In a classic rap battle, two MC’s (Masters of ceremony a.k.a. rap artists) face off against each other to determine who is superior without leaving any blood on the floor. In the first high stakes cabinet-meeting-turned-rap-battle in Hamilton, the issue on the table is which of the polar opposite views of the country’s future will prevail. Treasury Secretary Alexander Hamilton envisions an economy based on manufacturing with a thriving financial system. Secretary of State Thomas Jefferson favors an agricultural economy with the gentleman farmer as the ideal, in spite of the reality of widespread slavery in the South. As someone who was in debt for most of his life, Jefferson loathed banks.
At the end of the American Revolution, the federal government owed $54 million on top of the $25 million that was owed by the individual states. Hamilton argued that the states’ debts should really belong to the federal government since that was the cost of independence. A few states including Virginia had already managed to retire their debts, and Jefferson as a Virginian resented states such as New York getting a pass on irresponsible spending. We had similar national conversations in 2009 with the mortgage crisis and the question of whether people who were underwater on their mortgages should get bailed out. It might be better for the country overall, but the responsible spenders resented the free ride given to others.
In both 1789 and in 2009, considerable amounts of bad debt were crippling the economy and were preventing anyone from borrowing money; in both cases, bailing out those who were causing the bad debt gave the economy a boost. Hamilton also foresaw that in the early days, bundling the states’ debts together would strengthen the nascent ties binding the states into a single country.
The second issue with Hamilton’s plan dealt with domestic debt. During the Revolution, soldiers might have been given a $20 note as part of their pay. (I made that up, but I needed a number.) Because the paper wasn’t backed by anything solid such as gold, the paper note depreciated rapidly. Wondering if the paper might eventually become worthless, soldiers often sold their notes to speculators who might pay $2 for that note. Hamilton’s plan was to give the holder of the note the full value of $20. That paid off the speculator and shafted the soldier who had originally received the pay. It was a brutal act and beggared a considerable number of soldiers who had fought through horrendous conditions in the war, but Hamilton argued that it would be impossible to trace each note back to the original owner. This is the source of the principle used in today’s stock market that the holder of the stock at any given time gets all of the profits or all of the losses regardless of previous ownership.
Because I feel that everything is fair game in my class, asked the students questions of what kind of debt is good debt (student loans perhaps) and what kind of debt is bad debt (credit card balances.) We also discussed paying interest on loans and the importance of having a good credit rating. I pointed out that Hamilton felt that although debt wasn’t necessarily bad, it was important for a government to balance taxation and expenditures, just as it is important for individuals to balance income with expenses. I just dispense pearls of wisdom when I can and hopefully some of them are useful.
The homework assignment for this day was what I call “annotations,” which involves the students writing comments on the lyrics, and we discuss what they noticed. My favorite exchange was as follows. In Jefferson’s rap, he announces, “In Virginia, we plant seeds in the ground, we create.” Hamilton mockingly responds, “We plant seeds in the South, we create,” and then delivers,
“We know who’s really doing the planting.”
I asked the students what that meant, and they immediately caught the first meaning that it was actually the slaves who did the planting, not people like Jefferson. I then had to lead them towards, “planting a seed is a euphemism for what?” Pregnancy. I let them process a minute and then pointed out that this line was a slam at Jefferson for getting Sally Hemings pregnant. The students, who had previously arrayed themselves as staunch Sally Hemings defenders, were simultaneously appalled and impressed at the creativity and subtlety of the put down. The looks on their faces were priceless as they tried to sort out which emotion to prioritize.