In the face of an audacious stonewall by Democrats against President Bush's ownership society vision, personal retirement accounts in particular, there is growing pessimism among some conservatives. A few Republicans fear that aggressively pursuing the vision could endanger their congressional majorities.
Nonsense. Now is not the time to go all wobbly. Now is the time to forge ahead boldly as George Washington and Alexander Hamilton did in the early days of the republic, when pessimism called the future of our grand experiment into question.
In the aftermath of the American Revolution, the new federal government under the Articles of Confederation was up to its ears in debt and continuing to borrow even more money from France, England and Holland just to stay afloat. In addition, the new government owed enormous sums to creditors who had financed the Revolutionary War through the purchase of war bonds - so-called "Continentals."
The new federal government had no revenue source to repay its debt and - for all intents and purposes - was bankrupt. These gloomy financial prospects were reflected in the fact that outstanding Continentals and other forms of Continental-Congress debt were trading at 10 percent to 15 percent of par. No one expected the new federal government to pay off the holders of its predecessor's bonds. Were George Gallup around at the time, he surely would have discovered more people believed in UFOs than believed the new federal government would repay its debt.
When the new Constitution was adopted in 1789, it would have been an easy matter to repudiate the mountain of debt incurred under the Articles and earlier by the Continental Congress on the grounds that the debt was unsustainable and that the acts of those previous governments did not bind the new republic. The Founding Fathers, however, understood the political and moral obligation to honor America's earlier financial commitments, and thus Article 6 of the new Constitution bound the United States government to accept the debts incurred by its predecessors.
Consequently, in 1790, when Treasury Secretary Hamilton submitted his "Report on Credit" requested by President Washington, he did not talk about "empty promises" and lament that previous Congresses had "promised more than the nation could afford." He did not argue for the debt to be repudiated on the grounds that the government had no moral, political or legal obligation to redeem the promises of previous governments, nor did he offer bondholders a small fraction on the dollar under the assumption that they would be grateful to receive anything at all, given their low expectations.