chair. thell turn it over to manual introduce our chairman of the board. >> hello everyone. it is not -- nice to see so many people here celebrating best -- 261st0 birthday. augmenting interpretive programming there. special thanks to david callan and nizam of american finance staff for host into this program. this is the seventh year where we partnered with both exhibits. we think museum for that. c-span's american history tv continues is valuable role in sharing the key historical record nationwide. three initiatives have happened in the last year in part of celebrating hilton's birthday to ensure a more accurate understanding of who he was. -- hamilton's birthday. the city tavern in philadelphia, that had all of the founding fathers except for him, that has been remedied. another moment in june of last year, hamilton was inducted into the new york state writers hall of fame. and major news for the first time to be announced publicly. new discoveries related to alexander hamilton's life are now being posted weekly by national hamilton scholar michael newton, including the oldest known hamilton documents before 1768 and 1769. these detailed hamilton's -- biological details of hamilton's maternal grandfather are available. on st. croix, a 10-year-old alexander hamilton was introduced to dueling. last week, there was a detailed sourcing of funding of hamilton's education in new jersey and new york. it was not because of the hurricane letter he wrote. it was not a reference. -- a reverend. new discoveries are going to be going on for months and months. i want to encourage those of you at home in upper manhattan to see it. it has been restored. our speaker, now. richard sylla is professor emeritus of economics at the stern school of business at new york and if -- you knew -- new york university. he was henry kaufman professor of the history of financial institutions. dr. sylla is also research associate of the national bureau of economic research. the professor received his ba, ma, and phd from harvard. his research focuses on the financial history of the united states and comparative contexts. he is the author of a number of books, including "alexander hamilton: the illustrated biography," beautiful. pictures help us understand the financial dimension of it. the doctor will be signing those after the question and answer today. he has also written "the american capital markets: 1846-1914." he has co-authored a book on alexander hamilton that is going to be available this year. he co-edited the economic policy of the 1790's, as well as articles, essays, and reviews on business, economic, and financial history. dr. sylla is a former editor of the journal of economic history. he has served as the chairman of the board of trustees and in the association of quantitative economic historians. he has served as president of the business history conference, the leading professional association, which presented their lifetime achievement award to him in 2011. dr. sylla currently serves as chairman of the board of trustees of the museum of american finance. we are privileged today too. about hamilton on financial responsibility, with one of our nations foremost financial and economic historians. ladies and gentlemen, dr. richard sylla. [applause] dr. sylla: thank you for that kind introduction. thank all of you for coming out on hamilton's 261st birthday. thank you to the society and museum for sponsoring the event. it is an honor to be here. my topic is timely. as congress passed a tax cut, that is estimated will add $1,000,000,000,000.5 -- $.15 trillion dollars to the national debt, my topic is hamilton on fiscal responsibility. whatever will be the merits of the recent tax cut, and i think there are some, there is little doubt hamilton would regard the law as not passing the test of fiscal responsibility. hamilton would regard many of the fiscal policies and some of the monetary policies of the past half-century, the middle of the 1960's, as not passing the fiscal and monetary responsibility tests as he defined them in the early to mid-1790's, during and after his tenure as our first secretary of the treasury. there is probably a good site to that -- good side to that. maybe before 50 years ago, the first part of our history, maybe the policies would have passed hamilton's tests. it is a matter of your arithmetic, but you may be surprised when i tell you, i have lived through slightly more than a third of u.s. history. [laughter] since george washington took office in 1789. anyone in his or her late 70's could probably say the same thing. we have a young country. even someone born in 1940 has lived 77 years. if you go back to 1789, when washington famously took the oath of office, what is it -- in 2015, it was 75 years from 1790-1865 to the end of the civil war. another 75 years until i was born. in 2015, i could say i lived through a third of u.s. history, under the constitution. now it is 2017, and i have lived through more than a third of u.s. history. when i look at some of her monetary policies over the past half-century, i am talking about an era i witnessed in my adult life, and as a historian, i have studied quite a bit of history in those 150 years when i wasn't around. for the most part, from the 1790's into the middle of the 1960's, was a long time of responsibility as hamilton defined it. to set the stage, in 1965, when i was a 25-year-old phd student, our national debt, the debt. over 175 years of history was $317 billion. that sounds like a pretty big number. three times jeff bezos' net worth. [laughter] it is a big number. by 1981, i was 41 years old. the debt is $317 billion in 1955. by 1981, it had traveled -- tripled to almost a trillion dollars. by 1990, it tripled again, to $10 trillion -- 3.2 trillion dollars. by 2008, it tripled again, $10 trillion. since 2008, it has doubled to more than $20 trillion in another nine years. $317 billion of national debt is now over $20 trillion. if you do the arithmetic, the national debt has increased 63-fold from that time 50 years ago, when i was writing my phd thesis. i know some of you are thinking, there has been a lot of inflation. we will get back to that. i won't neglect to tell you something about debt-gdp ratios later on. rand mentioned the alexander hamilton illustrated biography that has been out able more than a year now. -- a little more than a year now. david and i have a book and press right now, "alexander hamilton on finance, credit, and debt." these are a collection of at&t documents hamilton -- 18 documents hamilton wrote over the course of his career related to finance. we have annotated every document as to why it is significant. the writings on finance have not been featured as much as they might have been given. this was the importance of hamilton's work. hardly anything he did was more important than his financial reforms. you want to read 10 pages of tax increases -- you wouldn't want to read the 10 pages of tax increases hamilton has in some of his documents. but we make it more interesting to a modern reader. we had to read what hamilton wrote very carefully. as i did so, it became even clearer that hamilton had these very definite ideas, clear and consistent ideas that started when he was very young, and he maintained him throughout his career. the first relevant document was in 1781, when he was a soldier marching in the military at yorktown. the last one is from 1795, which he wrote a few months after he stepped down from treasury secretary. the clearest analysis on the subject of fiscal responsibility and white proves difficult to achieve and how it can be achieved -- and why it proves difficult to achieve and how it can be achieved came january 7 -- january 16, 1795, in an address to congress on public credit. he was a private citizen again, having resigned as of january 31, 1795. this is a rather long report that deals with finance and debt management, technical subjects that are often ignored. i am sure there are a bunch of hamiltonian's in the room. i am not sure how many of you have dwelled on this one technical report -- longer technical report. most people don't say a lot about it, this technical finance stuff. it proves that the charges of hamilton's political opponents, jefferson and madison and others, they charged that hamilton wanted to perpetuate and grow the national debt and use it to manipulate congress or markets. those were the charges leveled against him. this report shows those charges were so much "fake news." [laughter] i wrote about earlier this week and then i read the "times," this morning. it said that fake news is the phrase of the year. a few years ago, it was "selfie." "fake news," which i just use as an expression,'s last year's word or phrase. i have pages from the forthcoming book. i wanted to show you what hamilton actually said about the problems of fiscal responsibility that he faced. this is from the 1790's, january 1795. washington had just given the state of the union address, and hamilton says, there is no sentiment which can better deserve the serious attention of the legislators of the country than the one expressed in the speech of the president, which indicates the danger to every government from the progressive accumulation of debt. the tendency is perhaps the natural disease of all government. it is not easy to conceive anything more likely that could lead to great and convulsive revolution. one of the results of creating new causes of expenditure, i will paraphrase now, there is always new things to spend money on. on the other hand, there is a general propensity and those he administer -- and those who administer the affairs of the government to shift a propensity which may be expected to be strong. the more people get to vote for things, the more they will vote for, don't tax me. let's borrow it. hamilton says, to extinguish a debt which exists is almost always favored by public feeling and opinion. to pay taxes for one or the other purpose, the only means of avoiding the evil, if you want to extinguish the debt hamilton says, pay more taxes. this is always more or less unpopular. spending is popular. paying taxes is unpopular. it is no uncommon spectacle to see the same ends clamoring for occasion of expense. they have to be in unison with the present humor of the community, claiming against the public debt. for the production of it as an abstract basis. the government against every plan of taxation proposed to discharge old debts. hamilton called this "these un-handsome arts." artificial embarrassment in the way of administrators of the government serves to promote the accumulation of debt by leaving that which at any time exists without adequate provision for its reimbursement. and preventing or delaying new energy when new taxes or expenses occur. the consequences of the public debt swells, and the burdens of the people gradually increase until they become intolerable. such a state of things breed disorder in the whole political economy. there can be no more sacred obligation on the public agents of the nation than to guard with provident foresight against so mischievous a results. he refers to his earlier plan, do you want to improve the favorable situation in which the united states stood at the time for extinguishing with reasonable whole or any the country, and four-lane the foundation -- and four-lane -- for laying immortality to public credit? he didn't get to his actual plan, but that will become apparent in some of the earlier documents. hamilton solution to the problem of fiscal responsibility is quite simple. what you need to do is couple borrowing measures with revenue measures to pay the interest of the money borrowed, plus a little bit more. with that little bit more, depending on how much more, it will allow the debt to be retired in some number of years. with the are all pretty familiar with this. -- we are all pretty familiar with this. we are paying extra to not just pay the interest on a mortgage, but to have it go away in 30 years. hamilton's idea was this is the way the government should run itself as well. couple borrowing revenues with revenue measures -- couple borrowing measures with revenue measures to pay a little bit more. he wanted public credit to always be there when we needed it, when an opportunity arose, like louisiana, or to get through the civil war. hamilton's fiscal responsibility can be traced to founding documents. 1781, he was would tenant colonel in the continental army marching toward yorktown. -- he was lieutenant colonel in the continental army marching toward yorktown. he was somewhere between new york and yorktown, marching with washington's army. he is a 23-year-old soldier. -- he is a 24-year-old soldier. one of his insights, the great defect of the confederation, it gives the united states no property, no revenue, other than the means of acquiring it. he says that is a bad idea. he says, congress will do -- will depend on several grants at the expense of the federal government, and will neither have dignity or credit. credit supposes specific and permanent funds for the payment of interest, with the moral certainty of the financial redemption of the principal. it will probably require more on account of the general dividends as a result of the past disorder in finance. it will appropriate funds for redemption of the principle of an indeterminate period. hamilton is a 24-year-old soldier, but he sounds like a professor. key as a footnote to his thought -- he adds a footnote to his thought, which contends the germ of hilton's later thoughts of fiscal responsibility. "it might be a good restraint on the spirit of running in debt which cart -- which governments argue to be effective, to make it sufficient that they shall be obliged to appropriate funds for the payment of principal as well as interest." in one sentence, that is hamilton's fiscal responsibility. when you borrow money for whatever reason, you should appropriate, increased taxes to pay the interest of the money you borrow, and a little but more so you can repay the principal at some point. as a 24-year-old soldier, wondering what is going wrong with the country's finances, he hits on the solution to the problem. nine years later, in the famous report on public credit, january 1790, the original printing of it here is in the museum's collection. there are several paragraphs to the idea of fiscal responsibility. this is a fairly well-known passage. he says in the january 1790 report, persuasive as the secretary is, and he is now first secretary treasury of the united states, persuaded as the secretary is that the proper funding will render it a national blessing, yet he is so far from exceeding the position it in latitude in which this is sometimes laid down that public debt or benefit be positioned inviting to reliable and dangerous abuse that the secretary arguably wishes to see it incorporated in the fundamental maxim in the system of public credit in the united states, that the creation of the debt should always be accompanied with a means of extremist meant. if he regards this as the true secret for rendering public credit immortal. this is a situation in which -- in which there may not be an adherent to the maxim. at least he feels this may be attended by the united states and they may commence their measures for the establishment of credit. in his great report, he is calling for the assumption of state debts and restructuring of the national debt. he reiterates what he can't do in a footnote some years earlier. between 1790 and 1795, hamilton did not succeed in getting congress to adopt his measure for making public credit immortal. congress appropriated money, but it did not always bring in new taxes. the financial situation of the country had improved greatly. the united states began growing rapidly. the debt actually rose in 1790-1795. but i will tell you later it went down a great deal in terms of gdp ratio. the death rows able bit under hamilton, but the gdp for much faster. the debt actually rose, but many congressmen, and others, complained the debt was not being produced, even though it was their own behavior and the failure to adopt hamilton's regulations to make public credit in that was responsible. -- immortal that was responsible. "oh no, we can't raise taxes, cut expenditures. but dammit, get us out of this debt!" hamilton's frustrations about that came out in the 1795 report. the fourth and final hamilton document pertaining to fiscal responsibility is his defense of the funding system, which is incomplete. perhaps he wrote it in 1795, six months after stepping down from the position of secretary of the treasury. it wasn't even published for another century. the incomplete document discusses the tubing features of hamilton system. first, the reasons for a soul in the state debts -- for assuming the state debts. why he did it the way he did in page after page. second, the reasons for funding the debt. this means specifically dedicating revenues before they could be used for anything else. you promise the bondholders these particular government revenues will first go to paying the interest on the debt. funding had been attacked by hamilton's enemies and political opponents, one was the charge that funding, by making things better on better terms -- by making credit available on better terms. it encouraged that. your own private credit should not be good. most of us think the opposite. that will encourage you to borrow more money. that will get you in trouble. hamilton had no trouble undercutting such arguments. an analysis of this argument proves that it turns upon the the death rows able bit under hamilton, but the gdp for much faster. the debt actually rose, but many congressmen, and others, complained the debt was not being reduced, even though it was their own behavior and the failure to adopt hamilton's regulations to make public credit immortal that was responsible. they said then just like they do today, "oh no, we can't raise taxes, cut expenditures. but dammit, get us out of this debt!" and hamilton's frustrations about that came out in the 1795 report, already quoted. the fourth and final hamilton document pertaining to fiscal responsibility is his defense of the funding system, which is incomplete. perhaps he wrote it in 1795, six months after stepping down from the position of secretary of the treasury. it wasn't even published for another century. the incomplete document discusses the defence features of hamilton's system. first, the reasons for assuming the state debts. why he did it the way he did in page after page. second, the reasons for funding the debt. this means dedicating specific revenues before they could be used for anything else. you promise the bondholders these particular government revenues will first go to paying the interest on the debt. funding had been attacked by hamilton's enemies and political opponents, mostly on specious grounds. one was the charge that funding, by making credit available on better terms encouraged the encourage of more debt. your own private credit should not be good. most of us think the opposite. we want to have a good credit. but you are wrong. but they said you should not have more credit because that will encourage you to borrow more money. that will get you in trouble. hamilton had no trouble undercutting such specious arguments. he said an analysis of this argument proves that it turns upon the abuses of a thing intrinsically good. meaning having good, excellent public credit. this is an excellent point. i would argue over the last 50 years, we have been abusing public credit. public credit is intrinsically good, but it can be abused. hamilton foresaw that. would enjoy fact, excellent credit for the next two centuries, and would borrow money to enlarge its territory. we would do this often by borrowing money to pay for money for new territory. the important point was to finance all the wars of the united states. so hamilton was right. but he may have been too optimistic that a thing as intrinsically good as having excellent credit might not be abused. a taste -- a case could be made that we have been abusing our credit for the past half-century. the 63 times the debt has multiplied in the past half-century might be evidence of that. how has this happened? it seems that happened for s hamiltonthe reason outlined in his january 1795 report. congress appropriates ever more money to defend us from our enemies and pay us our entitlements, such as social security and medicare. but if anyone suggest we ought to raise taxes to pay for these things, congress and the president pleases us by saying, we are already overtaxed. so we cannot raise the taxes to pay for these things. for a one of the past 50 years, and this is history that i have 1981,at least since congress and presidents argue for cutting taxes even as they spend more. they have argued for cutting taxes even as they spend more and more. at the same time, they complained about the national debt being too large. now and then the even shut down the government when the debt bumps up against the debt ceiling congress has enacted, in what i would call a charade of fiscal responsibility, . it is a charade because the debt ceiling makes it impossible to pay for everything congress has authorized. when are we going to bump into the charade? this month i think we are going to have it again. things, called these unhandsomendsome -- arts serve to promote the accumulation of debt. the weight becomes intolerable. eventually, he forecast disorders and revolutions and convulsions will take place. there are -- therefore he said there can be no more sacred obligation than on the public agents of a nation that should guard with perseverance against those mischievous results. the united states managed to avoid these mischievous results for 175 years, but not quite in the way hamilton foresaw and recommended. he wanted congress and by implication state and local authorities to couple their borrowing of state and local authorities with revenue measures to retire the principal eventually. the history of the u.s. national debt shows the interest was always paid, which is why we have such excellent credit in the world -- when there is turmoil in the financial markets, sell things and buy u.s. government debt because it has the history of never missing an interest payment. but we always pay the principal back not by tax increases that accompany the borrowing, but by economic growth. hamilton i think probably should have seen, implicitly i could say he did foresee, that as the economy grows, whatever the government is taxing is going to generate more revenue. so through most of our history, pretty managed our debt well by growing the economy. growing the economy. and that led to a larger economic base, so that we were able to pay down our debts. i think what we did have until the middle of the 1960's was a certain amount of restraint. that as the debt would go up in wars, but then the economy would grow, and that would reduce the burden. that is where we get to the notion of the debt-gdp ratio. that is an important thing to look at. i'm going to give you some debt-gdp ratio. in 1790, the debt was $77 million. that was the debt hamilton restructured. and it was 41% of the gdp. the debt income ratio was 41%. the debt actually rose to $84 million by 1795, when hamilton stepped down. but the gdp ratio fell to 22%, not 41%, because of economic growth. a quick tour. in 1811, because jefferson and madison had cut expenditures, maybe a little too much. in 1812, the debt-gdp ratio was only 6%. but the war of 1812 raised the debt to a much higher level. but the debt-gdp ratio was 14%. from 6% to 14%. many of you know that in the middle of the 1830's, this ratio went to zero. and that is because -- you see the pattern. you borrow a lot of money during war, you did that and the american revolution and war of 1812, but then after the war, the economy grows, and the government takes its cut of a growing economy. and because of restraint and spending, it reduces debt income ratio. by 1860 the debt income ratio was 1%. the debt in 1860 was 1% of the gdp in 1860. the civil war gave us a $2.8 billion of debt. at the end of the war the debt gdp ratio was 30%. by 1893, because of a growing economy and reluctance of government to spend wildly, the civil war-debt gdp ratio was down to 6%. in 1914, the debt-gdp ratio was only 3%. 32%., world war i, up to 3% to 33%. by 1930, it is down to 18%. the depression raised it to 43%. in 1939 the debt gdp ratio went to 43%. in 1939, a lot of money was borrowed and the economy didn't grow much in that period. 43% was like hamilton's 41%. 1946, we get the all time peak. world war ii rosie debt gdp ratio to 118%. when i was four years old the national debt was larger than the gdp. even though in 1945 the united states gdp was half of the world's gdp. so we borrowed a lot of money in world war ii. by 1959 when i was a freshman at harvard, that 118% debt-gdp ratio was down to 54%. not because the debt went down, it didn't go down. the debt actually went up a little bit, and the economy grew a lot. some of us old-timers remember the 1950's were really a pretty good economic time. by 1965, it is down to 43%. 1790, the gdp ratio was 41%. old running5 years my phd thesis, it is down to 43%. this is when i think things start to go wrong, but it did not become apparent right away. because the ratio went down in the 1970's, at 43%. it was down to 31% by 1981, even though the national debt had tripled in that period. those of you that are old enough to remember the 1970's, there were very high inflation rates. so what we were doing then was inflating ourselves out of debt, essentially. and the national debt tripled. but the inflation rate was very high. gdp grew faster than the debt did even though the debt tripled so the ratio went down to 33%. inflating your way out of debt is not something hamilton would have approved of. since 1981, the debt-gdp ratio is 31%. 1986 it is 46%. 1990 it is 54%. this is the period when some of us will remember ronald reagan wanted to increase defense spending and have tax cuts. o'neill, hend tip says i will go along with your increase in defense spending, as provided you don't cut any of our pet programs. hamilton talked about this. so the debt-gdp ratio by 1990 had gone up from 31% to 54%. by 1993, we had the gulf war. it was up to 64%. to 2001,ctually, 1993 i think clinton and newt gingrich were more responsible. they controlled spending and the economy grew. debt-gdp ratio fell from 64% in 1993 to 55% in 2001. so we get to our own century now. 2005, it is up to 60%. remember george bush cut taxes? 2008, it is up to 69%. 2009 because of the financial crisis, it is up to 83%. is3, the debt gdp ratio 100%. 2016, 104%. 2017, we don't know yet. fairly recent. but it is like 105%. this is what i mean about the last 50 years, showing signs of fiscal irresponsibility. so i think now that hamilton warned us against this. he had a consistent way of trying to keep us out of debt. even if we didn't enact the revenue measures to a company specific borrowing, we were bailed out of running up large debts and so on by the growth of our economy. one thing that bothers me now is we are running up our debt faster but people are saying our growth rate is likely to be lower. we cannot count on 3% or 4% growth to bail us out of our fiscal follies if the economy only grows at 2%. the other thing that bothers me about our current situation is that interest rates are extremely low. and that has made it easy for us to not sort of say that the budget is being blown by paying interest. but let us suppose that interest rates rise by maybe only 1%. when you have $20 trillion of debt, 1% increase is an extra $200 billion that has to be paid. the federal government has to find. how are they going to do that? raise taxes? that will probably issue more debt and that could be dangerous. so i hope i have not spoiled your day. [laughter] but i think it is something we ought to think about. on hamilton's 261st birthday. i think we should remind ourselves about his analysis and warnings and maybe do something about it before it is too late. and i haven't actually gotten into the full dimensions of the problem we have. i steered you a little bit with the rapidly rising debt gdp ratio but there are certain things, like unfunded liabilities, medicare, that are not really part of the national debt. that could be an even bigger problem. so i think we have kind of gotten ourselves into a fiscally irresponsible situation. and as we often do, we look back to the founders of our country, those great men who give us some guidance, to get our act back together a little more. thank you very much for your attention. i am willing to take some questions now. [applause] the q&a is here. wait for your mic so cspan can capture you. >> in the last few hundred years, you imply these are different times of different cultural expectations. there are times when society elects people who do not want to raise debt or taxes, and there are times like now, when the kind of person you send to congress does not seem to fear debt as much as in the past. certainly hamilton was less fearful of debt than his unquote jefferson and others. can you speak about the various times in the last 200 years when the temperament of the community, the country, affected the debt? dr. sylla: hamilton thought the debt -- bob wright talked about this last summer -- hamilton more than once said the national debt, provided it is not excessive and well-managed, can be a national blessing. that was an odd idea for the 18th century. the polite adam smith and david hume and other writers in the 18th century did not like this at all. jefferson was much more attuned to the prevailing view. but hamilton knew that debt is just the other side of credit. and credit is really a good thing. hamilton saw credit as a new power in the world. he actually says that if we don't have a good credit in the united states and britain does in maybe france does, we are vulnerable for them to take us over. credit is like a weapon in a war. so hamilton did have a different idea than most people. they made fun of it. what a terrible idea. hamilton probably should have said credit is a blessing, but credit and debt are the same thing, two sides of the coin. the temperament at various times -- i think that the pattern we had for 175 years of u.s. history is, yes, we will run up the debt in wars or if we can double the size of the country in the louisiana purchase. but when we do that, afterwards we are going to be fiscally responsible, restrained spending, let the economy grow. and that will reduce burdens of the debt. i think that was basically the way we ran the country until the 1960's. yes we would incur debts in wartime and the highest ever debt-gdp ratio was in 1946, 118% in world war ii. but it is cut in half. i think something changed in the 1960's. maybe we can all collectively figure it out, i don't know exactly what it was. but we began to not care that much. whether the government financed itself by eschewing debt. it didn't make any difference whether you raise taxes or borrowed money. it is kind of a far-fetched idea but it was kind of saying that whenever the government borrowed a lot of money to finance itself we all knew they would come and tax us later on so we would save her money. we anticipated taxes going up whenever the government financed itself so we would save money right away. it is an interesting economic concept but i don't think it actually works in practice. so there is a change. the first 25 years of my life, we seemed to be doing the same things we did through our previous almost two centuries. in the last 50 years of my life we are doing something else. i see the change, but what is behind it is what you're getting at. maybe it is something we should think about. maybe somebody else will have a notion. i don't know what the precise answer is. >> thanks for coming today. the question is, can you discuss the crowding out effect and what influence that has on the private sector? and the second question is and at what point does the government borrow too much? 130% of gdp when it crowds of the private investment and tanks us? dr. sylla: i think crowding out is, you know -- i have to say that the run-up of the debt during and after the financial crisis, when the unemployment rate was rising and we were having close to 10% unemployment and the economy was in the great recession, you don't have to worry about crowding out in those instances. that is a keynesian idea. most of us economists now say the great recession lasted longer than it should have and our growth has been slower since the crisis because the obama administration did not have a bigger stimulus. what, $700 billion or something? it probably should have been bigger. the economists were only in office for a few months and they didn't realize how about the recession was going to be. so i don't think you have to worry about crowding out when the economy has a lot of unemployment in a recession. but fast forward to now. now we have pretty much full employment and the economy is growing at 3%. this is not the time when you want to have a tax cut finance d by higher debt. i think in this situation, at full employment, if the government over the next decade or so runs up the debt $1.5 trillion more than it would have, that money is not going to be available in markets for private investment. so crowding out is a problem, but it is not a problem all the time. it is a problem when the government is competing with private enterprise for capital. when does it get too big? that is really an interesting issue. the peak in united states was 118% in 1946. of course then for the next 20 years became down a lot. something similar but even more extreme happened in britain in 1815, the british were fighting the french from louis the 14th all the way up to fighting napoleon. louis the 14th in the 16 80's and 60 90's and napoleon and the first part of the 19th century. the british borrowed a lot of money. they won all their wars but one, 1688. which one was it? the american revolution. britain had good public credit, france did not. public credit is like an element of war. at the end of the napoleonic wars, the british had a gdp ratio of approximately 250%. the national debt of great britain was 2.5 times its gdp. if you were really worried about this, you'd say well, britain is in terrible trouble. but britain did the same thing the u.s. was doing. but the british put a lid on spending. the british economy grew. the debt-gdp ratio throughout the 19th century, restraining their spending, they grew out of that to 50% debt to gdp ratio. some people would say the best days of the british empire, the u.k. were in the 19th century, when they had this humongous debt ratio. that should not make us feel good -- that should make us feel good. if our debt is up at 105%, if somehow we could bring about spending restraints, and hope that our economy might grow faster than the 2% that many economists are forecasting, then we don't have such a big problem. we can solve the problem. but coming back to your point, i don't think we seem to have a public awareness now, there is nobody pushing for doing something like this. and that maybe one of our problems, that we just allow this debt-financed spending to go on. because we like tax cuts and we like spending so the debt will just keep on growing. that is what hamilton warned us about. yes. >> to the gentleman's question about the culture, you may have just partially answered this, in 1992, ross perot ran one of the most successful third-party candidacies. and his two main platform items were trade and the debt. you probably remember those great charts he used to trot out. giant sucking sounds and big charts with the deficit picture, and the debt picture at the time was much less than it is now. the interesting thing about perot was he drew the country's attention to the issue of the debt. do you see any of that type of leadership anywhere? dr. sylla: you know, that may be the problem. this crowd is not the average american crowd, probably. but i think most people, if you told them what hamilton said, that we should responsibly manage debt, most people would agree. what we seem to be lacking is the leadership at the top levels. there is something called the concord coalition's which worries a lot about pp or send -- pete peterson. when they started worrying about the rising debt in the financial crisis, krugman made fun of them. and krugman was sort of right. in the middle of a financial crisis, it is not right to worry about debt. but i think he was saying you never have to worry about that. i think responsible leaders -- perot did not get elected. having clinton, he sort of agreed with newt gingrich. the economy grew and jackie -- and debt gdp ratio went down. i don't see that working right now. we just had a tax cut. we are talking about a lot more spending for infrastructure, building walls or fences or whatever. >> [inaudible] dr. sylla: you need a mic. >> i have a question. you started your remarks by decrying the tax cuts. we know that hamilton did not know about the laffer curve. if he were alive today, and he knew about it, would he agree with you that cutting taxes and restoring private property to the american people at a time when gdp is historically near zero, has been zero for about eight years, would he agree with you that cutting taxes is not fiscally responsible? dr. sylla: hamilton? i said at the beginning, answered that question at the first part of my talk. i said hamilton would not think it was fiscally responsible. to your point about the laffer curve, i think you are wrong. i think hamilton did have an idea about it. the government financed itself mostly by taxing imports. in hamilton was saying -- some people accused him wrongly of being a protectionist. he was not a protectionist. he said i don't want those tariffs to go too high. because if you keep out the imports, you won't collect any revenue. so hamilton did have the laffer curve idea. you could put imports so high, the government has no imports and there would not be a revenue. he was very much aware of the laffer curve idea. i justhink in general, assumed in my talk and i thought i persuaded you, but maybe i was not successful, that hamilton would agree that the last 50 years of fiscal policymaking is not very responsible. >> i think i might have an answer to the gentleman's question about what is unique to the culture of the last 50 years. instant gratification, lack of responsibility. i was one of the original hippies, so i am partially to blame. if you look at the last 50 years you have instant gratification, lack of responsibility, no savings. . what is it, 1%, 2%? so that my friend i think is the cultural change that is endemic , baked into our society. what did the famous cartoon say? we have looked at the problem and it is us. dr. sylla: that is pogo. we have no time to worry about the national debt or the debt income ratio, because we are checking this all the time. where is the next? >> i just want to travel back in time to the beginning, 1790. can you talk briefly what were hamilton's rationale for assuming the debts of individual debt for this newly minted government? dr. sylla: you should buy this book coming out. [laughter] >> will do! dr. sylla: and read what he calls the defense of the funding system. --torians have distorted pro-jefferson and madison historians have distorted this a lot by saying hamilton wanted to assume the state and national debts so the national debt would be bigger and therefore more people would hold their interest payments to the federal government and that would generate support for the government. hamilton in this defense of the funding system said this idea occurred to me, but it would not have been my main reason. what he really wanted to say was if you have the federal government and the state governments all with taxing authority, hamilton saw there could be collision between federal taxes and state taxes. and this could threaten holding the country together. because we did give the federal government the power to tax us andctly and the states local governments have the ability to tax us directly. bothton's solution said the state and federal governments could tax people and that could cause problems. the solution, cutting the knot, was to eliminate the need for states to have much in the way of taxes which he did by taking the state debt into the national debt. the country held together pretty well for the next two decades because state government didn't have to borrow much money. so when the federal government was raising revenue, states weren't mad at it. the governments financed themselves with imports. that was his big argument. eliminate the need for the taxes than they would not complain about the federal government having taxes. that was his argument. but it is like 20 or 30 pages of justification of his debt assumption thing and it was in this document that was never finished. but i read it carefully. it gives you -- if you are not persuaded it is good policy, you must be a victim of jefferson. [laughter] >> a good portion of that had to do with the american revolution, correct? dr. sylla: yes. next question. >> i am puzzled by your response that hamilton would have found tax cuts to be fiscally irresponsible given the fact there is another part of the namely that if you cut back government expenditures, that would correlate with decreasing taxes. and that hamilton was an ardent defender of private property, that he thought that there should be limited government, that perhaps what government was making expenditures on was outside the purview of a properly limited government. so of today's expenditures, which d think -- do you think hamilton would advocate cutting? dr. sylla: you were surprised that i said hamilton would've thought tax cuts were fiscally irresponsible? you know, when you are running up expenditures as we are, and cutting taxes, that doesn't seem -- to me or to alexander hamilton, to be fiscally responsible. but your other part of your question is more about whether hamilton would've ever wanted to cut taxes? >> [inaudible] dr. sylla: oh. >> [inaudible] agree.la: i the question is about the expenditures, what would hamilton think about expenditures. hamilton, some people say he wanted big government. that is not right. hamilton wanted a limited, but energetic government. and so, i think he wasn't against government expenditures. he wasn't for the libertarian view. he thought that we ought to have a national infrastructure program. actually his successor, jefferson's secretary of the treasury thought the same thing. there is a question of whether it was constitutional. hamilton thought we might need a constitutional amendment but he saw a lot of growth in canals and things like that. let's say it needed tautology, but hamilton was against frivolous expenditures. knowing what the federal government is doing today, he would say the federal government has no business doing that. we are not still financing inner-city, nighttime basketball at the federal level. but 10 or 20 years ago there was a program the federal government would pay to keep the lights on, so the kids would play basketball instead of doing less wholesome things. hamilton probably wouldn't have thought that was the federal responsibility to light the basketball courts. but the government was of course much smaller. the federal government spent more money in every year of u.s. history than all the states together did. but it was, for long time, it 3% of the gdp, and now we are likely talking 20%. so the government was much more limited through most of our history. i think hamilton probably would have thought we were spending on essential things. i don't know what hamilton would have thought of medicare or something like that. that is something he just wouldn't anticipate, a national healthcare program. >> last question here. >> you spoke about 2% economic growth we are experiencing lately. bernanke hadt ben a targeted deflation rate of 2%. does that can slow the growth we have been experiencing the past two decades? dr. sylla: so what is the question? >> if the inflation rate we are experiencing now cancel out the economic growth? dr. sylla: the question is about economic growth and inflation. the federal reserve talks a lot about a 2% inflation target. one of their worries -- they want to raise interest rates too fast because the inflation has been slightly less than 2%. lately. but there is nominal gdp growth, which is basically real growth but inflationary. i personally don't like the 2% inflation target. there were a lot of periods in u.s. history where you had zero inflation or even a little bit of mild deflation and the world did not come to an end. the 2% inflation target is based on the experience of the 1930's, when there was really a bad deflation. the argument i have heard economists make -- i am one of them it is not my argument -- is if you target 2% inflation, you will be farther away from experiencing deflation. which of course is the worst thing in the world, but i don't think it's the worst thing in the world. another argument is say 2% willtion on 1% real growth lead to higher level of interest rates. so you have to cut interest rates to get out of it. that is an argument they make. my friend, paul volker, think the fed ought to target 0% inflation. that is not a bad thing. 2% apparently does not fool us, even though it cuts the value of our money in half in about 35 years or so. did i hear that was the last question? [applause] thank you. [captions copyright national cable satellite corp. 2018] [captioning performed by the national captioning institute, which is responsible for its caption content and accuracy. visit ncicap.org] there are many authors and speakers. one of the things that the alexander hamilton awareness society wants to indicate his who are those who have a great scholarly -- that you can have faith and trust in. so we have a special award we would like to give to you. for your dedication to representing the accuracy of alexander hamilton's record to national and international organizations, to university students, and to the public. the purpose of this museum. the museum of american finance. as i mentioned you have been very patient with many people and very kind with your advice. very hamiltonion. so i just want to thank you. i want to read the award. "richard sylla is hereby recognized as a national hamilton scholar for exemplary scholarship, research and writing to provide accurate, objective, and insightful information to the public about the united states of america's remarkable founding father, alexander hamilton." the alexander hamilton awareness society 2018. we thank you for your decades of service. [applause] announcer: you are watching american history tv, all weekend, every weekend on c-span3. to join the conversation, like us on facebook at c-span/history. announcer: next on american history tv, ohio state university professor mitchell lerner talks about the 1968 north korean capture of the uss pueblo. mr. lerner is the author of a book on american foreign-policy. we recorded

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