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132 Can the United States Achieve Fiscal Sustainability? Will We?who would pay those taxes were part of the dominant coalition inParliament, and therefore had control over both spending and taxation.12 It was Britain’s political system that enabled it to raise the vastsums of money necessary to fight the wars of the eighteenth centuryand ultimately to defeat Napoleon.The United States began its life in a serious fiscal crisis, missing paymentsdue to foreign governments repeatedly in the 1780s. 13 Thisshould not have been a surprise; the central government lacked boththe authority to levy taxes (a power reserved by the states under theArticles of Confederation) and any administrative apparatus to collectthem. The fiscal crisis was a major motivation for the ConstitutionalConvention of 1787 and the ratification of the new Constitution,which gave the federal government the power to impose andcollect taxes. 14 This made it possible for Treasury Secretary AlexanderHamilton to restructure the national debt, effectively swapping outstandingobligations for new bonds that had lower interest rates butwere now backed by both tariffs and excise taxes. 15 The fast-growingAmerican economy could generate the resources necessary to pay offthe national debt; once the government had the ability to levy taxesand showed the willingness to do so, investors quickly became convincedthat it was a good credit risk. 16Only two decades later, however, the federal government was facinganother fiscal crisis. In 1812, at President James Madison’s request,the Democratic-Republican majority in Congress declaredwar against Great Britain. Since taking power in 1801, however, theDemocratic-Republicans had lowered taxes and cut defense spending;when war broke out, the U.S. Navy had seventeen ships, while12 Steven C.A. Pincus and James A. Robinson, “What Really Happened During theGlorious Revolution?” NBER Working Paper 17206, July 2011, pp. 30–36.13 Davis Rich Dewey, Financial History of the United States, 2nd ed. (Longmans,Green, and Co., 1903), p. 89. For a longer discussion of early American finances,see Johnson and Kwak, note 6, above, pp. 20–33.14 Sidney Homer and Richard Sylla, A History of Interest Rates, 4th ed. (John Wiley& Sons, 2005), p. 274.15 Dewey, note 13, above, pp. 94–96.16 On economic growth rates, see Louis Johnston and Samuel H. Williamson,“What Was the U.S. GDP Then?” MeasuringWorth, 2011, available at http://www.measuringworth.com/usgdp. On market reception of the restructured debt, seeDewey, note 13, above, p. 96.