In Debt to Jefferson
Thomas Jefferson has been something of a controversial figure in the founding of the United States, giving rise to mixed opinions. Even mine. He was wise, even prescient, in many of his writings. But he was also intensely political, and given to rather underhanded tactics in dealing with his political enemies. On balance, I still give him high marks, while aware of the deficits. But speaking of deficits…
Jefferson and the Debt: Personal and Private Reasons
Thomas Jefferson wrote early on about his concerns about the country running up a national debt. This was one of the major topics of his disputes with Alexander Hamilton. Part of Jefferson’s concerns about the debt had a noble cause, and part were rather more personal in nature.
The debt itself arose from the Confederation of States’ war against the British, a nearly eight-year battle that won the American colonies their independence, but which cost them dearly in blood and treasure. A big part of that monetary debt was in the form of notes issued under the authority of the Congress formed by the Articles of Confederation, in which they promised to pay various local citizens for the materials and food used for the war effort. Besides the nations such as France from which that Congress had made big loans, most of the recipients of such “scrip” notes were farmers, with the larger recipients having large land holdings … like Thomas Jefferson.
But not everyone believed that the Confederate Congress would ever make good on these debts. Many of these farmers sold off their notes to speculators for pennies on the dollar, and were willing to give up on the chance of a full future recovery in order to get something out of those notes immediately.
Jefferson was one of those who had sold off his notes. One could infer from this that he did not believe that America would survive to pay its bills. Or that he needed the money fast, and needed it so badly that he was willing to take the potential loss. There is evidence to support a bit of both ideas.
Take On the Debt?
So now, a few years later, Jefferson is George Washington’s Secretary of State of the brand new Constitutionally formed United States, both a sovereign nation in its own right and a collection of sovereign states. And the argument between Jefferson and Alexander Hamilton, the new Secretary of the Treasury, focused on whether the new United States should repay the debts of the old Confederation of States.
Hamilton felt strongly that it should. While technically the US was indeed brand new and could be considered not to owe any debts of any now-dissolved previous governments, Hamilton was concerned about the effect this would have upon relationships with the nations of the world. It would be seen as a technicality to escape payment, and perhaps the US if it got into further financial difficulties could pull such a “reformation” stunt again, and again. Hamilton also worried about the effect upon the farmers and others who still held those notes within the US.
Jefferson was torn - as he expressed a bitter distaste for those speculators who bought the notes cheaply being rewarded by collecting the full face amount. I would note that he took their money readily enough when it was offered, and his position here seems driven merely by envy. By the same token, he wasn’t excited about seeing France lose its investment, as he was quite fond of that nation. But he continued to oppose Hamilton’s push to undertake and then eventually pay off the war debt to all holders, foreign and domestic.
The Deal Over Dinner, and a New City
George Washington was aggrieved by the bickering between his two friends and close advisors. Finally, he arranged a dinner at his home to thrash it out, and brokered a deal: Jefferson would allow the US to undertake and pay the debt, but Jefferson’s beloved country (now state) of Virginia would gain prestige by moving the seat of government to land claimed by Virginia, to be called the District of Columbia. While it didn’t go completely that way, Jefferson honored Washington by calling the new federal city by his name.
Hamilton got his way, but the two men continued to be bitter enemies. Later, Jefferson anonymously wrote and had a congressman circulate a petition to have Hamilton impeached for various wrongdoings. Adams and his party, who supported Hamilton, later passed a law making it illegal to criticize everyone in the government except Jefferson. (You could criticize or slander the vice president, but not the president nor Congress.) Jefferson himself was at risk of jail due to this unpopular law, and many others were jailed.
Oddly, Hamilton was the man who got Jefferson elected president - because he hated Jefferson’s opponent Aaron Burr even more. Perhaps another day for that story, with the divorce, the affair, the blackmail, and the pamphlets.
But What About the US Debt?
But about the idea of debt, Jefferson was steadfast. He wrote decades later about the threat of a national debt to the people:
“To preserve [the people’s] independence, we must not let our rulers load us with perpetual debt. We must make our election between economy and liberty, or profusion and servitude. If we run into such debt, as that we must be taxed in our meat and in our drink, in our necessaries and our comforts, in our labors and our amusements, for our calling and our creeds … [we will] have no time to think, no means of calling our mis-managers to account but be glad to obtain subsistence by hiring ourselves to rivet their chains on the necks of our fellow-sufferers … And this is the tendency of all human governments. A departure from principle in one instance becomes a precedent for a second; that second for a third; and so on, till the bulk of the society is reduced to be mere automatons of misery, and to have no sensibilities left but for sinning and suffering. … And the fore-horse of this frightful team is public debt. Taxation follows that, and in its train wretchedness and oppression.
Noble sentiments indeed - but at this point, Jefferson had retired from having been president of the United States for eight years. He had been one of those “rulers.” How had he done in practice?
Actually, not bad. Despite the seemingly expensive at the time acquisition of the Louisiana Purchase (doubling the size of the US) and creating a navy and fighting America’s first war post-independence (with Islamic pirate nations), Jefferson almost completely paid off the national debt.
He did well, I think, despite being in some respects what we would now call a “progressive” and using the term himself. More about that another time.
===|==============/ Keith DeHavelle