Friday, March 20, 2009

Martin Van Buren And The Panic Of 1837

NOTE: Since we are going through an “economic downturn” (depression/recession) as the pundits like to call it, I thought it might be interesting to look at another period of “economic instability” from a time other than the Great Depression, and the President who was in office at the time. I thought President Van Buren's comments regarding governments role in economic crises somewhat appropriate for today, especially considering the Congressional penchant for “bailouts”.

Martin Van Buren was the eighth President of the United States serving from 1837-1841. He was the first American citizen to be elected President who had not been a British subject. He had served as the Vice-President during Andrew Jackson's second term as President from 1833-1837. He was nicknamed “the Magician” because of his behind the scenes political maneuvers. However, unlike Jackson, he was never able to win popular support for himself or his policies.

In his inaugural address Van Buren had assured the nation that he would attempt to continue to follow the policies and examples set forth by Jackson, and as evidence of his intent to play the role of caretaker, he reappointed all the member's of Jackson's cabinet. In his address Van Buren had described the United States as being “an aggregate of human prosperity not elsewhere to be found”. Then, the United States first major economic depression, the Panic of 1837, hit the country, when the banks suspended the payment of gold or silver for paper money. Van Buren got the blame for it, even though it occurred only two months after he took office, and effectively killed any chances of his ever achieving popularity.

When this depression hit, Van Buren called a special session of Congress in September 1837, asking for the establishment of an independent treasury system (so the government could retain control of collected tax money instead of depositing it in private banks), and proposed the government begin issuing paper money in the form of treasury notes. Van Buren warned that it was not within the constitutional rights of Congress to give “specific aid to the citizen to relieve embarrassments arising from losses by revulsions in commerce and credit.

Further he said: “All communities are apt to look to government for too much. Even in our own country, where its powers and duties are so strictly limited, we are prone to do so, especially at periods of sudden embarrassment and distress. But this ought not to be. The framers of our excellent Constitution and the people who approved it with calm and sagacious deliberation acted at the time on a sounder principle. They wisely judged that the less government interferes with private pursuits the better for the general prosperity. It is not its legitimate object to make men rich or to repair by direct grants of money or legislation in favor of particular pursuits losses not incurred in public service. This would be substantially to use the property of some for the benefit of others.

Congress was slow in approving Van Buren's suggestions, with the independent treasury system not coming into effect until July 1840. Prosperity temporarily returned in the winter of 1839-1840, but bad times recurred at the end of the Van Buren administration, continuing until 1845.

Van Buren was unanimously chosen by the Democratic Convention to run for a second term in the election of 1840. Delegates were unable to decide on a vice-presidential candidate leaving the choice up to the electors, thus leaving Van Buren without a popular running mate to bring him support, and all the forces that opposed him united behind the Whig candidate, William Henry Harrison.

Whigs called the President “Martin Van Ruin” because of the nationwide depression. They portrayed him as an aristocrat who drank his wine from a silver cooler and ate his meals from gold plates, and criticized him for using public money to install a hot water tank in the White House to warm his bath water. They featured Harrison as a man of the people who could live in a log cabin and be content with hard cider. The facts were that Harrison was born in a mansion as a Virginia aristocrat, while Van Buren was the self-made son of a tavern keeper. The voters believed the Whig version, and Van Buren was defeated.

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