In paper 21, Hamilton builds off of the previous papers’ criticism of confederacies that afford too little authority and power to the central government. It discusses three specific issues that illustrate how America’s system of government under the Articles has left the national government weak and ineffectual. Hamilton first discusses the inability of the national government to enforce its legislation. The government can pass laws, but it cannot enforce them. States can simply disregard the laws without facing any serious repercussions from the national government.
The second issue relates to what Hamilton calls “a mutual guarantee of the state governments.” That is, the national government has no authority to protect state governments from being violently overthrown or torn apart by internal divisions. For example, if a small faction or powerful individual were to forcibly take control of Pennsylvania, the national government under the Articles would have no authority to intervene and restore freedom and justice.
The third issue Hamilton discusses is the inability of the national government to raise revenue from the states. The national government would routinely demand that states contribute certain sums of money to pay for pressing national expenses. However, the government had no way to actually compel states to pay the amount they owe. Hamilton argues that there is no way to fairly calculate how much each state should pay to the national government. He argues that the national government should be able to impose a national consumption tax that all citizens pay directly to the national government. He contends that a consumption tax is the safest tax since, were the government to impose too high a tax, people would simply consume less and thus pay less in taxes. This, Hamilton argues, will keep the tax rate at a reasonable and manageable level.
Hamilton is moving beyond a more general discussion of the weaknesses of confederate government into the specific failings of the Articles of Confederation. In the previous several papers, Hamilton and Madison made clear that confederacies marked by weak central governments have repeatedly descended into ineffectualness and anarchy throughout history. Now, Hamilton is showing in very specific terms how the Articles have already started America down that path. The national government cannot enforce its own laws, guarantee the democratic character of state government, or even raise its own revenue.
During the debate over the Constitution, most Americans agreed that the Articles of Confederation had many serious deficiencies that needed to be addressed. According to the authors of the Federalist Papers, one of the most severe failings of the Articles was their failure to provide the central government with “energy.” In discussions of the constitutional politics, “energy” refers to the ability of a central government to exercise its authority and impose its will. If a government can only pass laws or make declarations without actually being able to enforce those declarations, then it lacks “energy” and is nothing more than a distant talking-head.
Another striking aspect of this paper for the contemporary American is Hamilton’s support for a consumption tax, which is essentially the same as the present-day sales tax. Many economists and some politicians advocate the adoption of a national sales tax in America that would replace most other taxes, including the federal income tax. Hamilton defends the consumption tax by pointing out that Americans will have a very simple way of avoiding the tax: limit consumption. Theoretically, if the government were to raise consumption taxes too high, Americans would simply purchase less, leading to a decline in economic activity and government revenue that would cause the government to reconsider its tax policy.