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The Power of the Purse: A History of American Public Finance, 1776-1790
""The Power of the A History of American Public Finance, 1776-1790"" is a comprehensive book written by Elmer James Ferguson. The book explores the financial history of the United States during the critical years of its founding, from the Declaration of Independence in 1776 to the ratification of the U.S. Constitution in 1789 and the establishment of the new federal government in 1790. Ferguson provides a detailed account of the financial challenges faced by the fledgling nation during this period, including the costs of the Revolutionary War, the struggle to establish a stable currency, and the debates over taxation and public debt. He also examines the key figures and institutions involved in American public finance, including Alexander Hamilton, the first Secretary of the Treasury, and the Bank of North America, the country's first central bank.Throughout the book, Ferguson argues that the power of the purse ������� the ability to control public finances ������� was a crucial factor in shaping the new American government and its policies. He shows how debates over taxation and public debt were central to the development of American political culture and helped to establish the principles of federalism and limited government that continue to shape the country today.Overall, ""The Power of the Purse"" is a valuable resource for anyone interested in the history of American finance and the role of money in shaping the nation's political and economic development. It offers a detailed and nuanced account of the challenges and opportunities faced by the United States during its formative years, and sheds light on the enduring debates over taxation, debt, and public spending that continue to shape American politics today.This scarce antiquarian book is a facsimile reprint of the old original and may contain some imperfections such as library marks and notations. Because we believe this work is culturally important, we have made it available as part of our commitment for protecting, preserving, and promoting the world's literature in affordable, high quality, modern editions, that are true to their original work.
376 pages, Hardcover
First published February 11, 1961
About the author
E. James Ferguson
5 books1 followerE. James Ferguson earned a BA and MS at the University of Washington. He completed his Ph.D, in 1951 at the University of Wisconsin-Madison. Ferguson taught at the University of Maryland until 1964, when he took a position at Queens College and the CUNY graduate program, where he taught until his retirement in 1984.
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Displaying 1 - 5 of 5 reviews
January 18, 2024
This book is probably not for most readers, but if you really want to dive deeply into the realities of finance during the Revolution, it is likely indispensable. I grew so tired of so many books that merely wave qualitative hands at matters of finance, even in the biography of the Financier of the Revolution, Robert Morris, that I am reading concurrently. This book prints actual numbers so that you can see the realities for yourself.
There are a few mistakes. I found these because a number of the financial tables in the book are ideally suited for electronic spreadsheets. I translated them as such and these found a copy/paste error or two. But they are readily identifiable.
An interesting way to look at this history is stratigraphically. Consider the Compromise of 1790.
1. At the top level one might have an understanding as it is presented in the Hamilton musical. Jefferson and Madison oppose Hamilton and they reach a compromise. (Burr is not in the room.)
2. Readers of popular histories can reach a slightly deeper level and learn that Jefferson and Madison opposed Hamilton's plan to pay off the much-depreciated Continental currency at full value because the original soldiers had already sold theirs off for cents on the dollar and so it would be rewarding wealthy speculators only, and the two opposed assuming state debts because states like Virginia had paid off their debts and so it wouldn't be fair. These are very, very commonplace assertions in most popular histories.
3. But in this book we can reach a third level.
(a) Hamilton did not originate these ideas, as many claim. In fact they had been the project of the nationalist faction for many years and many such proposals had been attempted in Congress, but all had failed.
(b) Hamilton did not pay them at full value (more like divided by 100).
(c) Madison’s opposition on the grounds that the payments should instead go to the original holders – often soldiers – is suspicious. He had never opposed it before and his claim that the financial instruments had only recently been acquired by wealthy speculators is not entirely accurate. They had been acquired over the past many years. Rather, the significant factor appears to be that that was what voters back in Virginia thought about the matter and Madison, who had failed in his attempt to win a seat in the Senate and only barely managed to win one in the House, needed to gain the support of his voters.
(d) Regarding the federal government’s assumption of the debts of the states, in reality whether a state had already paid the debts made little difference. The debt that solvent states would get rid of in 1790 would be accounted for, so they would pay one way or another in any case. The main states in opposition were Maryland, Virginia, North Carolina and Georgia. In these states, during the war truly awful accounting practices had occurred. Documentation of expenses was very often missing or not properly recorded, and thus in danger of being rejected as invalid. A report to this effect submitted to Congress was quickly expunged and the clerks blamed for errors. In any case, reconciling the accounts in these states would take a long time and might not be completed in time to count. These states were eager to have their version of the debts stand and not have everything re-examined by the Treasury Department.
(e) The Assumption of the state debts was clearly not essential to the union. It needlessly increased the federal debt, and divided the nation's leaders along the lines of State interest. Assumption passed only as a result of the famous trade that gave Virginia the permanent capital. What is not generally recognized, is that there was another feature of the negotiation: the compromise of 1790 also conceded Southern demands in the settlement of State accounts.
4. But this book is not yet done. There is even a fourth level. It even delves into the details of how the debt was to be assumed. It wasn't just a matter of the government raising taxes and tariffs and then using this money to pay off the states. No, Hamilton in fact proposed three different ways that holders of debt could be compensated, creating certificates that paid varying interest rates and the possibility of being granted land west of the Appalachians instead. Congress reduced this to a single method, but still.
This book is an incredibly impressive effort. The author is an historian, but I believe he must have been at least half accountant as well to deal so competently with so many different financial instruments and technicalities. This is a magisterial work on its topic.
There are a few mistakes. I found these because a number of the financial tables in the book are ideally suited for electronic spreadsheets. I translated them as such and these found a copy/paste error or two. But they are readily identifiable.
An interesting way to look at this history is stratigraphically. Consider the Compromise of 1790.
1. At the top level one might have an understanding as it is presented in the Hamilton musical. Jefferson and Madison oppose Hamilton and they reach a compromise. (Burr is not in the room.)
2. Readers of popular histories can reach a slightly deeper level and learn that Jefferson and Madison opposed Hamilton's plan to pay off the much-depreciated Continental currency at full value because the original soldiers had already sold theirs off for cents on the dollar and so it would be rewarding wealthy speculators only, and the two opposed assuming state debts because states like Virginia had paid off their debts and so it wouldn't be fair. These are very, very commonplace assertions in most popular histories.
3. But in this book we can reach a third level.
(a) Hamilton did not originate these ideas, as many claim. In fact they had been the project of the nationalist faction for many years and many such proposals had been attempted in Congress, but all had failed.
(b) Hamilton did not pay them at full value (more like divided by 100).
(c) Madison’s opposition on the grounds that the payments should instead go to the original holders – often soldiers – is suspicious. He had never opposed it before and his claim that the financial instruments had only recently been acquired by wealthy speculators is not entirely accurate. They had been acquired over the past many years. Rather, the significant factor appears to be that that was what voters back in Virginia thought about the matter and Madison, who had failed in his attempt to win a seat in the Senate and only barely managed to win one in the House, needed to gain the support of his voters.
(d) Regarding the federal government’s assumption of the debts of the states, in reality whether a state had already paid the debts made little difference. The debt that solvent states would get rid of in 1790 would be accounted for, so they would pay one way or another in any case. The main states in opposition were Maryland, Virginia, North Carolina and Georgia. In these states, during the war truly awful accounting practices had occurred. Documentation of expenses was very often missing or not properly recorded, and thus in danger of being rejected as invalid. A report to this effect submitted to Congress was quickly expunged and the clerks blamed for errors. In any case, reconciling the accounts in these states would take a long time and might not be completed in time to count. These states were eager to have their version of the debts stand and not have everything re-examined by the Treasury Department.
(e) The Assumption of the state debts was clearly not essential to the union. It needlessly increased the federal debt, and divided the nation's leaders along the lines of State interest. Assumption passed only as a result of the famous trade that gave Virginia the permanent capital. What is not generally recognized, is that there was another feature of the negotiation: the compromise of 1790 also conceded Southern demands in the settlement of State accounts.
4. But this book is not yet done. There is even a fourth level. It even delves into the details of how the debt was to be assumed. It wasn't just a matter of the government raising taxes and tariffs and then using this money to pay off the states. No, Hamilton in fact proposed three different ways that holders of debt could be compensated, creating certificates that paid varying interest rates and the possibility of being granted land west of the Appalachians instead. Congress reduced this to a single method, but still.
This book is an incredibly impressive effort. The author is an historian, but I believe he must have been at least half accountant as well to deal so competently with so many different financial instruments and technicalities. This is a magisterial work on its topic.
October 5, 2026
The Power of the Purse is one of the fundamental works of the modern understanding of the American revolution. It is a very technically impressive book, managing to substantiate claims that previously had been made, and subverting other claims. Still, this book is old, and it shows. At the start, the book claims to be a history, rather than an economics book. Still, the book uses so much jargon without explaining it that I occasionally had to stop and try and make sense of things, and I think I read a decent bit in this genre. This book really would have benefitted from stopping and explaining concepts at a more surface level before diving in. When we talk more than half a dozen different currencies, more effort into the distinction (and true value) would've helped prove some of the claims the author made. The analysis provided is excellent, but more effort could've been put into crafting a narrative. All the elements are there! The author pokes around the claim that the common debt was necessary for the formation of the federal structure, shows how different sections of society came together in support, but then effectively SKIPS OVER the actual formation and then just gets into the early taxation of the federal government. All this build up for nothing! Ultimately, I find that this book is a great work of history. Ferguson is a very smart man. I'll stop my praise there though, the authorship could've been slightly better. It is by no means ILLEGIBLE or unreadable, I was often pretty interested, but I also felt let down at times. Also I'm a nerd about debt so I would've loved more explanation on interest expenses before and after consolidation. The book is great in many regards, but I think it could be done better.
Finally they added partial stars
Finally they added partial stars
April 30, 2010
Someday I'll write a book like this one...
March 27, 2023
Great explanations of some complex concepts confronting the nation at its birth. Relatively grasp-able at concepts like debt assumption, currency depreciation, and tax sinking that tend to make some comparable works incurable dense. Took me a while to read but seems silly to blame the book for that. Well it’s not entirely the books fault. Okay it’s a bit slow.
Read
June 30, 2012Great scholarship and very revealing of the economic realities of the day. Extensively footnoted and sourced.
Displaying 1 - 5 of 5 reviews