Status of the US, post war (part 1)
the Texas addendum was just for fun. This is the real post for today
Status of the US, post war (part 1)
[FONT=Arial, sans-serif]Socially[/FONT]
[FONT=Arial, sans-serif]There is a lot of social unrest caused by the failure of the war, with taxes raised so much and nothing to show for it. There is much anger, but it's hard to know just to whom to direct it. Some are mad at the New Englanders, some at the British, some at the 'incompetent' government, some at 'foreigners' (no one said anger had to be rational), some at 'those darned Injuns' (mostly meaning the Red Stick Creeks, but also Tecumseh's confederacy, and even pro-US Indians like the Cherokee). Many, of course, are angry at (fairly random) combinations of the above. This nasty social stew just makes solving America's real problems much harder. There are riots and mobs targeting Federalists, foreigners and Catholics in various places, and sometimes the authorities don't seem to want to intervene. Some flee for New England or BNA, and many others think about it. [/FONT]
[FONT=Arial, sans-serif]Financially[/FONT]
[FONT=Arial, sans-serif]The US ended the War of 1812 with a huge debt load, and the loss of New England, which as a centre of commerce and industry had provided a disproportionate share of the US tax burden. When New England went independent, the US had hoped that she would assume a 'fair' share of the national debt, but the end result was far 'fairer' to New England than the US. [/FONT]
[FONT=Arial, sans-serif]In Congress, there is very little agreement as to how to solve the financial situation. Partly, of course, they can't. There is no way they can return to a financial status quo ante, and that adds to the frustration. However, it is clear that some things have to be done. 1) Soldiers and sailors have to be demobilized, which saves on money, but causes other problems (including a sudden surge in young men trying to re-enter a workforce in a recession). There is no immediate danger of any foreign wars, so that's safe enough. 2) The rather generous funding of pensions for injured and killed military is reduced. (OTL they spent ~2.5M$ in 1819, which was more than they spent on their entire war department in 1810, and more than a third of what they spent on that department in 1819) 3)Federal funding on roads and canals is temporarily slowed, but not stopped. Already some income is flowing in from the roads constructed with federal help during the war, and it is obvious that this should be a high (long term) priority. 4) tax revenues, direct and indirect, are raised. Actually, some war time tax rates are lowered, but customs duties are kept and even raised. With the end of the war, and the ending of the blockade, this starts bringing in a lot more revenue. Finally, the customs increases enacted during the war are having some benefit. The resulting tariff wall has the additional effect of protecting and encouraging American industry. (This is a desired result for some – namely industrialists in New York, Pennsylvania and Virginia, and an undesired side effect for others – just about everyone else in the country.)[/FONT]
[FONT=Arial, sans-serif]One advantage the government has that is not immediately recognized as one, is the very significant inflation that is taking place. The government simply can't issue only Tnotes that are backed by gold, as they don't have that much, and they still have expenses that have to be paid. Already, by the end of the war, the US dollar is trading at 1/4 to 1/5 its nominal value in gold, and it keeps dropping. Thus loans that were taken out at, say 8% can be paid off in inflated dollars. Of course, they were often taken out in inflated dollars, so they don't get QUITE as much benefit, but it's still there. On the other hand, there are several financiers who bought large amounts of the Government debt as a gamble. OTL, they profited handsomely, here they are ruined. This means that there is less PRIVATE investment available for improvements in the coming decades. Similarly, expenses like pensions aren't indexed to inflation, so the government saves a lot there, too, even if it creates a lot of misery for widows and wounded soldiers. The financial reforms do keep away hyperinflation, but don't stop the drop in the dollar until it is worth 1/10 its original value, where it more or less stays. [/FONT]
[FONT=Arial, sans-serif]Some years later, the government tries to increase the value of the dollar, but this causes DE-flation, which is as bad in some ways as IN-flation, and so they back off. So when the US does start issuing gold-backed bank-notes, they do have to recognize the new rate. (At approximately 50/British pound rather than 5).[/FONT]
the Texas addendum was just for fun. This is the real post for today
Status of the US, post war (part 1)
[FONT=Arial, sans-serif]Socially[/FONT]
[FONT=Arial, sans-serif]There is a lot of social unrest caused by the failure of the war, with taxes raised so much and nothing to show for it. There is much anger, but it's hard to know just to whom to direct it. Some are mad at the New Englanders, some at the British, some at the 'incompetent' government, some at 'foreigners' (no one said anger had to be rational), some at 'those darned Injuns' (mostly meaning the Red Stick Creeks, but also Tecumseh's confederacy, and even pro-US Indians like the Cherokee). Many, of course, are angry at (fairly random) combinations of the above. This nasty social stew just makes solving America's real problems much harder. There are riots and mobs targeting Federalists, foreigners and Catholics in various places, and sometimes the authorities don't seem to want to intervene. Some flee for New England or BNA, and many others think about it. [/FONT]
[FONT=Arial, sans-serif]Financially[/FONT]
[FONT=Arial, sans-serif]The US ended the War of 1812 with a huge debt load, and the loss of New England, which as a centre of commerce and industry had provided a disproportionate share of the US tax burden. When New England went independent, the US had hoped that she would assume a 'fair' share of the national debt, but the end result was far 'fairer' to New England than the US. [/FONT]
[FONT=Arial, sans-serif]In Congress, there is very little agreement as to how to solve the financial situation. Partly, of course, they can't. There is no way they can return to a financial status quo ante, and that adds to the frustration. However, it is clear that some things have to be done. 1) Soldiers and sailors have to be demobilized, which saves on money, but causes other problems (including a sudden surge in young men trying to re-enter a workforce in a recession). There is no immediate danger of any foreign wars, so that's safe enough. 2) The rather generous funding of pensions for injured and killed military is reduced. (OTL they spent ~2.5M$ in 1819, which was more than they spent on their entire war department in 1810, and more than a third of what they spent on that department in 1819) 3)Federal funding on roads and canals is temporarily slowed, but not stopped. Already some income is flowing in from the roads constructed with federal help during the war, and it is obvious that this should be a high (long term) priority. 4) tax revenues, direct and indirect, are raised. Actually, some war time tax rates are lowered, but customs duties are kept and even raised. With the end of the war, and the ending of the blockade, this starts bringing in a lot more revenue. Finally, the customs increases enacted during the war are having some benefit. The resulting tariff wall has the additional effect of protecting and encouraging American industry. (This is a desired result for some – namely industrialists in New York, Pennsylvania and Virginia, and an undesired side effect for others – just about everyone else in the country.)[/FONT]
[FONT=Arial, sans-serif]One advantage the government has that is not immediately recognized as one, is the very significant inflation that is taking place. The government simply can't issue only Tnotes that are backed by gold, as they don't have that much, and they still have expenses that have to be paid. Already, by the end of the war, the US dollar is trading at 1/4 to 1/5 its nominal value in gold, and it keeps dropping. Thus loans that were taken out at, say 8% can be paid off in inflated dollars. Of course, they were often taken out in inflated dollars, so they don't get QUITE as much benefit, but it's still there. On the other hand, there are several financiers who bought large amounts of the Government debt as a gamble. OTL, they profited handsomely, here they are ruined. This means that there is less PRIVATE investment available for improvements in the coming decades. Similarly, expenses like pensions aren't indexed to inflation, so the government saves a lot there, too, even if it creates a lot of misery for widows and wounded soldiers. The financial reforms do keep away hyperinflation, but don't stop the drop in the dollar until it is worth 1/10 its original value, where it more or less stays. [/FONT]
[FONT=Arial, sans-serif]Some years later, the government tries to increase the value of the dollar, but this causes DE-flation, which is as bad in some ways as IN-flation, and so they back off. So when the US does start issuing gold-backed bank-notes, they do have to recognize the new rate. (At approximately 50/British pound rather than 5).[/FONT]
