In this essay, after wandering around a bit on rather soggy ground, the author comes to his main point: the disabilities of the American central government under the Articles of Confederation.
Reiterating what he had said more than once in previous essays, Hamilton emphasized that the chief defect in the existing national government was its "total want of a SANCTION to its laws." It had no power to command obedience, or to punish disobedience. The situation posed not only foreign but domestic dangers. A faction might subvert a state constitution and "trample upon the liberties of the people, while the national government could legally do nothing more than behold [this] . . . with indignation and regret." A case in point was the "tempestuous situation" from which Massachusetts had just emerged. Hamilton was here referring to Shay's Rebellion which occurred late in 1786.
Who can determine what might have been the issue of [Massachusetts] late convulsions, if the mal-contents had been headed by a Caesar or by a Cromwell? Who can predict what effect a despotism established in Massachusetts, would have upon the liberties of New-Hampshire or Rhode-Island; of Connecticut or New-York?
Another fundamental error of the Confederation was the principle of assigning individual states a quota of money to be contributed to the national treasury. First, this did not raise sufficient revenue because many states were delinquent in meeting their quotas. Second, a matter of equity was involved. Neither the value of lands nor the size of population, which had been established as the rule for determining state quotas, was equitable.
There was "no common measure of national wealth; and of course, no general or stationary rule, by which the ability of a State to pay taxes can be determined." The national government should be authorized 11 to raise its own revenues in its own way [by] imposts, excises and in general all duties upon articles of consumption" which would tend, in time, to level off to the individual's ability to pay. If they did not buy something, they would not be taxed for it.
"Impositions of this kind usually fall under the denomination of indirect taxes," Hamilton concluded, "and must always constitute the chief part of the revenue raised in this country."
Getting back on more familiar ground where his footing was surer, Hamilton summarized his objections to the existing central government under several headings:
First, its "total want of a SANCTION to its laws." It could not command obedience, or punish disobedience.
Second, the principle of assigning to states a quota of money to be paid into the national treasury. States were often in arrears, and on occasion refused to pay anything toward carrying out measures of which they disapproved. The national government should have the power to raise revenue in its own way, preferably, Hamilton suggested, by what were virtually sales taxes in the form of "imposts, excises and in general all duties upon articles of consumption." Hamilton did not note that sales taxes fall harder upon the poor than the rich.
Third, the government's want of power to regulate commerce, whether interstate or foreign.
Fourth, the government's inability to raise troops except by requisitioning quotas of men from the states. The whole system of quotas to raise men and money was an "imbecility in the Union."
Fifth, the fact that under the Confederation each state, large or small, whether quite populous or much less populous, had an equal right (one state, one vote) in the decision-making of the central government created injustice and inequality. It violated the "fundamental maxim of republican government, which requires that the sense of the majority
Sixth, the crowning defect of the Confederation was its want of judiciary power. There should be one supreme court, "possessing a general superintendance" and authorized to "declare in the last resort, a uniform rule of civil justice."
The American central government was "one of the most execrable forms of government . . . ever contrived . . . a system so radically vicious and unsound, as to admit not of amendment but by an entire change in its leading features and characters."
The only way to avoid impending disaster was the swiftest possible ratification of the proposed new constitution, argued Hamilton, although, as noted before, he thoroughly disapproved of the Philadelphia document, accepting it only because, along with Washington and others, he thought that it was as good as could be expected under the circumstances.