But is it paid for?

What would our country be like if most of the goofy Republican caucus in Congress walked away from their jobs for some goofy reason, and Democrats suddenly had majorities which could try to implement their legislative priorities? The well-thought-out policy ideas of Elizabeth Warren and Bernie Sanders would instantly be on the legislative agenda and politicians would jockey to find ground from which to distinguish themselves in the novel environment. Add in an existential war in progress that had to be funded by previously unheard of expedients and things might get radical.

That's a fair parallel to where newly elected President Abraham Lincoln and the then-newly consolidated Republican Party found themselves in 1861 when southern states tried to end the Union -- and thus end the experiment in constitutional government which was the federal United States.

We can be confused reading this history today because 1) the Republicans were both the progressive force and the mostly anti-slavery political party and 2) the Democrats were the hide-bound conservatives whose attachment to states' rights hamstrung government action and support the slavery system. In the century and a half since, our political parties have roughly traded sides.

Roger Lowenstein is an American financial journalist and writer who recently explored aspects of governance in the 1860s in Ways and Means: Lincoln and His Cabinet and the Financing of the Civil War.

This is a book that probably tries to do too much. Others have written gracefully about Lincoln's Team of Rivals, his contentious Cabinet. I didn't really care about how the Confederacy tried to solve its fiscal problems; my understanding of Confederate fiscal history is that what happened there was mostly decided by the failure to bring Britain in on the side of the South in the war.

What interested me here was what the Republican Congress of 1861 accomplished with its new freedom of action. And Lowenstein offers plenty that is interesting. This prologue helps with imagining Republican priorities which were not what we might assume in 2023:

Few northern whites had much to do with Blacks, slave or free, and even fewer supported abolition. They were opposed to slavery's extension mainly because they preferred their own societies to the slave societies of the Deep South. Whigs, and later Republicans, advocated a system "free labor," which connoted not just the absence of slavery, but a positive culture of small farms, cottage industries, and independent craftsmen. ... What northerners truly abhorred was the South's economic and social backwardness. The South was less urban, less educated, woefully under-industrialized. ... Republicans did not plan on a war in 1861, but their social vision prepared them for one. Their ideal of a stronger and larger central government not only enabled them to harness the necessary resources to win the war, it encouraged them to do so in a way that helped bring about a modern and dynamic industrial society.

The accomplishments of the freed-up Republican Congress were great -- and the consequences unexpected when they finally were able to pass what northern social movements had envisioned. Lowenstein labels the Congress of December 1861-July 1862 the "Forgotten Congress."

... [they] enacted a blizzard of legislation that made the federal government, for the first time, a visible presence in the lives of ordinary Americans. ... It broke from the "governing least" philosophy of Jefferson and legislated in the spirit of the "more perfect union" advanced by Lincoln. It abandoned laissez-faire and interposed a visible hand in the hope that, also in Lincoln's words, "every man [might] have the chance." Congress enacted a protective tariff ... and enabling legislation for a transcontinental railroad. It involved the federal government in agriculture, education, and land policy. It legislated an income tax and refocused the war's purpose to include a frontal attack on slavery. It could almost be said that it created the government itself. ... They legislated boldly and to the perceived edge of constitutional license. A San Francisco newspaper approvingly declared, "Constitutions are made for peace. We are at war." ... On the whole, they were less intent on preserving, more on building and improving. ...

By war's end and the defeat of the South in 1965,

... it was now, as it had not been before, the federal government's business to help educate farmers, to preserve natural lands, to fix the standard railroad gauge, to nurture the sciences, to operate an expanded postal service, to regulate banks, to encourage immigration. Even abolition, on the surface a stand-alone event, was enabled by the new ideology of centralism.

... The purposes of the government were also elevated in the minds of Americans. They looked to it, as they hadn't before, to solve national problems. Since the government had freed the slaves, people expected it to address other pressing issues, such as low farm prices, labor disputes, the power to the railroads, and monopolies. ...

Though in the war's aftermath the Republicans were soon captured by the industrialists and plutocrats of the Gilded Age, in a vital moment, they gave the country its most benign institutions.

• • •

I was curious about this book because a great-great grandfather of mine played a part in its story. Elbridge Gerry Spaulding (1809-1897; yes, named for the relative and Massachusetts governor who gave his name to our present dubious redistricting processes) had been a Buffalo mayor, an early adopter of the new Republican Party, and a successful banker who sat in the Forgotten Congress. I'm sure the idea was floating around in the wider policy ether, but he was the guy who proposed that the Treasury could fund the war with "greenbacks," the paper currency that led to the current dollar. Previously government, and especially war, had been funded by a small stream of tariff revenue and by borrowing from banks and bankers. That was where the cash was. Banks were chartered by the separate states and they all issued their own notes; this was not a system which inspired confidence in paper money.

By the winter of 1861-1962, the federal government was desperate for cash. According to Lowenstein, Spaulding proposed a bill to pay for the war that was "revolutionary."

As if by a conjurer's trick, it authorized the Treasury to print United States Notes to distribute to soldiers, suppliers, and others. The catch was that, unlike virtually every other bill in circulation, Spaulding's notes would not be redeemable for silver and gold. This meant the government would not be constrained by the supply of metal; it could print as much as it liked, or at any rate as much as Congress authorized.

And Spaulding's notes would not pay interest. Today, we scarcely pause to consider that the money in our wallets does not yield a return. After all, it is "money." In 1861, virtually all government paper did pay interest. That was the inducement for holding it. Finally, Spaulding's paper would not have a maturity date. This, too, was unusual. A maturity date was a pledge that the paper could be exchanged for something of value at a specified time. But these notes would not be redeemable. They were issued for perpetuity.

To the Civil War mind, these features were both shocking and blasphemous. ... U.S. Notes would be "legal tender" -- they would be money by proclamation, that is, by government fiat. They would suffice for all debts and commercial exchanges; acceptance would be compulsory and universal.

The twists and turns of getting the greenback bill passed were many; Lincoln supported it, but left it to his doubtful, but desperate, Treasury Secretary to do the legislative lifting. Once passed, the system made it all the more obvious that a system of state-chartered banks could not serve the Union cause. Financial entrepreneurs jostled to cash in on the reform. The Confederates tried something similar but you have to win on the battlefield to make a fiat money system work.

By the end of the war, both enhanced revenue and national banking had been added to the federal arsenal, creating something akin to the financial system as we have known it. That system might be due for another upgrade; I am sure Elizabeth Warren is working on it. Imaginative and determined individuals make these things happen, remote as they may seem.