The Whiskey Rebellion

by William Hogeland

  The Indian problem, ignored by governments in the east, was turning westerners even more urgently to their own devices. An afternoon trip to church or town could become a scene of butchery. At night a cabin could be abruptly filled with whooping warriors, swinging children by their feet to open their skulls, slicing limbs and taking scalps, disappearing into the woods with wailing captives. The imagined fates of kidnapped children made parents long for their own deaths. Survivors’ faces carried lifelong maiming by tomahawks. Settlers formed posses, and in some famous massacres turned peaceful Indian settlements into slaughterhouses, lining up innocent men, women, and children by the dozen, aged and newborn alike, for scalping and bludgeoning to death. Members of Congress and state legislatures deplored the westerners’ barbarity but didn’t create credible policies for security. State taxes seemed earmarked for anything but western defense. Things could be expected to get worse: England was working with the western tribes to amplify native harassment.

  The various western new-state movements, spurned by Congress, were becoming a single western defiance movement. The state of Franklin, which had formed itself out of three counties of North Carolina, agreed to swear fealty to the king of Spain—a Roman Catholic!—if that would open the Mississippi to western products. The Pennsylvania movement calling itself Westsylvania had been discouraged by a state law making it a capital crime even to discuss independence. Yet near the Forks of the Ohio, and especially in Washington County, south of Pittsburgh, meetings still went on, making common cause with western Virginians, creating committees of correspondence, sending circulars to other western regions. When Kentuckians called a convention, in response to a circular from the Forks of the Ohio, they amplified the mood of the Shays Rebellion. To the dismay and anxiety of nationalists and state governments alike, Kentucky was urging the whole west to resist the dominance of eastern creditors and politicians.

  • • •

  That was 1787. Only two years later, the Constitution of the United States had been ratified, and the first U.S. Congress was settling into its temporary home in New York City, confirming Alexander Hamilton’s appointment to the executive branch of a government with pervasive powers throughout the states. Nationalists had won. State-sovereigntists had won too: They administered their own counties and court systems and passed their own laws; their legislatures appointed U.S. senators and delegates to the state colleges for electing the president. Since both sides had won, both felt they’d lost too much, and dissatisfaction was rampant among both federalists and states-rights proponents. Tensions over the Constitution’s meaning would, putting it mildly, persist.

  What virtually everybody who pushed for ratification believed, however, was that the Constitution would disable rural populism’s political wing in the state assemblies while subjecting its violent wing in the countryside to strong policing. The popular movement had managed to bring together forces that shared almost nothing but a vital interest in suppressing the popular movement. On the Constitutional Convention’s first day of business, Edmund Randolph of plantation Virginia—hardly a Morris-style merchant-financier—identified the problem the convention must address and repair. “Insufficient checks against the democracy,” Randolph called it, and to demonstrate the incompetence of the confederation, he cited the financiers’ two frustrations: Congress’s failure to pass a viable impost, and the debilitating effects of the states’ paper-finance schemes. To Randolph, the Shays Rebellion and other violent protests pointed to something second only in embarrassment to the lack of a national power to defend against foreign attack: lack of power to suppress insurrection. The federal government must, he said, be given the rights to tax, enforce taxes, and create a peacetime army. At least as important: states must be prevented from issuing currency and bonds.

  So when Alexander Hamilton sat in his Broadway office at the end of 1790, working up his finance plan, he had exciting new powers to work with. The U.S. Constitution, Article One, section eight, clause one, gave the federal government a right to collect every kind of tax from the whole people of the United States. Even before creating the office of secretary of the treasury, the U.S. Congress had exercised that power, imposing the long-stymied countrywide duty on foreign goods, with specific taxes on dozens of items; in a separate act, Congress created and deployed a cadre of federal officers to collect the impost, and the officers’ powers, which included search and seizure, were unhampered by state lines or state laws. Just as Hamilton had predicted to the confederation Congress in 1782, the nation was being unified by tax officers. Furthermore, sections fifteen and sixteen empowered the federal government to call out the state militias to enforce federal laws, to organize and control those militias when so engaged, and to prescribe militias’ training at all times.

  Perhaps the most thoroughgoing continental renovation came with section ten, clause one. It pried loose the paper-finance movement’s grip on legitimate politics, always weak, by prohibiting states from printing paper money, issuing bonds, and making anything but gold and silver a legal tender for paying public or private debts.

  Even creditors in radical Pennsylvania got their dearest wish. In 1790 a convention met to review the radical state constitution. The land speculator and financier James Wilson, Bob Morris’s associate in the assembly, rewrote the document almost single-handedly. There was an upper house in the legislature. A single executive was elected independently of the legislature. District judges were no longer elected in the counties they served but were appointed by the executive in the capital. The power that the people had been given in 1776 was taken away.

  • • •

  Hamilton wanted more. He knew what he’d known in the eighties: the federal impost wasn’t enough. Though he took a more nuanced approach than Robert Morris’s, his goal for the domestic debt remained making reliable payments to creditors and inspiring confidence in federal bonds as articles of investment and trade. Funding the debt would spring-feed a pool of capital, from which, if managed carefully—with each creation of debt accompanied by a fund dedicated to retiring it over decades—the federal government could draw, and draw again, in nurturing a growing nation. Wealth would be concentrated in the hands of moneyed investors. Their ambitions would fund the nation’s ambitions.

  The impost taxed merchant importers, the very people who held bonds. To make bonds truly wealth-creating, revenues for paying interest on them would have to be raised from the mass of ordinary citizens who didn’t hold them. That called for a tax not on imports but on a domestic product.

  In January of 1790, Congress came back to New York, and Hamilton filed his proposed finance plan, the Report on Public Credit. It was a stunning document—almost literally. The reading of its fifty-one pages to the sixty members of the House was followed only by ambient room noise. Nobody could take it all in. To some it seemed an impenetrable monolith, to others a blizzard of infinitesimal detail. With its multiple tables, charts, schedules, and row after row of figures, in schedules A through K, listing every imaginable expenditure and revenue source of government, the plan did not invite input. Such was Hamilton’s enthusiasm that he disdained to reel Congress, jerk by jerk, toward potentially distressing elements in the plan: everything the secretary wanted to do, in all its ambition and controversy, was right there in plain arithmetic.

  The report urged a three-part program, familiar from the Morris period: paying interest on, rather than paying off or voiding, the federal domestic debt; hugely expanding that debt by absorbing in it all the states’ debts; and raising revenues for interest payments on the expanded debt by adding to the customs laws new duties on imported wine and spirits, and imposing an excise on domestically distilled spirits.

  But so important was the tax portion of the proposal that Hamilton appended a fully detailed revenue bill—the only aspect for which he included a sample law. Far from waiting to reveal what might have seemed the most controversial element, Hamilton wanted creditors to see exactly how his revenue-raising measures w
ould work.

  He was made to wait to sell the beauties of a whiskey tax. The House turned instead to the most palatable part of the report, the funding of the federal debt, which the House chose to debate as a discrete entity, despite the report’s insistence on funding, assumption, and revenue as interdependent elements of a unified whole.

  Hamilton was nervous. He took intense meetings with his allies and supporters, hung around outside the chamber hoping to snag people, paced outside. The ubiquitous presence of this charismatic, demanding member of the executive branch offended states-rights and separation-of-powers congressmen. (Hamilton had wanted to read the report to Congress himself; he’d been barred.) The plan was making New York the center of a national excitement that further aroused the landed class’s inveterate scorn for speculators. The value of all securities was soaring, in nervous anticipation of the government’s commitment to funding them, possibly at face value, and finding credible ways to secure revenues for payment. Hamilton was proposing to pay full 6 percent interest on the face value of the federal certificates. You’d be able to take your interest in two attractive ways: combine tracts of federally owned western land with 4 percent in coin, or take no land and get the full 6 percent. Some federal stocks would wait ten years to start drawing cash interest; others would start drawing right away. If you’d bet on full payment, you might already have won.

  The House passed a funding bill and sent it to the Senate. But the next phase of the program, assumption of state debts, became a problem that also threatened the whiskey tax. Assumption would add about $25 million to the federal debt, and speculators now gambled daily, in an anguish of hope and fear, on how Congress might treat the state bonds they’d started buying when federal bonds had become scarce. Financial firms like Morris’s had dozens of agents rummaging attics and old coat pockets from the Carolinas to Maine, buying devalued state paper cheap in hopes of full federal payoff supported by taxes. Coffeehouses, taverns, and offices became impromptu exchanges for trading. The ethos now was ruin-or-fortune. Everybody was working the margin, borrowing to speculate, hoping to finance one big strike on a major slice of debt. Ships left the New York docks on the mere hint that a cache of state paper had been seen somewhere up or down the coast.

  Yet the concept of assumption seemed to confound the House. Hamilton tried to explain it. If accounting was practiced correctly, no state could lose or gain anything from assumption, which he intended to subordinate to the final settlement anyway. In May, Hamilton’s ally in Congress, Fisher Ames, argued passionately and at length not only for assuming state debts but also for funding them and the existing federal bonds through a whiskey excise. In June, anti-Hamilton forces responded with a version of the revenue bill that removed the whiskey excise entirely; Hamilton’s allies were forced to vote down that toothless version. Then assumption itself was defeated. Some speculators holding state securities—trading had continued to be frantic; prices had gone wild—faced ruin.

  In the end, though, deals for assumption were made. James Madison had taken to contesting everything his former nationalist collaborator Hamilton proposed, but he did agree to restrain opposition to assumption and the whiskey tax, if the national capital could be located on the Potomac. Robert Morris helped: he dealt away Philadelphia as a permanent national capital. Hamilton let go of any hope for a capital in New York. When assumption passed the House, the Senate combined funding with assumption in a near-final bill, lowering payments and stripping out some payoff options. Summer ended with two parts of the plan enshrined as law. The only thing missing, despite its obvious centrality, was the tax.

  • • •

  Hamilton stayed cool. In December, he reported to Congress the unsurprising fact that the federal government, in taking on a legal obligation to fund a debt that included all state obligations, had run up a deficit of about $830,000. Fortunately, he reported, the new import duties and the excise on spirits—the revenue bill, that is, proposed in the report of almost a year earlier—would raise $975,000, more than enough to cover the deficit.

  He was becoming a mature politician. With the congressmen primed at last, he gave them cover. There was, he said, no alternative to excise, but this excise, he assured them, unlike classic excises that infringed liberties, would give no summary powers to its officers: people accused of failing to pay the tax would be entitled to jury trials. Alternatives like land taxes, he suggested, should be reserved for emergency situations, a thought that couldn’t fail to please the crowd that liked to abominate excise on principle but would actually have been hurt by taxes on land. Further import duties, another seeming alternative, would be too burdensome for the merchants who had to pay such duties. Hamilton took a moment to hymn the merchant class. He didn’t ask the congressmen to consider that merchants were the very people who held the federal bonds and would thus directly benefit from proceeds of the whiskey tax. He did call it bad policy to contradict anything the group most committed to federal authority deemed proper.

  The product Hamilton proposed to tax, distilled spirits, was not, he said, a necessity but a luxury item consumed by those who could afford, by definition, to pay the tax. Throughout debate, his allies had invited the House to see a whiskey tax as a public-health effort; now Hamilton presented a letter from the Philadelphia College of Physicians, who said that domestic distilled spirits, the cheap drink of the laboring classes, had become a ravaging plague requiring immediate treatment.

  But what Hamilton especially wanted the congressmen to appreciate drew him back to his dreams of the confederation period. This law would be a good thing for the country, he told Congress, because it made collection of public revenue dependent not on the goodwill of the taxed, as state revenue laws always had, but on the vigilance of federal officers. The people’s movement had always made itself arbiter of whether taxes could be collected. States hadn’t been lazy, Hamilton said, or weak; they’d been scared. Federal officers, he promised, wouldn’t be. This tax would be collected everywhere. The means to do it existed. He evinced no reluctance to use force.

  He could have gone on piling up arguments and inducements. He didn’t have to. The finance plan had given the United States a legal obligation that it couldn’t meet without either imposing an excise or resorting to far-out measures like a land tax, or even to something truly wild, a tax on income, or on wealth itself. Hamilton did overplay slightly. Some Congressmen sputtered over being patronized by a bunch of doctors. But after a lot of back-and-forth among House, Senate, and Treasury, with frequent interruptions for debating Hamilton’s next big program, a central bank for the United States, which he was losing no time in pushing through, a revenue bill almost identical to the version submitted more than a year earlier passed both houses of Congress, and as the session ended in March of 1791, the whiskey tax became law.

  • • •

  Exactly how an excise on whiskey would open the purses of the people wasn’t something Hamilton described to the congressmen. Nor did they ask. The people on whom the tax operated would get little help from Hamilton’s opponents in Congress, the representatives of the landed. The law’s operation was in fact somewhat obscure; understanding it took a grasp of finance that few in the congressional opposition wanted to have.

  Many in the western country did have that grasp. You wouldn’t have to be a distiller, or even a drinker (though most in both country and the city were that), to feel the tax on whiskey singling you out for punishment. The tax redistributed wealth by working itself deeply into rural people’s peculiar economic relationship with whiskey. Many of Hamilton’s congressional opponents wouldn’t have understood that relationship. Hamilton did.

  Nothing like whiskey occurs naturally. Its origins are alchemical, as implied by the term used in the whiskey-tax law: “spirits.” The word “whiskey” anglicizes and abbreviates the Gaelic “uisce beatha,” or “water of life”; romance languages used “aqua vitae” and “eau de vie.” All refer to a beverage that comes in many styles and whose
production is simple if counterintuitive. Beer and wine would exist (or something like them would) without human intervention. Wet grain will become rank beer; wet flour, sourdough; old juice, bad wine. When controlled and treated right, good things come from what would otherwise be rot.

  Nature produces alcohol—but also limits it. Yeast dies, ending the process. Increasing the potency of a fermented beverage, unlike concentrating flavors, can’t be accomplished by boiling it down. Alcohol boils before water and dissipates instantly as steam.

  Hence distilling, in which the steam rising from a boiling fermentation is made to cool into a dew. The boiled wine or beer, robbed of its spirit, can be thrown away as dross or served to animals. What remains, proportionally small by volume, is huge in kick and heat. Do it again, boiling the distillate, condensing its steam, and you’ll have even less of something even more astoundingly strong, at once liquid and fume, the power of wine and beer magnified and trapped for all time. Fermentation makes a virtue of spoilage, but whiskey won’t spoil.

  Eighteenth-century Americans distilled whiskey just as their ancestors had, using a pot still. A kettle of fermented liquid known as wash—the wash was usually made from rye or corn mash; the best kettles were copper—bubbled over a hardwood fire. A pipe channeled the wash’s steam through a tight lid on the kettle and then in coils, known as a worm, through a nearby bucket of water continuously replenished from a stream, and finally out through the side of the bucket. The steam was now a fluid, dripping into a receptacle. Known as low wines, this first run had more alcohol per volume than the original wash but not enough for whiskey. So low wines in turn were boiled, sometimes in a second, smaller still, and on this pass, when ejaculate emerged, it had to be divided. First came the foreshots, poisonous and smelly, not to be drunk by anyone valuing sanity. Then the heads, potable whiskey mixed with the last of the foreshots; using some of the heads lowered quality but added volume. Then the run, purest whiskey; and at the end, feints, weak and funky, also diminishing quality if mixed in excess with the run. Knowing by smell, taste, or hydrometer when the foreshots were ending, recognizing heads and the run, selecting the moment to make the cut, removing the run before overdiluting it with feints—these were among the skills of whiskey-makers.