For debt crisis lessons, look back 225 years

By John Blake, CNN
July 24, 2011 -- Updated 1019 GMT (1819 HKT)

(CNN) -- America's political leaders are paralyzed. The government is reeling from debt. Corrupt bankers foreclose on people's homes as a brutal recession sweeps the land.
We're talking, of course, about the great debt standoff of 1786: Shays' Rebellion.
Nervous Americans glancing at the upcoming August 2 deadline for raising the debt ceiling are being told that the nation is entering uncharted territory. But historians say they've seen this movie before.
Many of the same issues driving this modern-day standoff -- disagreement on how to handle the national debt, ineffective government and a populist citizen's revolt -- drove the 18th-century uprising that's been called America's first civil war.
Historians say the lesson that can be drawn from Shays' Rebellion and other transformative events in U.S. history is this: Protracted political gridlock is seldom resolved through compromise. It comes when one political party finally beats the other down.
Many Americans, however, have told pollsters that they want the political parties to work together to solve the debt ceiling crisis. Yet political stability doesn't always come through give-and-take, some historians say.
"There are times when only the outright defeat of political enemies can bring about needed reform," says Richard Striner, a history professor at Washington College in Chestertown, Maryland.
"It was only by confronting and defeating the aggressive leadership of the slave states that Lincoln and the Civil War Republicans rid the nation of slavery."
The fight over 'big government'
Shays' Rebellion was such a crisis. Rooted in economic anxiety and political turmoil, it even involved a leader of a tea party.
The country had incurred massive debt during the Revolutionary War. But it couldn't pay it off because the Colonists, distrusting "big government," had created the Articles of Confederation to run the country, which weakened the authority of a central government.
The result was anarchy.
The federal government wasn't allowed to raise taxes to pay off war debts. Various states responded with crushing taxes. Shady bankers in states such as Massachusetts foreclosed on farmers' homes and threw people in debtors' prison. Some thought the country would dissolve.

Sunday (NOT SO) Fun: The Fictional Jobs Agenda

Clipped from the Disciplined Investor

In the editorial section of IBD this weekend, there was an excellent article that caught my eye. As all of the gamesmanship and immaturity has been focusing on the debt ceiling, the news coverage regarding the poorly execute jobs recovery plan has apparently been shifted – at least temporarily. With the recent display of political grandstanding and empty promises, does anyone still believe that his administration, along with Congress, has any idea on how to get the U.S. back to growth?
Promise were made that the enormous amount of stimulus would be used to bring down the unemployment rate and we now know how that has worked out. So, what have we been left with? A no-win situation where the choices will be to increase the debt-ceiling in order to pay the bill, increased taxes to pay back the money borrowed and a cut in the spending that was used to provide benefits during a time of a national economic emergency. In other words, the U.S. now has an inconceivably high tab to pay for the spending spree that didnothing more than buy us some more time.
Of course, if the government did not step in during the height of the financial crisis, we would have entered a prolonged depression with high unemployment and a series of institutional failures. At least that is what we have been told. So, Uncle Sam footed the bill for not only the U.S, but also  many foreign entities.