The middle-class revolt of 1992 is an angry rebellion against America’s 25-year experiment with nondemocratic government. Around the mid-1960’s, both political parties abandoned the average American, but for different reasons. The Democrats, taken with the high morality of the counterculture, deserted him because their hearts turned against him; they decided he was selfish and racist. By 1972, the Democrats had become so exotic that the party ceased to have anything in common with him. The Republicans didn’t either, but they were willing to say they did in exchange for middle-class votes. The Republicans, in fact, were willing to tell the middle class whatever it wanted to hear—all about patriotism, the work ethic, antiwelfare, anticrime, antiquotas, antibusing, “family values,” and stopping the state’s intrusion into the citizens’ daily life, or, as it was put, “getting the government off the people’s backs.” The Republican rhetoric, however, was not followed by action.

As the government has stopped representing the people, the people have likewise stopped feeling any responsibility for the government. A government alienated from its people is afraid to ask its people for taxes. It knows it will be thrown out as soon as it asks the people for sacrifices. Unable to tax adequately to fund its programs, the government has to finance itself by borrowing, and then by borrowing some more.

As long ago as the infancy of our nation, however, Thomas Jefferson recognized that debt is the power most dangerous to a democracy. It separates the spending from the cost that—as everyone with a credit card knows—makes all the difference in the world. Public debt, because it requires no immediate taxes, removes the critical limitation on democratic government—that to fund a program for the benefit of one group, the money has to be taken from another group.

Jefferson tried, in 1798, to amend the Constitution to prohibit the federal government from borrowing. He said he was “willing to depend on that [amendment] alone” to keep the administration of government in line with the principles of the Constitution. Debt violates the fundamental Jeffersonian premise that one generation cannot bind another. The legislature and the people acting together never have the right to legislate for the future, to bind down those who come after them, either by debt or by any other system of legislation that would prevent them from perfect freedom of action. Debt is essentially antidemocratic, because it restrains the freedom of future generations without their consent.

Jefferson believed that economic democracy is inseparable from political democracy. In a democracy you have to agree on what you want to do and on how to pay for it. A pay-as-you-go system demands immediate taxes to cover all spending. What the payees will currently receive the payers must currently pay; the payers are apt to resist, the issue must be discussed, and some compromise reached. With a borrowing policy, Jefferson said, the rules are entirely different. Debt, since it requires no immediate taxes, separates the recipient from the payer. The future taxpayer, who will pay, is not represented by any of the current parties. The burden is easily cast upon the unrepresented future.

David Hume wrote in his 1752 essay on public credit that an unpopular government will “mortgage the public revenues, and trust that posterity will pay off the encumbrances contracted by their ancestors,” which, on the face of it, is fairly preposterous. As preposterous, say, as expecting Yeltsin’s Russians to pay the debts that dictators incurred in oppressing them.

Public borrowing, of course, leads to more public borrowing and ultimately to national bankruptcy, writes Hume, “as naturally as an animal body to its dissolution and destruction.” In the last stage: “Where a government has mortgaged all its revenues, it necessarily sinks into a state of languor, inactivity and impotence.” The 1993 budget estimates we will spend $315 billion in interest on the national debt. We have certainly reached the point, as Hume said, when “the nation becomes heartily sick of [its] debts, and is cruelly oppressed by them.” Realistically, the government’s liabilities are unlimited, and when a government’s liabilities are infinite, no tax system makes any particular sense. No matter how much money the government collects, it is not enough.

The country’s losses are steadily growing, with accumulated losses at $4 trillion (the national debt) and current losses running around $400 billion a year (the deficit). Who bears the burden of the loss? Who gets to pay? It could be the individuals and institutions holding the debt. Or it could be the taxpayers. All current discussion assumes the taxpayer will pay, but as Hume wrote, “The public is a debtor, whom no man can oblige to pay. The only check which the creditors have upon her is the interest of preserving credit; an interest which may easily be overbalanced by a great debt, and by a difficult and extraordinary emergency.” The Democrats and Republicans agree that the losses will continue as far as they can sec. The President’s 1993 budget estimates a $209 billion deficit for 1997. The middle-class citizen assumes the losses will continue to be allocated on his head and will soak up everything he has now or will have in the future.

Beginning in 1965, one administration after another poured debt onto future generations. For the first time in our history, the debt was far beyond what the living generation intended to pay, or could pay in its time. The post-1965 administrations, in Jefferson’s words, ate “up the usufruct of the lands for several generations to come,” breaching the basic moral principle that the “public debts of one generation” cannot “devolve on the next.” Jefferson gave the example of Louis XV:

Again suppose Louis XV and his contemporary generation had said to the money-lenders of Genoa, give us money that we may eat, drink, and be merry in our day; and on condition you will demand no interest till the end of 19 years you shall then for ever after receive an annual interest of 12-5/8 percent. The money is lent on these conditions, is divided among the living, eaten, drank, and squandered. Would the present generation be obliged to apply the produce of the earth and of their labour to replace their dissipations? Not at all.

Hume believed that once public debt is more than a country can afford, it must be disposed of, or in financial terms, liquidated. He saw two ways this was likely to happen: one he called the “natural death” of public credit and the other “violent death.” Neither ending is appealing, but the violent death is far worse than the other.

“Natural death” would occur if the government could not sell all of the $400 billion notes and bonds it needs to cover the annual deficit. While tax revenues continue to come into the treasury, about $315 billion come earmarked to pay interest on the outstanding debt. If at some point during the year an emergency arose, say the nation was threatened with an invasion, the government would act in self-preservation and use the earmarked $315 billion to resist the invasion. It would promise that the diversion is temporary, that the money would be replaced as soon as possible. But it would not happen. The national debt would then collapse, burying those who hold it. This would mean “thousands [of debt holders] are sacrificed to the safety of millions,” in Hume’s words. He noted that history showed that in a surprisingly short time the national credit would revive.

“Violent death” results when a country makes too many sacrifices to meet the debt. This happens when the debt-holding class controls the country and insists on sacrifices past what “prudence, policy, or even justice” require. It runs down the national defense. It puts the economy in a contorted position and cuts the standard of living further in order to squeeze out the interest payments. Ultimately, our children “weary of the struggle and fettered with encumbrances” are so weak that they cannot resist a takeover by foreign interests. In the violent death ending “millions may be sacrificed forever to the temporary safety of thousands.”

Competition between the political parties is supposed to keep government on track, but the Republican and Democratic parties have not truly competed for 25 years. Indeed, over time, the parties have turned into deformed selfparodies. The Democrats trace themselves to Thomas Jefferson, who believed the American Revolution was part of a larger revolution of the human spirit against oppression. Jefferson believed society would be as good as its people and would be trusted largely to the good sense of the common man. Beginning in the mid-1960’s, the Democrats lost confidence in the common man; they considered the middle class an obstacle to the kind of society they wanted to create. They took Andrew Jackson’s equality of opportunity and spun it into governmentally enforced equality of result. They took Jefferson’s idea that governments derive their just powers from the consent of the governed and turned power over to judges, whom they thought agreed with their vision of a new society and would force the majority into line.

The Republicans trace themselves to Alexander Hamilton but have lost the ability to create national wealth. The Republicans created the American market and gave substance to the belief in an ever-expanding pie. The middle class voted Republican from 1860 to 1932, not out of affection, but because the party had successfully managed the economy. However, during the second Republican majority, 1968 to the present, the party has not been able to create wealth. The Republicans have abandoned sound business principles, encouraged financial manipulation, and begun the dismantling and sale of the economy through a process called globalism. The Republicans seem intent on getting the last bit of profit from a collapsing country.

Economic historian Tracy G. Herrick reports that “there have been three periods in the nation’s history when middleclass living standards declined for more than a decade: 1804-1821, 1852-1882 and 1972-present.” He further notes that “each of the two previous periods . . . was accompanied by a political revolt of the middle class, war, and led to the emergence of a major new political party.”

Both prior periods ended with the middle class regaining political power in the country. The middle class was then able to fashion economic policies that restored its prosperity. The first period of declining living standards (1804-1821) led to the collapse of the Federalists and the rise of the Jacksonian Democrats. The Tariffs of 1828 and 1832 protected domestic industry and contributed to the industrialization of the North. Jackson’s supporters were the pre-industrial middle class— the country’s small capitalists, farmers, skilled craftsmen, and mechanics; his opponents were the wealthy “moneyed interests.” Hamilton’s moneyed interests had, by this time, secured from government various monopolies and privileges, allowing them to run banks, bridges, turnpikes, railroads, and ferries. Jackson’s small capitalists wanted government to stop making special deals with privileged groups.

The second period of decline (1852-1882) led to the collapse of the Whigs and the rise of the Republican Party. The overarching Republican vision was the creation of the American market—a tariff-free trade zone of unprecedented size and resources. The Republicans maintained the Union by force to prevent the free-trade South from attaching itself to the European economy. Lincoln, who thought of himself as middle class, said that the people he most admired were “the attorney in the country town; the merchant at the crossroads store; the farmer who toils all day.” After the Civil War, the Republicans, although basically a party of Hamiltonian-New York bankers, were able to form a coalition with the middle class. The basis of the coalition was that both the bankers and the middle class agreed that the country’s future depended on extensive railroad construction, which would tie together the American market. The New York bankers explained that the country had to go back on the gold standard, because foreign bankers would not otherwise loan the funds needed to build the railroads. To implement the gold standard, it was necessary to redeem Civil War greenbacks. The redemption (1866-1879) was intentionally deflationary. It acted as a heavy tax on Midwestern farmers, who had borrowed cheap dollars to buy their farms and who now had to repay with dear ones. Nevertheless, the farmers and the rest of the middle class deemed it advantageous to support the bankers in creating the American market. And they were right. In 1865 there were 35,000 miles of railroad in operation; in 1887 there were 157,000 miles. The country’s population in 1870 was 38 million; by 1890, 63 million. By 1890 the United States was the wealthiest country in the world. The Republican vision was so well realized that it kept the party in power, with small interruptions, from 1860 to 1932.

The party changed as it went along. After the Civil War, the men who created this great wealth lost a sense of commitment to the rest of the country. The Progressive movement, led by Theodore Roosevelt, was a middle-class reaction to the distortions created by the success of industrialization. The middle class believed that both the extremes of wealth and poverty and the war raging between capital and labor would sooner or later destroy the country. Roosevelt said that Republican laissez faire policy “is thoroughly vicious”; the worker is not “an industrial asset to be allowed to drift or to be put at the mercy of the exploiter,” and he cannot tolerate the low wages that “mean the sacrifice of both individual and family life and morals to the industrial machinery.” Roosevelt proposed to regulate capitalism by enforcing antitrust laws, outlawing child labor, improving working conditions, limiting hours, enacting health and inspections laws, and preserving the country’s natural resources. Roosevelt worked a compromise between democracy and capital that operated efficiently until the I960’s.

Americans, because of our consistently rising standard of living, believed, like F. Scott Fitzgerald’s Gatsby, in “the green light,” a future that will fulfill all promises. Freedom, the Jeffersonian principle, and economic growth, the Republican principle, came together as the American dream. The energies released by freedom created growth and gave substance to the belief in an ever-expanding pie. In the absence of an expanding pie, politics is bound to focus on the distribution of the wealth that already exists, a dismal zero-sum game.

The Republican majority collapsed when the party led the country into the Great Depression. The Democrats created a new majority party composed of three groups: the South, intellectuals, and working-class Catholics. The New Deal dismantled the old Jeffersonian government based on cheeks and balances and the separation of powers. The forms of the old government—federal, state, executive, legislative, and judicial—were retained, but they became operating parts of a single Hamiltonian mechanism that used all its powers to solve economic problems. The Hamiltonian-New Deal government was able to tax, spend, inflate the currency, and regulate business and individual activity to any extent it thought necessary. Government could spend the country’s income—what used to be called its social product—to accomplish its goals. Government also began running deficits and issuing debt so that it could spend the future’s social product as well. Later, the Hamiltonian government directed its energies toward solving what it considered social and moral problems. Increasingly, the country’s operating rules were imposed from the top down, rather than from the bottom up.

The question today is where the third period of declining middle-class living standards (1972 to present) will end. They can continue to diminish because of Hamiltonian-like policies, or they can turn around with a return to Jefferson’s faith in the common man. Can a democracy so debt-ridden even be saved? Will the middle class end up on top or isolated and destroyed? The answer is hardly clear.