#88
I mentioned the Bonus Army in last week’s letter, not really thinking I’d spend the rest of the week thinking about cash entitlements from the Federal government…but here we are.
After writing last week’s letter, I continued reading Richard White’s The Republic for Which It Stands and was intrigued by the historical precedent for cash payments to veterans and cash entitlements for Americans in general. In chapter 10, “The Party of Prosperity,” White constructs the context for a political battle in 1879 between Northern Republicans and Southern Democrats. Republicans were in favor of a protective import tariff that facilitated domestic production of goods, where Democrats favored free trade to reduce prices. Congress was deadlocked (some things never change) until an enterprising Republican Senator from New Hampshire proposed a solution…
Without a final brilliant touch, however, the tariff would have probably been an untenable political liability for the Republicans. It not only raised consumer prices, it generated a surplus that gathered in the treasury, exacerbating the inadequate money supply. Henry Blair, a senator from New Hampshire and an ardent protectionist, had a solution. By spending the surplus the tariff generated to create a federal welfare system, he diminished the surplus and expanded the realm of the federal government, and created powerful constituencies that would serve to sustain both the tariff and the Republicans.
The Arrears Act, signed by President Hayes in 1879 proved to be one of the more unheralded pieces of legislation in American history. It expanded a U.S. pension system designed to take care of the dependents of Union Army soldiers killed during the war as well as disabled soldiers…
By making pension payments retroactive to the date of the soldier’s discharge, or in the case of dependents from the date of a soldier’s death rather than the date of an approved application, the Arrears Act created a windfall for veterans and their families. All recipients would receive a check for the “arrears” owed them, and anyone filing for a new pension before July 1880 would also receive a payment covering the period from the date of his discharge. The average first payment including arrears in 1881 was roughly $1,000, at a time when the annual earnings of nonfarm employees were about $400. Between 1879 and 1881, total disbursements for pensions roughly doubled and then rose even more steeply during the 1880s. Civil War pensions became the leading expenditure of the U.S. government. Republicans used it to justify high tariff rates.
My mind was blown in multiple directions. As we sit around and watch our political leaders haggle over a $600 or $2,000 one time stimulus in 2021 dollars, 19th century Republicans were able to approve a law that authorized lifetime cash payments to veterans and a one time “arrears” windfall that amounted to 2.5 times the average household annual income. Try and imagine any faction in our government approving a one time cash payment of over double the median household income. Assuming a median household income of ~$68,000 in 2021 dollars, it’d mean a significant section of our society getting a check for ~$170,000.
Reading this, it was hard not to laugh at the ideological drift within American political parties over the past 140 years. Imagine a Republican Party that was not only in favor of raising taxes, but also in favor of using the surplus generated by taxes to expand the power of the Federal government and issue an incredibly generous cash entitlement program. It really puts the current spat over $600 or $2,000 into context. One time cash stimuli aside, can anyone in America even fathom a modern regime of either party enacting any kind of entitlement for people who served the country in a time of need (healthcare and other essential pandemic workers come to mind…).
Something to chew on as we move into a new era.
Thank you, as always, for reading. If you enjoyed this, please forward to friends, family, or post to various social media networks… if you feel so inclined.
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