Be assured fiscal policy is on the mind of many Americans as the budget deficit rises and as issues of spending and taxation loom large in the current primary campaigns. Which is why the subject of Robert Wright’s new book is so relevant now.

“One Nation Under Debt: Hamilton, Jefferson, and the History of What We Owe” offers a thoughtful, exciting, and historically rich narrative of the fascinating debates and political machinations that led to the establishment of America’s financial system.

Mr. Wright carefully examines the origins of the ideas that guided America’s founding fathers to embrace the principles and practices that were embodied in the U.S Constitution and in the basic tenets of the early finances of this country.

The searing experience of the financing of the Revolutionary War and then the ineptness and haphazard financial practices of the Continental Congress were, as he compellingly describes, central factors driving Hamilton to insist on major changes in the way the new government, under the Constitution of 1787, repaid Revolutionary War Debt and subsequently managed its finances.

The notion of fiscal soundness, keeping faith with the myriad of domestic creditors with claims on the government, and meeting the payments owed to foreign investors, was central to Hamilton’s thinking. But fiscal responsibility was not a universally accepted concept at the time. He had opponents who wanted to discriminate between the original holders of the debt and those who had bought it at a deep discount from the original holders; the new owners of the debt were frequently vilified by opponents of this plan, such as Jefferson and Madison, as “speculators” who, they argued, were not entitled to the appreciation in the value of the assets they had acquired.

Then there were those who believed that giving the Federal Government the responsibility for servicing state debt would consolidate too much power in the hands of the national authorities and undermine the states’ claims to assert taxing power.

That Hamilton prevailed in this tug-of-war between the major political titans of the time is one reason that the sanctity of federal debt and the credibility of federal obligations were established so early in American history.

Mr. Wright goes on from there to present a lively rendition of the debates over the federal debt that occurred under the Jeffersonians and the Jacksonians. The texture, depth, and intensity of his account of the fractious interactions among competing political figures during these periods adds enormously to the body of our knowledge of these formative years in American financial history. It also explains the powerful forces in American politics surrounding debt and fiscal policy that exist today.

It is much easier to understand the major strands of American financial policy and the various schools of tax and borrowing philosophy of our current era if one takes the time to understand the period that Mr. Wright so eloquently describes.

Many of these philosophies were born during the pre-Revolutionary period, shaped in the cauldron of intense political debate just after the Revolution and became key forces in American politics during the early years of the 19th Century. Mr. Wright explains these with clarity and a colorful analysis of the individuals who shaped policy during this period — explaining their motivations and the fervor of their commitments to their political and economic views.

Mr. Wright also draws on this tour of early American financial history to remind us that for politicians taking on debt is less likely to cost votes than increasing taxes — and, he might have added, cutting spending. He correctly warns against seeking easy fiscal answers by shifting the burden to future generations. And he appropriately cautions that this country might not be able to grow out of its obligations it is incurring this time, as it has in the past. He is certainly correct that most taxes that will be collected in the future already have been committed to programs such as Social Security and Medicare.

When Mr. Wright’s work strays from history his arguments become less compelling — and that is when he gets to recommendations for the future. He suggests, for example, that one house of Congress be given the power to decide how much to tax and the other the power to decide how to spend it . I would like to hope this was written tongue-in-cheek. The hang up here is but a minor one — it would require changing the entire structure of the legislative branch as laid out in the Constitution. And to give one house the power to spend without being held accountable for the revenues required to meet its desired spending levels does not strike me as enhancing the prospects for fiscal responsibility. Although I will acknowledge that these bodies haven’t done so well under the current structure either.

Beyond that he suggests that Congress delegate its fiscal powers to an independent agency, thus removing the responsibility for the allocation of resources from the political process, as is done with monetary policy. Again, what stands in the way is a mere matter of the Constitution. The better course, in any case, would be to hold politicians responsible for their fiscal choices, not to allow them to divest themselves of that responsibility.

Finally, he suggests “that individual Americans should be allowed “to allocate their taxes as they see fit” among government programs. Talk about fiscal cacophony — suppose the result was that the military received only trivial sums because of an unpopular war, jeopardizing the troops already in the field and rendering the nation more vulnerable to an adversary in the future, or that the vast percentage goes into areas where it cannot be spent usefully.

But these recommendations occur only at the very end of the book, and should not detract from what is otherwise a lively, compelling analysis of the formative years of America’s financial system. It is well worth reading by anyone who wants to understand how the principles and practices that have made America the world’s preeminent financial power came to be.

Mr. Hormats is vice chairman of Goldman Sachs (International) and author of the recent book “The Price of Liberty: Paying for America’s Wars from the Revolution to the War on Terror.”