The federal assumption of the states’ war debts resulted in huge profits to New York businessmen. They had bought the state debts from private citizens and former soldiers who had been given IOUs in lieu of actual cash during the underfunded Revolutionary War. When the assumption deal passed, the bonds suddenly became redeemable at face value, and the speculators reaped spectacular profits. Virginia got the capital. New York got the cash.
Hamilton, as the author of the assumption deal, was naturally suspected by many people of having engineered this scheme to enrich his natural constituency, the Tory-sympathizing New York City mercantilists. In late 1790, not long after the federal government had relocated to Philadelphia (the temporary capital chosen to placate the powerful Pennsylvanians who were betting that the swampy new capital would never be built), Hamilton submitted his funding plan to pay for the new government and the newly assumed debt.
In his usual thorough manner, Hamilton was eager to diversify the tax base beyond the import duties of British goods, and he came up with the idea of an excise tax on whiskey. This “internal” tax hit the hardy frontier-types right in their thirsty, mud-bespeckled kissers.
Washington was on board with his treasury secretary. They agreed it was a wonderful device to strengthen the federal government by taxing spirits before the state governments could grab some of that swag. In March 1791 Hamilton’s funding bill passed. His band of merry capitalists had won. Or so it appeared.
When frontier settlers heard about the new tax, they howled. “No taxation without representation” had rallied the new country through seven long years of war. The frontier citizens could imagine no reason to abandon that idea now that the war had been won, especially for a power-mad New York moneyman like Hamilton, Founding Father or no. The tax was widely flouted up and down the frontier to the point of invisibility. Resistance to the tax in western Pennsylvania surged like a spring flood.
In response to the law that threatened their way of life, a group of approximately 500 men in western Pennsylvania, with deep ties to the local militias, renamed itself the Mingo Creek Association, after a church where they held meetings. The association became the backbone of the organized resistance to the tax.
Not long after this first meeting, a tax collector happened to get himself tarred and feathered by some citizens who disagreed with his efforts to perform his job. The brave collector recognized two of his assailants and attempted to have them arrested for their assault. The federal marshal who showed up to serve the arrest warrants was too scared to proceed; he was directed by General John Neville, the inspector of revenue for the region, to hire an illiterate cattle driver to perform the job. The cattle driver also managed to get himself tarred and feathered by a mob, all of whom were dressed in one of their typical disguises (blackface, women’s dresses, and Indian costume were all standard mob issue). It was a hearty frontier welcome for the tax collectors to the ranks of the massively disenfranchised and actively persecuted.
But not all the rebels delivered their message in hot tar while dressed in drag. Some moderate rebels sent a flow of objecting petitions to Hamilton. The debate became countrywide when the National Gazette, a Philadelphia paper secretly owned by a friend of Thomas Jefferson, Hamilton’s archfoe in the cabinet, published an article in the spring of 1791 by a western Pennsylvania legislator suggesting changes to the law. The opponents also began a whisper campaign accusing Hamilton of hyping the rebellion in order to justify creating a standing army, which they imagined was another one of his tricks to establish a monarchy.
In fact, Hamilton did want to create a standing army, but he knew not even he could push that law through the fractured Congress. His blunt instrument of power would have to remain the barely-in-control state militias. He hated the idea that some faraway field hands were threatening his entire financing scheme and sensed that a face-off loomed. To prepare for this inevitable showdown, Hamilton broke out his sharpest quill and crafted the Militia Act of 1792, which allowed the president to use the state militias to crush an insurrection while Congress was not in session. The only limit on the power of the Militia Act was that a justice of the Supreme Court had to certify that rebellion was in fact happening. A trifling point to a power broker like Hamilton. Out west, the mob slowly grew bolder. General John Neville was doing double duty making a small fortune providing stores to the nearby army outposts while also distilling whiskey. In a place where most people were too poor to own slaves, hatred and envy of slave-owning grandees like General Neville, not to mention tax collectors, was intense. Neville, showing a flair for creating an incredibly bad public profile, had voted against a previous state tax on whiskey when he was part of the Pennsylvania legislature, but then flip-flopped when offered the post of inspector of revenue, which featured a nice annual salary and a commission on his collections. A convenient bonus was the opportunity to closely monitor his competing distillers.
Hamilton’s agile intellect, perfectly suited for designing systems of government and finance, betrayed him in this lowly matter, where the reality on the ground was a messy mass of conflicting aims that defied logic. His genius at expostulating far-ranging solutions from the germ of a problem led him to spring, in one giant leap, past any modest solutions, such as beefing up protection for the tax agents, and arrive almost instantaneously at the conclusion that this unrest in the woods required the dispatch of an entire army. It was all or nothing with him.
Central to his argument was that the western Pennsylvania unrest, so close to the capital, embarrassed and weakened the infant government. But Washington held back his young protégé and insisted on a more cautious and diplomatic approach. The president had ridden, scouted, and fought in the wilds of western Pennsylvania, first with the Virginia militia and later with British General Braddock, and knew the land well. He owned a big chunk of it (nearly 5,000 acres) for speculation and understood backwoodsmen in a way Hamilton didn’t. Washington was understandably tired of war, but the ever-restless Hamilton seemingly had not had his fill. Too valuable as a key staff officer to lose, Washington had kept the superefficient Hamilton off the battlefield throughout the Revolution. But Hamilton was desperate to earn more battle stripes and quit Washington’s staff to be on the field of battle at Yorktown in 1781. This small role in the big battle was still not enough for him.
As the mob grew in power out west, Neville tried to get additional military help from Philadelphia, but to no avail. During 1793, Benjamin Wells, one of his county deputy inspectors, kept plugging away at his job while getting repeatedly punched and abused, his office sacked, and his wife threatened when he was away from home. Wells traveled three times in 1793 to Philadelphia to report on the situation, but still Washington held his fire. They had bigger problems.
In 1792 France had launched into its own revolution and demonstrated its commitment to democracy by beheading King Louis XVI in January 1793. Hamilton and many in the government saw the increasingly bloody French revolution, led by Robespierre and his fascistic “Committee of Public Safety,” which was soon guillotining enemies of the revolution, as a nightmare that could easily be duplicated by the whiskey-swilling radicals roaming western Pennsylvania. Washington’s government was also riven with internal strife as Hamilton and Secretary of State Thomas Jefferson continued their gentlemanly brawl over their competing visions for the country’s future. Jefferson and Hamilton had been butting heads for a long time. Jefferson, the aristocratic, hereditary landowner who nurtured a fantasy of agrarian simpleness with states’ rights paramount for the country’s future, was a deeply indebted Virginia planter who opposed the strong Federalist system that Hamilton was feverishly building. Jefferson, like many other Virginia planters of his class, hated banks in the way that only deeply indebted landholders could. Jefferson (who shied away from open confrontation) finally quit his post as secretary of state in 1793 when he failed to convince Washington that Hamilton was secretly plotting to install a monarchy in the United States. Indeed, Hamilton stoutly denied any monarchical intentions, professing a preference for an all-powerful executive, a president-for-life, surely, but not a monarchy.