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When the Party’s OverThe Politics of Fiscal Squeeze in Perspective$
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Christopher Hood, David Heald, and Rozana Himaz

Print publication date: 2014

Print ISBN-13: 9780197265734

Published to British Academy Scholarship Online: May 2015

DOI: 10.5871/bacad/9780197265734.001.0001

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PRINTED FROM BRITISH ACADEMY SCHOLARSHIP ONLINE (www.britishacademy.universitypressscholarship.com). (c) Copyright British Academy, 2022. All Rights Reserved. An individual user may print out a PDF of a single chapter of a monograph in BASO for personal use.date: 06 July 2022

Managing Fiscal Squeeze after the United States’ Panic of 1837

Managing Fiscal Squeeze after the United States’ Panic of 1837

(p.55) 3 Managing Fiscal Squeeze after the United States’ Panic of 1837
When the Party’s Over

Alasdair Roberts

British Academy

In 1836–39, the United States suffered a financial sector collapse that plunged the nation into a severe economic depression. The revenues of state and federal governments evaporated, prompting legislators at both levels to undertake an extraordinary project of fiscal squeeze. By 1842, one-third of American states were in default on British loans. Meanwhile, the decline of federal revenues heightened partisanship and legislative gridlock in Washington. Strategies of managing fiscal squeeze shifted substantially during the crisis. By its end, many states had resumed payments on their debts, developed new methods of collecting taxes, and adopted constitutional changes restricting deficit financing. Meanwhile, federal politicians completed a painful renegotiation of federal tax policies and adopted a more pragmatic attitude about debt financing of federal expenditures. The effect of the crisis was to produce a transformation in the American constitutional order whose effects are still obvious today.

Keywords:   United States, Panic of 1837, financial crisis, depression, fiscal squeeze, default, deficit financing, constitutional change

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