Asset-Helsinki-Presentation

Asset-Helsinki-Presentation - The Net Worth of the U.S....

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The Net Worth of the U.S. Federal Government, 1784-1802 Farley Grubb Professor and NBER Research Associate Economics Department University of Delaware “I know no subject that is so little understood or has been less profoundly examined by the legislative Characters of America, than that of Finance…” William Bingham, a director of the Bank of North America , to Alexander Hamilton, U.S. Treasury Secretary, November 25, 1789.
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INTRODUCTION: The War for American Independence (1775-1783) left the U.S. Federal Government deeply in debt. The spoils from winning that war also gave it an empire of land. So, post-1783 was the government solvent— or when did it become solvent? Did winning that war in effect pay for the war? Knowing the answer to this question is important for understanding how the method for funding the national debt was chosen, how the adoption of the new Constitution in 1789 affected public finance, and how this new untried government—that was deeply in debt and had been in default on this debt for half a decade after independence—could garner an excellent credit rating by the early 1790s. Evidence is gathered on the government’s liabilities and assets to estimate its net worth by year between 1784 and 1802. The results indicate that the U.S. Federal Government was solvent, but only after it made the default on its non-interest-bearing debt— the Continental Dollar—irrevocably permanent.
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Figure 1 The U.S. National Government’s Debt Position, 1784-1802
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Figure 2 Land Assets Ceded to the U.S. National Government, 1784-1802
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Table 1 Land Cessions to the Federal Government by the 13 Original States, 1781-1802 ______________________________________________________________________________ Year State Acres Notes ______________________________________________________________________________ 1781 New York 202,187 jointly claimed by Massachusetts 1784 Virginia 229,917,493 some acres jointly claimed by other states, excludes Kentucky, and includes lands reserved in Ohio to Virginia 1785 Massachusetts 34,560,000 jointly claimed by other states 1786 Connecticut 25,600,000 jointly claimed by other states, but with 3,800,000 of Ohio held back as a reserve 1787 South Carolina 3,136,000 solely claimed 1790 North Carolina 26,679,600 mostly Tennessee which had already been alienated and so is typically not counted 1802 Georgia 56,689,920 solely claimed
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Asset-Helsinki-Presentation - The Net Worth of the U.S....

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