhoun’s diagnosis and prescription were penetrating and, when fully digested, quite astonishing. But in order to understand them, you have to first understand something about the monetary system that existed in the United States before the Civil War. Unlike today, the federal government did not issue currency back then. Banks did. When a bank made a loan to a business, it issued paper bills that it promised to redeem on demand in gold, knowing that so long as it maintained a solid reputation, it would have to make good on only a small fraction of these notes at any given moment. The rest would circulate in the economy, passing from hand to hand as payroll, purchases, and other transactions. (The more the money circulated, the more loans the bank could make and the more profits it could earn.) By the 1830s there were hundreds of banks putting out notes in nearly whatever quantities and denominations they chose. Not all of them operated well or honestly. The bills were also pretty easy to forge. As a result, every ordinary monetary transaction was fraught with uncertainty about the soundness of the bills being used. Notes circulated at various discounts on their face value, reflecting people’s confidence and demand. It was, to say the least, rather chaotic and susceptible to sudden bouts of mass panic.
Calhoun recognized that the financial crisis had exposed the fragility of the system, and he drew the obvious conclusion: Instead of allowing a rabbit’s warren of small and panicky financial bunnies to issue their own cash, the federal government should establish a uniform public currency. His theory of monetary value was simple and compelling. If there was steady demand for a given type of money, there would be general confidence in its value and it would continue to circulate without depreciating. During the financial crisis, the stop to business had essentially led to a drop in the demand for bank money, which quickly lost value relative to gold. The federal government, however, could always generate demand for money simply by raising taxes and fees, tightening regulations, or selling assets, including its huge fund of public lands. The government’s “fiscal action,” Calhoun said, “pervades the whole community, and affects, more or less, every individual in it, and it must, of course, create a general demand for whatever it receives and disburses as money in the management of its fiscal concerns.” This basic principle was the same for any money-issuing entity: There had to be a durable mechanism to generate demand for your bills. But, Calhoun pointed out, “there is this difference … that the demand of the Government is far more universal, and may be rendered more steady, which gives it a decided superiority over the credit of the banks.” In other words, Calhoun was saying that public money was superior to private.
This had potentially far-reaching implications. If the federal government could operate a sound monetary system simply by spending and collecting the cash it created itself, and do so better than other financial entities, could it not—should it not—massively fund needed infrastructure that clearly promised large social returns? Suppose that the federal government had wanted to build the Erie Canal. It could have issued its own notes and accepted them back in payments for tolls, ensuring that the bills not only financed construction but also use of the canal. With steady demand, the money would hold its value as it circulated more widely, quickening additional economic activity. Financing like this was not available to New York, because the Constitution barred states from issuing their own money. Instead, it had to pay fees to Barings Bank, in London, and interest to British investors so that it could borrow on international capital markets.
The federal government faced no such limitations. Yet Calhoun immediately put the kibosh on any grand spending plans. He strongly “resisted any extravagant appropriations” and insisted on strict “economy and accountability” in the federal budget. It all sounds reasonable enough in the abstract. In practice, it meant fiscal austerity. Calhoun stated that “he wished to be distinctly understood that he did not carry his ideas of the Government using its own credit beyond the temporary wants of the Treasury.” Put simply, the federal government could deploy its moneymaking capacity to get the country past the worst of the financial crisis, but not a dime after that. In the end, Calhoun preferred bad money to good, because it better protected the foundations of the slave society that he wanted to defend above all else.
Were these standard-fare conservative principles? For some of Calhoun’s followers, perhaps. But Calhoun had bigger ideas. He was a pro-slavery maximalist with a panoramic conception of slaveholder sovereignty. He believed that a few were made to rule and others to serve. For Calhoun, fiscal austerity was analogous to Macon’s constitutional literalism: a bulwark against democratic power that would surely come calling one day for slavery. Macon had already envisioned it decades earlier: “We have abolition, colonization and peace societies. … If the general government shall continue to stretch its powers, these societies will undoubtedly push it to try the question of emancipation.”
Today’s Republicans, of course, are no slaveholders. It would be slander to suggest that they are. But when Republicans are firmly rooted in the states of the old Confederacy and can regularly be seen waving the battle flag’s stars and bars; when their state legislators are promoting the Big Lie and restricting ballot access in a way that targets Black and other minority voters; when some of their leaders can be overheard, from time to time, musing about bringing back property qualifications for the franchise—when Republicans are doing all these things, things that seem awfully reminiscent of Calhoun and his ilk, it needs to be asked if the similarities do not extend further.
Monetary discipline and fiscal austerity are not necessarily smoke screens for an undemocratic political agenda. But in the current moment they are precisely that, and are operating in much the same way as they did in Calhoun’s time. Calhoun ruled out ambitious federal infrastructure spending at the very same time as he fully recognized the desirability of such a project, and the technical superiority of financing it with good public money. Calhoun knew very well that infrastructure should be a government mandate. But he ultimately subordinated that knowledge to his deeper commitment to the hierarchies of race, class, and gender. Save the hierarchy, and the people be damned, was the real meaning of his politics.
Calhoun died in 1850, the Confederacy in 1865. Yet the politics of austerity endure.