Some Founding Fathers were strongly opposed to the central banking system which many believed led directly to the American War of Independence. However, eight years after the Revolutionary War, the U.S. Congress at the suggestion of the Secretary of the Treasury Alexander Hamilton, established the First Bank of the United States. The bank was given a twenty year charter, but many Americans were uncomfortable with the idea of a large and powerful central bank. Thomas Jefferson saw it as an engine for speculation, financial manipulation, and corruption. Therefore, Congress refused to renew it in 1811.
The Republicans main argument was to cut spending to equal the increase of the debt ceiling (United). Another argument was wanting the budget balanced in the next decade along with spending reductions "in the discretionary budget as well as for entitlements" (United). Democrats and the president wanted the debt limit raised without any stipulations because we were approaching a possible default on the nation's debt (United). The Republicans held the position that the government could pay interest on their debt (United). Some Democrats in the House wanted to get rid of the debt limit but several economists felt that it would "lead to uncertainty and poor fiscal outcomes" (United).
Americans citizens and politicians had a long-standing distrust for a banking system that seemed to mimic England’s. It was argued time after time that a central bank would focus its service on catering to the mercantile and large commercial centers of New York, Boston, and Philadelphia, therefore forgetting about the agriculture interest of the United States. It was even claimed that we separated from England because a central banking system allowed the rich to get richer off the backs of the middle classes money. More importantly in the early days of the United States most individuals thought that a central banking system would not benefit the agricultural community. This created a lot of opposition, because during these heated debates of a central banking system in the eighteenth hundreds and early nineteenth hundreds, the United States was predominantly agriculture.
During the Revolutionary War there was much need for a strong centralized government that would have been able to collect taxes. The states were able to issue currency and the government accepted this in exchange for specie. Specie was very hard to come by in the colonies and most states relied on foreign currency such as Spanish coins to back up their currencies. The Continental Congress issued a Continental Currency in 1775, but due to lack of faith in the currency, it rapidly fell in value and prices skyrocketed. They were abandoned in 1781.
It could also issue bank notes and it exempted from paying state taxes. The Congress could not license any other equivalent bank. For all these rights the Bank was to pay a bonus of one and a half million dollars. Nicholas Biddle, did much to repair the Bank’s corrupted reputation; the bank irregular management was blame for the bust cycle that culminated in the Panic of 1819.. Jackson felt that the Bank was not only unconstitutional, as it was believed by the Jeffersonian, but it could influence national affairs, and it had no higher entity... ... middle of paper ... ...t $10 million was and the elimination of the federal debt. Biddle continue to obstacle the credit at a time when it was needed due to businesses expansion, causing national panic.
The American Revolution was started basically because of problems with the British economy. The major concept of the time was "taxation without representation". After the French and Indian war, the British government was burdened with a huge debt. They wanted to tax more to the colonist because they were the ones helped the most from the war. Ordinary people had always been taxed lightly in America, but they did not want their money to be used to support the British.
National Debt: Macroeconomic Perspective For years, the issue of the Government's national debt (and its payment) has been a major political issue. As of July 1st, 2004 the Federal Debt has reached an all time high of 7.252 trillion dollars (that means that each person in the United States is be over 24,000 dollars in debt). According to economists, the debt will increase by 1.6 billion dollars per day! In economical terms, a debt occurs when an individual or group borrows money and is charged interest on that loan. The Federal Government through deficits (spending more than what is collected in taxes) in budget spending created this debt of over seven trillion dollars.
Taxes paid by Americans redistribute wealth towards their central governments to go towards creating and maintaining everything that makes the U.S. a leading industrialized nation. Federal tax laws are run by Internal Revenue Service (IRS) which is an agency under the U.S. Treasury Department. The federal government makes $2 trillion in revenue each year through taxes and borrowing. Money is borrowed by selling federal securities, which include bonds, notes, and certificates. Savings bonds are the most popular, for that investors are able to receive interest on the money they lend to the government.
The chart below depicts how the government debt has changed over the previous 10 years. According to the New York Times, as of June 2014, China is now the Largest Corporate Debt Issuer, surpassing the United States. The Standard and Poor’s ratings show that the Chinese nonfinancial companies had approximately $14.2 trillion in debt compared to the United States which had about $13.1 trillion. S & P also estimates that China will have more than $20 trillion in debt by 2018, and that will make up for one third of the worldwide corporate borrowing.
Finally, there are cases in which fiscal policy is more influenced by politics than economics, and the Fed working on pulling Uncle Sam out of the slump of recession could be hindered by a candidate seeking reelection (Meek, Morton, and Schug 452). The Federal Reserve System is a vital component of the United States. Without the Federal Reserve, America would succumb to the chaos of a second Great Depression. It not only keeps the economy in sync, but makes the lives of all citizens easier and more enjoyable. The Fed, through its currency, tells us “this note is legal tender for all debts, public and private;” perhaps we owe the Federal Reserve System of the United States the greatest of debts.