DISCLAIMER: I am not a historian nor a political scientist. I do have a fascination and interest in the Constitution and so I started reading the Federalist Papers and posting my interpretation on my own blog. I thought it might be of some interest here. Your interpretations and thoughts are greatly appreciated in the comments!
You can find the Federalist Papers in their entirety at The Library of Congress website.
All previous entries in this series can be found in this mothership.
No. 21 below the fold and cross-posted at LiveJournal.
Other Defects of the Present Confederation
For the Independent Journal.
The previous 3 papers gave historical examples of the failure of weak confederate governments. In this paper, Hamilton summarizes the most important defects with the Articles of Confederation so that citizens of the US could make a sound judgment about the ability of the proposed constitution to repair those defects.
Hamilton starts by saying the current federal government has no real authority to enforce its laws. There was no explicit declaration of such powers in the Articles of Confederation and in Article 2, all powers not expressly delegated to the United States were reserved to the states. Sounds like the 10th Amendment to the Constitution, no? Hamilton contends that it is absurd that such a power of enforcement would not be at least implied to the federal government, but given Article 2 about expressed powers, he states that in fact, the United States government had been put in a weakened state never seen in such a government.
If we are unwilling to impair the force of this applauded provision, we shall be obliged to conclude, that the United States afford the extraordinary spectacle of a government destitute even of the shadow of constitutional power to enforce the execution of its own laws. It will appear, from the specimens which have been cited, that the American Confederacy, in this particular, stands discriminated from every other institution of a similar kind, and exhibits a new and unexampled phenomenon in the political world.
The next defect outlined by Hamilton relates to the guarantee of obligations of the states. There was no expressed guaranty between the states - essentially, no backing of obligations of the states by the other states. Again, it might have been reasonable to assume that such a guaranty existed, but again as above, Article 2 restricted federal powers to those EXPRESSED in the Articles of Confederation. Hamilton says this lack of expressed guaranty is not as endangering as the inability of the federal government to enforce its laws.
Essentially this is dangerous to the union in cases of internal dissent (covered in depth in No. 6, No. 7, No. 8, No. 9, and No. 10). The federal government was powerless to persuade other states to help put down dissension in other states. Hamilton uses the recent example of Shay's Rebellion to demonstrate the potential danger of this deficiency.
The tempestuous situation from which Massachusetts has scarcely emerged, evinces that dangers of this kind are not merely speculative. Who can determine what might have been the issue of her late convulsions, if the malcontents had been headed by a Caesar or by a Cromwell? Who can predict what effect a despotism, established in Massachusetts, would have upon the liberties of New Hampshire or Rhode Island, of Connecticut or New York?
In the next section, Hamilton expounds on this conflict between local and federal governance articulating the age old argument of the federal government meddling in the business of the states. He says that at the heart of the matter is a distrust of the federal power, but the strong federal power is the essential component and advantage of the union. Of course, even this power of the government could not negate peaceable changes in state laws, and so Hamilton says there really is no basis for this fear. This power of the federal government would only be used in cases of violent rebellion in the states. Hamilton believes that this larger power to the union would indeed protect against such violent disputes.
The peace of society and the stability of government depend absolutely on the efficacy of the precautions adopted on this head. Where the whole power of the government is in the hands of the people, there is the less pretense for the use of violent remedies in partial or occasional distempers of the State. The natural cure for an ill-administration, in a popular or representative constitution, is a change of men. A guaranty by the national authority would be as much levelled against the usurpations of rulers as against the ferments and outrages of faction and sedition in the community.
The remainder of the paper deals with the treasury of the nation, a subject of Hamilton's expertise (covered in detail in No. 11 and No. 12). Instead of just recapitulating his previous arguments, Hamilton focuses on the issue of a national treasury in respect to equality between the states. At the root of the issue is the inability to determine a common standard for determining the wealth of a state. This is true whether one is comparing the relative wealth between The Netherlands, Russia, and Germany or Virginia and North Carolina (or other United States comparisons). Hamilton says that this inability to accurately compare the relative wealth of individual counties within a state. The reason for this in ability to accurately compare the wealth between states is that this wealth is comprised of a diversity of contributions which vary among the states. This results in:
The consequence clearly is that there can be no common measure of national wealth, and, of course, no general or stationary rule by which the ability of a state to pay taxes can be determined. The attempt, therefore, to regulate the contributions of the members of a confederacy by any such rule, cannot fail to be productive of glaring inequality and extreme oppression.
Hamilton then states that this inadequacy alone would be enough to eventually bring down the union even if a mode of enforcement could be determined.
The resolution of this conflict is to allow the federal government to raise its own revenues through taxes and other means related to consumption. This would allow each individual to determine his tax burden by controlling his consumption. Presumably potential inequalities among states in one area would be counterbalanced by inequalities in other areas. Even in cases where the inequalities were not balanced, they would not be as out of proportion as would be the case of revenue quotas for each state based upon some arbitrary valuation. Hamilton also notes the value of consumption-based taxes in regulating against excesses.
If duties are too high, they lessen the consumption; the collection is eluded; and the product to the treasury is not so great as when they are confined within proper and moderate bounds. This forms a complete barrier against any material oppression of the citizens by taxes of this class, and is itself a natural limitation of the power of imposing them.
Hamilton then proposes that such indirect taxes should make up the majority of the revenue as opposed to a direct tax on property etc. due to the difficulties in assessing fairly the value of such subjective articles. Hamilton then closes by saying that situations may arise where a limit might be made on the amount of taxation imposed by the federal government.
In a branch of taxation where no limits to the discretion of the government are to be found in the nature of things, the establishment of a fixed rule, not incompatible with the end, may be attended with fewer inconveniences than to leave that discretion altogether at large.