Philadelphia Reflections

Benjamin Franklin Parkway (2)

Art Museum

There are a number of residential relics along the Parkway, but in general the idea seems to have been to put governmental buildings there, in a sort of French-like celebration of governmental glory. There is the Youth Study Center, the Department of Education administration building, the Boy Scouts of America, the Cathedral of St. Peter and St. Paul, and of course the tower of City Hall at one end and the Parthenon-like Art Museum at the other. But this is Philadelphia, and certain small touches of the town are tucked among the European grandee design.

For example, WFLN (now WWFM) the original FM classical music station, had its studio tucked in a little building just behind the Cathedral. Ralph Collier would interview authors and city visitors there during the lunch hour, in a studio that was little more than a closet, while someone else changed records in a room downstairs. Somebody from New York once said that Ralph didn't seem to know how good he really was, which is a way New Yorkers like to talk. Ralph was, the just about the only interviewer who had actually read your book before the interview. In 1997, WFLN was sold for forty million dollars, which ought to impress even a New Yorker.

Logan Circle is bigger than it looks, primarily because the windows are set 100 feet high. This came about after the anti-catholic riots of the Civil War era, which made it advisable to put stained glass higher than most people can throw rocks. There is usually a cardinal in residence at this cathedral, and Cardinal Bevilacqua the much-respected lawyer-cardinal is now just retiring in favor of an incoming occupant from St. Louis. Cardinal Krol was famous in the past for his opposition to Pope John's Vatican Constitution, which he refused to allow to be translated into English. Before that, was Cardinal Dougherty, who is remembered for being considerably overweight. Cardinals are addressed as Your Eminence, and Cardinal Dougherty was (very privately) referred to as You're Immense. He was perhaps most famous for the Legion of Decency , an effort to make motion pictures more socially acceptable. The story is told of a 12-year-old girl who stood up and told the Cardinal that she didn't agree with him, she liked movies. The next day, her father, the most powerful Catholic banker in Philadelphia, had to go to the Cardinal and humble himself to make amends.

Amelia Earhart

Franklin Institute was originally on 7th Street, where the Atwater Kent Museum of Philadelphia History is now located. Much of the money to build it came from a $5000 bequest from Franklin himself, which was intended to demonstrate the power of compound interest over a period of time. It is part science museum, part memorial to Philadelphia's most famous citizen. It has a Planetarium, locomotive, a passenger airplane, Amelia Earhart's plane, a huge replica of a human heart, and thousands of working demonstrations of electrical phenomena. Ben Franklin's huge statue sits in a grand marble rotunda, where socialites occasionally hold receptions and weddings. But between the two extremes is the most interesting combination of museum and memorial -- a series of demonstrations of Franklin's most important scientific discoveries, utilizing the same instruments he used. Just a little effort at understanding these exhibits will convince any educated adult that Franklin was truly a genius.

Almost next door to the Franklin Institute is its more venerable neighbor, the Academy of Natural Sciences. The Academy is an offshoot of the American Philosophical Society, itself (originally founded by Franklin) and has a distinguished history of discovery and research of its own making, not merely a display of the work of others. Most school children will recognize the famous display of dinosaurs, including the First Dinosaur ever unearthed intact (in Haddonfield).

Art Museum

The Art Museum was intended to inspire awe, and it does. The builders ran out of money before the decorative friezes could be completed, but that even enhances its resemblance to the Parthenon, where the friezes were blown off in various wars. It's a little hard to know how to respond to the criticism that the building overwhelms its contents. Perhaps it is true that the creaking floorboards in Madrid's Prado Museum show off the treasures on its walls, but there is also little doubt that Spain (or Boston) would replace the floors if it could afford to. Although the City of Philadelphia has a little trouble finding the money to maintain and guard the Museum, the masonry is ultra-solid, it's very big, and will endure for ages to come. The collections slowly grow, benefaction by benefaction. The traveling exhibits are clearly the center of Philadelphia culture. And there, at the top of the stairs without any clothes on, is Diana of fame and fable. Her perfectly straight back is the true essence of the famously beautiful Philadelphia woman, like Fannie Kemble, Rebecca Gratz, Evelyn Nesbitt,Cornelia Otis Skinner, Grace Kelly, and Katherine Hepburn.

Yet Another Toast to Dr. J. William White

Dr. J. William White

Who was Dr. J. William White, and why do we drink a toast to him every year at our Annual Meeting?

I will answer my second question first: Dr. J. William White died on April 24, 1916, leaving a Will that he finally signed only on March 24 of that year. The Will, drafted by John G. Johnson, the most famous Philadelphia lawyer of that time, runs to 26 pages and disposes of an estate of $868,176.05,--which was real money in 1916.

Dr. David Hayes Agnew

Item 17 of that Will reads as follows: "I give to the Franklin Inn Club of Philadelphia five of its bonds of $100 each to me belonging.

IN ADDITION TO THIS, I give to said Club the sum of $5,000 to be invested by the Directors of the Club, with the approval of the majority of the membership, and the income to be expensed in such way as will best subserve the interests of the Club and conduce to its perpetuation.

I will be glad if, in doing this, they can assure the occasional remembrance of my name. The Club has been of me the source of so much pleasure and happiness that I feel that I owe it something in return."

Well, I have not examined the minutes of our Board to see if it really was discussed and voted upon by a majority of the members, but when I joined in 1968, I was told that Dr. White's bequest had been used for this annual dinner in his memory as long as there was money to pay for it, then only to buy the champagne for the toast to his memory, and then in my time even the champagne money was drunk up.

We still talk about him. He was in every sense a "character", a special Philadelphia character. A lot of this information comes from a biography his friend Agnes Repplier published in 1991. J. William White's father James William White Senior was a doctor, the founder of Womens' Maternity Hospital, and President of the S.S. White Dental Supply Company, an extremely successful business which operated until recently from a big building just down there on 12th Street. The Money that flowed from this business enabled our Dr. J. William White to do pretty much what he wanted all of his life.

Professor Louis Agassiz

He was a very smart boy, strong, and with a bad temper. He got into fights at school, but he also managed to earn both an MD and Ph.D. from the University of Pennsylvania in 1871, at the age of 21. He maintained a passionate loyalty to Penn all of his life. Directly after graduation, he obtained a job on a U.S. Coastal Survey ship, theHassler on a survey of marine life and ocean bottoms conducted by Professor Louis Aggassiz of Harvard. He was hired as a "Hydrographic Draughtsman" but it turned out he was to be the expedition photographer and film developer because nobody else knew how to do that. Before they sailed, he also wangled a job as correspondent for The New York Herald. They sailed from Boston in December 1871, explored their way around South America and arrived in San Francisco in August of 1872. On his way home by train, young Dr. White stopped in Salt Lake City to hear Bringham Young preach. Bringham Young preached against doctors and lawyers, and told the women in his audience that they should not employ obstetricians, that they and their babies would be better off without them.

When Dr. White returned to Philadelphia, he went to work, first as a resident at

PGH

Philadelphia General Hospital, then a doctor for Eastern State Penitentiary, where he apparently lived for a while, where he took boxing lessons from a giant prisoner. By 1876 he was an Assistant Demonstrator of Practical Surgery at Penn, and a couple of years later he was working under the most prominent Philadelphia surgeon Dr. D. Hayes Agnew. In Thomas Eakins' famous painting "Dr. Agnew in his Clinic" we can see Dr. White doing the actual cutting, while Dr. Agnew is giving the lecture.

This picture is also interesting because

Agnew Clinic

right there in the middle of the action is a stalwart female, the surgical nurse. By the time of this picture, both Drs White and Agnew were having trouble with the Board of Governors: female students were complaining that they were not allowed into these clinics.

Drs Agnew and White replied that "the nature of the diseases and the conditions of the patients made the presence of females undesirable."

The doctors offered to quit and the Governors apparently backed down. But what about that nurse?

Another famous story: In 1877 Dr. White was elected to the First City Troop

First City Troops

. For some reason, this didn't look right for a young doctor, because in these long years between wars, the Troop was known more for parties, banquets, and balls than for national defense. However, he joined, enjoyed the parties and the riding. Previous Troop surgeons had worn regular street clothes; Dr. White put on the fancy Troop uniform. Probably at a party, a Trooper named Adams objected, became loud. Dr. White floored him. Mr. Adams sent a formal challenge to a duel.

Sensation! Nobody could remember a duel in Philadelphia, where it was against the law. The newspapers were in an uproar, the New York Herald,

for which Dr. White once wrote letters from his voyage around South America, invented a story about a lady who was supposed to be the real cause of the fight. Mr. Adams and Dr. White, accompanied by seconds and a surgeon, crossed the Mason-Dixon Line, took single shots at each, shook hands and went home. Dr. White shot into the air. Years later, Adams confessed that he had aimed at Dr. White, but missed. Eventually, the storm blew over, but it is remembered as the last duel around here -- as far as I Know.

As to the City Troop, Dr. White's Will left $5,000 in Trust for a "J. William White Fund, the income to keep remembrance of the facts that I served as Surgeon and was the first incumbent of that position to be directed by the Troop to wear the time-honored full dress uniform."

I don't know if the Troop bought champagne to keep remembrance.

Franklin Field

Although Dr. White became one of the best surgeons here, and wrote several successful textbooks, he is mainly remembered for his passion for athletics. He was made the first Director of Athletics at Penn.

Army-Navy Games

He built the first Gymnasium, he built Franklin Field, he arranged for Army-Navy Games to be played here, he got his friend Theodore Roosevelt to attend, he spent every summer either climbing the Rockies or climbing the Alps together with his very sporting and strong wife, Letitia.

Letitia was also a better shot than her husband.

Perhaps Dr. White's most famous sport was called "Angling for Men". He learned this sport on vacation in

Narragansett Bay

Narragansett Bay. The players are in a rowboat, and the contestant jumps into the water, with a strong rope tied around his waist. The Men in the boat try to haul the Swimmer back into the boat, while he resists. When Dr. White was 46 years old it took three of his friends 38 minutes to get him back within 100 feet of the boat, but they never got him in!

Dr. White moved in very exalted circles. Among his close friends were Henry James,

whom he visited in Rye and who lived with the White's on his visits to Philadelphia: John Singer Sargent, whom Dr. White persuaded to paint his portrait although Sargent had given up portraits; and the famous English doctors Sir Frederick Treves and Sir Joseph Lister, and as I said, President Theodore Roosevelt.

In later years, after retiring from regular surgery, Dr. and Mrs. White traveled all over the world, although some patients including John G. Johnson insisted that only Dr, White could do any procedures upon their own bodies!

William Mayo

Well, of course, Dr. White had his own problems, and like all men, became a patient himself. In 1906, he developed a hard nodular mass in his left iliac fossa which, I gather, is not good. Probably cancer. He knew what to do. He took a train Rochester, Minn. To his friends the Mayo Brothers. When they decided to operate, three top surgeons from Penn went out to watch. Dr. William J. Mayo operated and successfully removed congenital diverticulitis which had caused a perforation of the bowel.

Later: Dr. Mayo: "Well, you're all right."

Dr. White "Well, you're a good liar. I've been there myself, and I know."

Dr. Mayo: You don't know everything. It's like a bag full of black beans, and one white bean. You pull out the white one. Now get well!"

Thomas Hardy

By next summer he was well and traveling again. He received a degree from University of Aberdeen, he met Thomas Hardy, he went to Egypt, next year to China, when the First World War began he was passionately pro-Allies, visited friends in London, visited wounded soldiers at the American Ambulance Hospital in Paris, spent much time there but did not operate, flew over the battlefields in a French military plane, and visited Reims during a German bombardment. He visited the British front, returned to London, involved himself in the issue of Henry James becoming a British citizen because of America's Neutrality, then sailed home across an ocean full of U-Boats.

Back in Philadelphia - actually on his estate in Delaware County he raised money for the American Hospital in Paris, and again involved himself in several disputes, about the War, about a Penn faculty member...but now he was dying, we're not clear from what, but it sounds like cancer, after all. He was in great pain and had to be hospitalized. He died in his beloved University Hospital, surrounded by colleagues and friends, on April 24, 1916.

I close with a few more words about his Will. As I said, it is 26 legal-size pages, really the story of a life, packed with bequests to every person who was close to him, every organization he belonged to-- and most of them, like the one to us here at the Inn, ask that something be done to remember J. William White, which seems --to me -- little sad. Why were this popular, successful men so afraid of being forgotten? Was it because he and his wife had no children?

I don't know, but here, tonight, we remember: I raise my glass-- champagne or not--to the memory of Dr. J. William White, a character if there ever was one!

------given at the Franklin Inn Club on January 14, 2005, by Arthur R. G. Solmssen

Revising, Amending, and Skirting The Constitution

Tiananmen Square

In some foreign countries, people who dislike the government about some issue wait for a clear day and go in the streets to riot. Some of our own younger people who spent a little too much time abroad have likewise occasionally called their friends on a cell phone and agreed to pour out into our town squares to protest. When you try that in Tienanmen Square (1989) or similar places, machine guns can suddenly end the meeting (2,500 dead). We had the Boston Massacre of 1770 (5 people killed) and Kent State of 1970 (4 people killed), where newsmedia somewhat over-dramatized the risk involved. In general, most Americans feel public demonstrations are neither very dangerous nor very useful.

Chief Justice, John Marshall,

One measure of Constitutional effectiveness can be found in just this public attitude. The citizenry has been told and generally believe that methods for addressing grievances have been provided in the legislative, judicial and executive branches, ultimately leading to the Constitution itself as the last point of appeal. The 1787 framers in Philadelphia probably had this design in mind, but it was not until the third Chief Justice, John Marshall, made it his life's work that the elegance of the system became widely appreciated. The Constitution is the capstone of our system; every citizen's grievance can be appealed within it. If things are sufficiently dire, even the Constitution can be changed.

second Constitutional Convention

A second Constitutional Convention could be called, but most lawyers shudder at what chaos might emerge from making multiple changes without waiting to see how a few worked out. For practical purposes, therefore, amending the Constitution is the last recourse when the government goes astray. Amendments don't easily succeed; hundreds were proposed in two hundred years but only two dozen were adopted. In totalitarian countries, millions of amendments might be envisioned, but either nothing significant would be adopted, or nothing significant would be enforced. In our country, it is sufficiently difficult to succeed that frivolous or ill-advised proposals are discarded or modified into less extreme forms by "due process". But enough amendments do succeed to keep the populace out of street protests. Amendments can succeed, if you and the proposal are really serious. So far the only real appeal beyond an amendment has been another amendment.

Judge Benjamin Cardozo

The step provided before an amendment is to appeal to the Supreme Court. That happens about a hundred times a year, with the generally satisfying outcome. Perhaps the only serious criticism of the Supreme Court is the difficulty of "gaining cert.", which is the process of petitioning the Court to take the case, by granting a writ of certiorari. Only about 2% of petitions are allowed to present their arguments, and the Court has protected itself from overwhelming volume by limiting its caseload to instances of conflicts between circuits, and cases involving sovereignty of some sort. For such a selective process to remain acceptable, implicitly the rulings of the various Circuit Courts of Appeal would also have to enjoy general approval. That such is the case is evidenced by the fame and distinction reached by certain Judges of Appeals Courts, like Benjamin Cardozo, Learned Hand, and Richard Posner. In Cardozo's case, he was finally appointed to the Supreme Court, but at such an advanced age and short tenure that his Supreme Court reputation is rather modest; he achieved his reputation as an Appellate Judge. The failure of Robert Bork and several others to achieve Senate ratification illustrates a somewhat different version of the same issue: that the higher courts, not just the Supreme Court, are generally held to do as good a job as human systems allow; supremely gifted judges are not exclusively in the Supreme Court. As you go lower in the court system, more dissatisfaction can be heard, ultimately reaching slander accompanied by knowing grins, such as "You show me a hundred thousand dollars, and I'll show you a Philadelphia judge." Whenever criminals meet justice, such mutterings can be expected. But the point to emphasize is that there are no muttered challenges to the contention that the higher you go in the Judiciary, the more distinguished the judge is likely to be.

That's the federal judiciary, of course. State judiciaries are held in less esteem, although they have the power to put people in jail forever, award multimillion-dollar verdicts and modify the climate of business. Somehow, the prestige of these judicial systems has eroded to the point where a joke can be heard that being a state supreme court justice is a pretty good way to start a law practice. It's hard to know whether prestige has disappeared because of performance, or the reverse. Whether the steady erosion of state legislative power by Congress has resulted in a parallel loss of status in the judiciary is a serious question. In that case, of course, there is very little the judiciary itself can do about it.

Dred Scott

In two hundred years, hundreds of amendments have been submitted to overturn Supreme Court rulings which displeased someone. Only three have succeeded. The first was the overturning of Chisholm v. Georgia by the Eleventh Amendment, reflecting a largely unspoken wish to employ state sovereignty to continue the anti-British animosities of the Revolutionary War. While understandable enough, this approach is most unfortunate. The second is the overturning of the Dred Scott decision on the legitimacy of the Fugitive Slave Law by the Thirteenth Amendment. While the outcome meets general approval, here is another court position which could only be changed by winning a war. And finally, the legitimacy of the graduated income tax as an allowable private taking was established by the Sixteenth Amendment, overturning an entirely legitimate decision in Pollack v. Farmers Loan and Trust that the original Constitution prohibited it. In each case, the desired remedy only existed in changing the Constitution. Dissenters are free under the First Amendment to describe such a Court decision as asinine, but it is going to continue to stand. Some will be tempted to circumvent the whole process in order to achieve their goal, and two examples come to mind. In the court-packing episode of 1937, most impartial observers would agree that the Supreme Court was forced to reverse its decision under threat of coercion by President Franklin Roosevelt. Amendment of the Constitution was a choice open to him, but he chose another way. The Commerce Clause of Article I, Section 8 now continues to read:

The Congress shall have power to .........Regulate Commerce with foreign nations, and among the several states, and with the Indian Tribes

just exactly as it did when for 150 years everyone referred to it as the Interstate Commerce Clause. What has changed is the declaration that Congress may regulate all commerce of any sort, without fear of challenge in the court system. Whatever chances Roosevelt might have had to amend the Interstate Commerce Clause before this uproar, it is clear he could never have achieved its amendment afterward.

The second instance of circumvention is related to the same episode. The insurance industry was highly displeased to find itself regulated by federal agencies, and within six weeks successfully lobbied the McCarran Ferguson Act into law. Congress could not overturn or make an exception to a Supreme Court ruling, but it accomplished the same result by prohibiting federal agencies from taking action in the business of insurance. To maintain regulation for insurance, all of the various states then passed laws establishing insurance regulatory mechanisms, and insurance regulation migrated back to the states. It is now difficult to know whether the same exception could have been created by then re-amending the Constitution. But since the advent of wide-spread current dissatisfaction with health insurance, it pretty clear that an amendment imitating McCarran Ferguson would never pass, today.

John Jay the Chief Justice

Finally, the Eleventh Amendment may not have been such a good idea, either. The dispute in 1793 (although it avoided saying so) was about compelling Americans to pay just debts regardless of the person they owed them to. And that included paying debts to former Loyalists. John Jay the Chief Justice was sent to England to negotiate a treaty to settle this matter, but after both nations ratified the treaty, state laws were passed to supersede it. From this evolved the issue of whether a treaty takes precedence over American laws, and the ensuing battle firmly established the preemption of Congress by treaties. Two hundred years later, when the British are our allies and Revolutionary debts fade in significance, many people are uneasy about such clear-cut deference to treaties. Our unwillingness to join the League of Nations, and sign the Kyoto Agreement, or enter into many other international cooperative ventures are related to uneasiness about the unintended expansive power inherent in the Constitutional location of a foreign treaty, enacted at a time of limited communication. We are doomed by demography to perpetual minority status in world forums but forced by economic success to exert leadership or become a target. There is no immediate emergency, but the prescribed generalities of enacting or enforcing treaties need sober reflection in the era of instant communication.

Robert Morris, Financial Virtuoso

For reader convenience, we here divide Robert Morris' financial rescue of wartime America into two parts before and after 1780, because he had two episodes of being officially in charge. The first immediately followed the Battle of Fort Wilson when chaos and worthless paper money required a strong hand; it will be described next. The second episode followed the later near-revolt of the Continental Army but has already been outlined. Here, Morris was recalled to the office with chaos erupting at the end of the war came in sight and everyone was reluctant to fight battles for no military purpose. At the same time British, French and American politicians connived for victory in a war each had failed to win militarily. For simplicity, time sequences have been distorted a bit, concentrating the creation of modern banking into the second episode, where failure to coordinate banking with taxation ultimately led to the Constitutional Convention in 1787. Chronology has been sacrificed to enhance clarity. It is now time to return to the brilliant expedients Morris employed after he took charge following the Fort Wilson shocker, omitting some of the banking details already described.

What helped the first crisis most was the ready availability of a financial genius to turn around a crisis, when just about everyone else was at a total loss. Robert Morris had made his fortune, probably the richest man on the continent, and nursed the grievance of crowd abuse at the Battle of Fort Wilson. He had some novel concepts to test; it is not too much to say he showed them off, particularly since they displayed a man in charge with prodigious energy, applying a financial virtuosity of seemingly unlimited ideas. No one else came close to Morris in stature, and he must be forgiven for flaunting it a little.

Robert Morris

At the climactic moment, however, Morris played coy. He was not so sure he would accept the office of Financier, a term newly invented for the occasion. Accepting Ben Franklin's cynical assessment of the future, he wanted everyone to be clear: he was not going to give up his private partnerships. And he insisted on his right to hire and fire anyone at all within the government bureaucracy who was concerned with public money. He accepted responsibility for new debts of the government, but not for old debts incurred before he took office. He would furthermore delay taking the oath of office for a few months. These conditions naturally generated wild opposition in Congress; Morris was serene, and Congress finally had to agree. Most of these terms had some obvious purpose while making no secret of his distrust of Congressmen. In fact, the opposition might well have hardened its position if the purpose of delaying the oath had been fully expressed. Morris wanted to delay becoming a federal officer in order to delay resigning from the Pennsylvania Assembly. During the interval, he applied similar power tactics to the Legislature, ending up simultaneously in charge of both state finances and federal.

Yorktown: Oct. 19, 1781

That purpose was soon to emerge, as just one instance of many tough tactics. Inflation tossed and turned the finances of everyone, so Morris would buy with one currency and sell with another, taking advantage of brief fluctuations, then quickly reverse the currency transaction when advantages shifted. He arranged with the French and Spanish ministers to keep their loans and foreign aid in separate accounts, applied the same techniques with state accounts, and even between near and distant counties within Pennsylvania. He thus had a choice between many currency values at any one moment. His far-flung commercial network supplied him with more precise information than his counterparties could get, and usually more quickly, so his trading activities were usually profitable. One rather extreme example was the arrangement with Benjamin Franklin in Paris; Morris would write checks to Franklin in one currency and Franklin would write identical deposits back to him on the same day but a different currency. He thus extended ancient practices among international merchants, carrying them over to government operations, which had the effect of creating a modern currency exchange. To outsiders, however, particularly his political enemies in Massachusetts and Virginia, it looked fishy. To modern observers, the astonishing thing was his ability to keep such complexity in his head. The political class which even today sees it as natural that governments might want to manipulate currency as they please might describe Morris strategies as dubious. Those who believe the market price is usually the true price however, must applaud this strategy for forcing manipulated prices back to market levels. Since here has rested the central dispute in American politics for two centuries, Morris must be credited with inventing even that dispute. One would normally suppose that doubling the silver price of American currency in two months would vindicate his trading strategy; but it has not always done so, suggesting the nature of the questioning has been more ideological than economic.

Within days of assuming office, the "legal tender" laws were repealed, stripping government of the ability to force its citizens to accept the worthless currency, impose rationing and price controls, and otherwise assume the mantel of "sovereignty". Like a miracle, food began to reappear in the Philadelphia marketplace at a lower price, and confidence in the competence of government began to return. To whatever degree the British ministry had been deliberately stalling the peace talks in the hope of American collapse, this incentive was dissipated.

The list of financial innovations which Morris produced in a remarkably short time, is seemingly endless. He next became central in the creation of the first American bank of the modern sort, the Bank of North America. And somewhere in that welter of activity appears to be the recognition of the so-called yield curve. Loans for a few weeks or months command a much lower interest rate than long-term loans; in the colonial period, almost all loans were for six months or less. Morris seems to have realized early that great profitability could be achieved by merging a sequence of several short loans into one long one. He thus devised a number of strategies which had the general effect of linking short loans together. Using the remittance for a transatlantic cargo in one direction as payment for the return cargo on the same ship was an early example. Once you grasped the idea and did it deliberately, long sequences of linked loans began to suggest themselves. Just to complete the thought, it might be noticed that present-day globalization reverses the process, with shorter-term loans for components substituting for longer-term loans for the entire assembled product. With lower interest rates, competitive prices can be reduced, unless a choice is made to increase profits.

There's one last issue in Robert Morris folklore: Did he finance the whole Revolution out of his own pocket? The answer is surely no because Beaumarchais ended up spending much more than any other individual, however involuntarily. The degree to which hard currency originated with the French, Spanish and American governments is a little unclear, and war damages are impossible to appraise. There were moments when Morris did personally finance major cash shortages, adding the considerable advantage of speeding up what could be a cumbersome process of budgeting, committee consideration, disputes, and hesitation. Where it was feasible, he sought restitution. Every bureaucrat has experienced delays and obstructions he dreams of eliminating by simply paying for it himself; Morris had the advantage that within reason, he could afford it.

As a very rich man, his more important personal contribution was his pledge to make good if the Treasury defaulted. Creditors generally preferred his credit to that of the government; his pledge was to pay if the government could not. His "Morris Notes" were not paying, but rather reinsuring government debts, in modern terms offering a Credit Default Swap. If we lost the war and our debts defaulted, Morris would have lost everything he had. But short of that, his pledge would result in much smaller losses. The public couldn't be expected to understand all that, so some simplified explanations were understandable. There were probably a number of similar examples, but near the end of the war, there was a particularly clear one. The Continental Army was very close to revolt when it looked as though Congress would disband the soldiers without paying them; there was no money but unpaid demobilization would likely send rioting soldiers through the countryside. Morris came forward with a million dollars of his own money and saved the day. Washington was forced to make emotional speeches appealing to the patriotism of the troops, but with most of the army barefoot, that was not certain to hold them back. Under those circumstances, to come forward later like Arthur Lee and remind everyone that Morris had once refused to sign the Declaration of Independence, was ingratitude of the meanest sort.

The accusation made after the war was that he profited from government losses, but there has never been evidence of that. His position was that he came out about even. Unspoken in these quarrels was the plain fact that until he got involved in the post-war real estate boom, he didn't need to cheat. Probably didn't even have time for it.

The Revolutionary War continued for two years after Morris took office for the second time, so war losses continued in spite of improved financial management. Both the French Government and the American one were at the edge of bankruptcy. Britain was also in political chaos, but it was only small consolation that Parliament had granted Independence to the Colonies when King George III remained adamant that it wasn't going to happen to his colonies. Strengthened by the British defeat of the French Caribbean fleet, the capitulation by the Spanish about Gibraltar, and great uncertainty about the Crimea and India -- almost anything was possible. Eventually, matters began deteriorating again. The British even then had the financial strength to hold out much longer, but obvious neglect of other opportunities eventually wore them down. Morris seemed to be winning, just by not losing.

In the midst of such anarchy, Morris had to admit his greatest failure as the Financier but was already formulating his plan for setting things on their feet. The Revolutionary War as seen by a financier had either been won by the British system of taxation or else lost by the American and French lack of such a system. It was irrelevant whether the War was described as a defeat for Britain or a victory for America; in Morris' view, the British had a good system and we had a poor one. No nation can finance a major war out of current receipts; you have to borrow. Your security for loans is the economy of your nation. Even if your illiquid assets are adequate for the war, the banking markets regard your ability to pay cash for the interest on the loan as their only reliable test of your solvency. That is, a nation at war must have the ability to keep the bankers happy with regular interest payments. For that, a nation had to have a proven system of reliable taxation. Britain had it, and the American/French alliance didn't. Franklin's masterful diplomacy was just lucky enough to achieve generous terms, but that wasn't good enough, we had to have a Federal tax system to survive and thrive. And to achieve that, we had to have a new Constitution. Never mind that resentment about British taxes got us into this mess. Never mind the chaos attending the Treaty of Paris. Never mind the war-weariness, bitterness, and destitution of the troops. Never mind that Morris was now about to embark on one of the most mind-boggling real estate ventures in history, was going to go to debtor's prison, was going to engage in millions and millions of dollars of borrowing and restitution. Never mind. We needed a new Constitution, and we were going to get it. Think big.

State and Federal Powers: Historical Review

John Dickinson of Delaware

It was expedient to leave certain phrases in the Constitution intentionally vague, but the overall design is clear enough. Just as twenty-eight sovereign European nations now struggle to form a European Union, thirteen formerly sovereign American colonies once struggled to unify for the stronger defense at a reduced cost. Intentionally or not, that created a new and unique culture, reliant on the constant shifting of power among friendly rivals. Everybody was a recent frontiersman, trusting, but suspicious. It still takes newcomers a while to get used to it.

So the primary reason for uniting thirteen colonies was for a stronger defense. As even the three Quaker colonies of New Jersey, Pennsylvania and Delaware could see, if you are strong, others will leave you alone. In time, the unification of many inconsequential behaviors created a common culture of important ones; and in time that common culture strengthened defense. At first, it seemingly made little practical difference locally whether construction standards, legal standards, language and education standards and the like were unified or not. Except, that in the aggregate, it forged a common culture.

The practice of Medicine was certainly one of those occupations where it mattered very little whether we were a unified nation. Unification of medical care offered a few benefits, but mostly it didn't matter much, right up to 1920 or so. Even then I would offer the opinion, that unification of the several states (with consequent Free Trade) only made a big difference to health insurance, and still made little difference to the rest of medical care. In fact, there are still about fifteen states with too little population density to provide comfortable actuarial soundness for health insurance, as can readily be observed in the political behavior of their U.S. Senators. Although the number of low-population states gets smaller as the population grows, there are even so perhaps only ten big states where multiple health insurance companies can effectively compete within a single state border. Quite naturally the big-state insurers expect one day to eat up the small ones. By contrast, the nation as a whole, the gigantic population entity which Obamacare seeks to address, has far too many people spread out over far too large an area, to be confident we could unify them into one single program. Dividing the country into six or seven regions would be a much safer bet. That's the real message of the failure of the Computerized Insurance Exchanges -- far too much volume. And the coming failure of the Computerized Medical Record -- with too much complexity. With unlimited money, it can be done, because diseases are disappearing and computers are improving. But why struggle so hard?

It is at least fifteen years too early, and mostly serves the interest of insurance companies, if they can survive the experience. At the same time, we are at least fifteen years away from growing the smallest states to the point where we could decentralize. It's really a situation very similar to the one John Dickinson identified, James Madison briefly acknowledged, and where Benjamin Franklin improvised a solution. In their case, it was a bicameral legislature. In the case of medical care, it could be an administrative division of revenue from the expenditure. It could be the cure of a half-dozen chronic diseases. It could be six regional Obamacare. But creating one big national insurance company during a severe financial recession is something we will be lucky to survive.

Returning to the Constitutional Convention, an additional feature was added to the tentative 1787 document to respond to protests from small component states. They objected that whatever the big-state motives might be, small states would always be dominated by populous ones with more congressmen if a unicameral Legislature is made up of congressmen elected by the population. Pennsylvania had recently had a bad experience with a unicameral legislature. So a compromise bicameral legislature (with differing electoral composition in the two houses) was added to protect small-state freedoms from big domineering neighbors. Even after the Constitution was agreed to and signed, the states in ratifying it still insisted on a Bill of Rights, especially the Tenth Amendment, elevating certain citizen prerogatives above any form of political infringement, by any kind of a majority. These particular points were "rights"; individuals were even to be insulated from their own local state government. The larger the power of government, the less they trusted it.

John Dickinson of Delaware, the smallest state, soon made the essential point abundantly clear to a startled James Madison, when he pulled him aside in a corridor of Independence Hall, and uttered words to the effect of, "Do you want a Union, or don't you?", speaking on behalf of a coalition of small states. It was probably galling to Dickinson that Madison had never really considered the matter, and went about the Constitutional Convention airing the opinion that, of course, the big states would run things. Dickinson, who had been Governor of two states at once, had observed the effect of this attitude and wasn't going to have more of it.

Delegates

Benjamin Franklin, who for over 40 years had been working on a plan for a union of thirteen colonies (since 1745, long ago producing the first American political cartoon for the Albany Conference), devised the compromise. It was essentially a bicameral legislature -- with undiminished relative power in the Senate for small states. In this backroom negotiation, it was pretty clear Franklin held the support of two powerful but mostly silent big-state delegates, Robert Morris and George Washington. These were the three men of whom it could be said, the Revolution would never have been won without each of them. In 1787 they were still the dominant figures in diplomacy, finance, and the military. All three were deeply committed to a workable Union, each for somewhat different reasons. Now that a workable Union was finally within sight, parochial squabbles about states rights were not going to be allowed to destroy their dream of unity.

And so it comes about, they gave us a Federal government with a few enumerated powers, ruling a collection of state governments with regional power over everything else. And since big-state/small-state squabbles are unending, almost any other solution to some problem repeatedly, seemed preferable to disturbing what holds it all together. On the other hand, the Industrial Revolution was beginning at about the same time, and people who recognized the power of larger markets almost immediately set about attacking state-dominated arrangements, systematically weakening them for a century, and redoubling the attack during the Progressive era at the end of the 19th Century. Attacks on what seemed like an abuse of state power, the power to retain slavery, and later the power to perpetuate white racism, were claimed to justify this attrition of states rights. The ghost of the Civil War hung over all these arguments, restraining those who pushed them too far.

However, the driving force was industrialization, with enlarged businesses pushing back against the confinement of single-state regulation within a market that was larger than that. This restlessness with confining boundaries was in turn driven by railroads and the telegraph, improving communication and enlarging markets, which offered new opportunities to dominate state governments, and when necessary the political power weakens them. One by one, industries found ways to escape state regulation, although the insurance industry was the most resistant, whereas local tradesmen like physicians found it more congenial to side with state and local governments. The 1929 crash and the Franklin Roosevelt New Deal greatly accelerated this dichotomy, as did the two World Wars and the Progressive movement from Teddy Roosevelt to Woodrow Wilson. The Founding Fathers were said to have got what they wanted, which was a continuous tension between two forces, supporting both large and small governments; with neither of them completely winning the battle.

Insurance Monopoly

The medical profession further evolved from a small town trade into a prosperous profession during the 20th century, but the practice of medicine remained comfortably local. Even junior faculty members who move between medical schools quickly come to realize their national attitudes are somewhat out of touch with local realities. For doctors, state licensure and state regulation remained quite adequate, and state-regulated health insurance companies paid generously. State-limited health insurance companies had a somewhat less comfortable time of it, but the ferocity of state-limited insurance lobbying, as exemplified by the McCarran Ferguson Act, perpetuated it. The medical profession watched uneasily as the growth of employer-paid insurance extended the power of large employers over health insurance companies beyond state boundaries, and thus in turn over what had been medical profession's kingdom, the hospitals. And the medical profession also had to watch increasing congeniality with big government extend through businesses, unions and universities, fueled by overhead allowances of federal research grants and finally in 1965, federal health insurance programs. Nobody likes his regulator, but national organizations inevitably prefer a single regulator to fifty different ones. Furthermore, everybody could see that health care suddenly had lots of money, and naturally, everybody wanted some.

There is nothing naturally inter-state about medical care -- except health insurance.

It was all very well to pretend that health care was out-growing local-state regulation, but those on the inside could uneasily watch the federal/state competition for control, with the federal government repeatedly stacking the deck more in its own favor. Aside from federal program interventions, there is still nothing naturally inter-state about medical care -- except health insurance. Doctors, hospitals, and patients all tend to remain local, but insurance can easily cross state lines if regulation permits. Even in insurance, small states have difficulty maintaining actuarial stability, driving health insurance toward one-state monopolies. With a few big-state exceptions, even most health insurance companies prefer single-state monopoly status to federal regulation because it facilitates marketing. To praise the virtues of insurance competition is fine, but if sharing the local market means struggling for adequate risk reserves, nationwide regulation will inevitably lead to domination by a few big-state insurance companies. Small-state insurers would enjoy access to a national market; but blocked from it, they need to retain a local monopoly to survive. Fleeting thought might be given to Constitutional Amendment, but there are probably always going to be enough states which consider themselves small, to block the two-thirds requirement for Amendment. Imposing nationwide uniformity by force would possibly improve standards, but uniformity is increasing rather than decreasing, so the argument is not a strong one.

To be fair about it, there was not a strong case for state regulation, either. It could have been argued that uniformity and reduced administrative costs favored central regulation over-dispersed control, because of improved efficiency; and few would have argued about it. Until the ACA insurance exchanges crashed of their own weight around the ears of hapless creators, that is, unable to do what Amazon seems to do every day, and raising quite a few embarrassing recollections. Recollections of the mess the Sherman Antitrust Act inflicted on local medical charity in Maricopa County, Arizona. Recollections of the "Spruce Goose" airplane that Howard Hughes made so big it couldn't fly. Recollections of the gigantic traffic jam strangling the District of Columbia every weekend. And, reminders that 2500 pages of legislation remain to be converted into 20,000 pages of regulations which it would take a lifetime to understand. Suddenly, let's face it, retaining state regulation of health care, or not rocking the boat, gets a lot better press. It might even work better than the national kind, especially in an environment where no one expected a perfect solution, and just about everyone had heard of the Curse of Bigness. When we first discovered that use of health insurance added 10% to the cost of health care, it had seemed like an easy place to extract 2% of the Gross Domestic Product for better things, just by streamlining administration. But after the health exchange fiasco, some people begin to wonder if 10% is just what it costs to use insurance to pay for healthcare. If that is the case, perhaps we should look at other ways of paying our bills, not just a different regulator. Nobody would pay 10% just to have his bills paid, if he understood what he was doing.