Albert Gallatin
dollar as the unit of account and payment. The board of treasury, which
for five years had administered the finances in a bungling way, was
dissolved by Congress in the fall of 1781, and Morris was left in sole
control. Semi-annual statements of the public indebtedness were now
begun. The expenses of the government were steadily and inflexibly cut
down to meet the diminishing income. A loan was negotiated in Holland,
and, with the aid of Franklin, the amount of indebtedness to France was
established.
The public debt on January 1, 1783, was $42,000,375, of which $7,885,088
was foreign, bearing four and five per cent. interest; and $34,115,290
was held at home at six per cent. The total amount of interest was
$2,415,956. No means were provided for the payment of either principal
or interest. In July of the previous year Morris urged the wisdom of
funding the public debt, in a masterly letter to the president of
Congress. On December 16 a sinking fund was provided for by a
resolution, which, though inadequate to the purpose, was at least a
declaration of principle. In February, 1784, Morris notified Congress of
his intended retirement from office. He may justly be termed the father
of the American system of finance. In his administration he inflexibly
maintained the determination, with which he assumed the office, to apply
the public funds to the purpose to which they were appropriated. He
declared that he would "neither pay the interest of our debts out of the
moneys which are called for to carry on the war, nor pay the expenses of
the war from the funds which are called for to pay the interest of our
debts." One new feature of Morris's administration was the beginning of
the sale of public lands.
On the retirement of Mr. Morris, November, 1784, a new board of treasury
was charged with the administration of the finances, and continued in
control until September 30, 1788, when a committee, raised to examine
into the affairs of the department, rendered a pitiful report of
mismanagement for which the board had not the excuse of their
predecessors during the war. They had only to observe the precepts which
Morris had enunciated, and to follow the methods he had prescribed, with
the aid of the assistants he had trained. But the taxes collected had
not been covered into the Treasury by the receivers. Large sums
advanced for secret service were not accounted for; and the entire
system of responsibility had been disregarded. John Adams attributed all
the distresses at this period to "a downright ignorance of the nature of
coin, credit and circulation;" an ignorance not yet dispelled. More
truly could he have said that our distresses arose from willful neglect
of the principle of accountability in the public service.
The first Congress under the new Constitution met at New York on March
4, 1789, but it was not until the autumn that the executive
administration of the government was organized by the creation of the
three departments: State, Treasury, and War.
The bill establishing the Treasury Department passed Congress on
September 2, 1789. Hamilton was appointed secretary by Washington on
September 11. On September 21 the House directed the secretary to
examine into and report a financial plan. On the assembling of Congress,
June 14, 1790, Hamilton communicated to the House his first report,
known as that on public credit. The boldness of Hamilton's plan startled
and divided the country. Funding resolutions were introduced into the
House. The first, relating to the foreign debt, passed unanimously; the
second, providing for the liquidation of the domestic obligations, was
sharply debated, but in the end Hamilton's scheme was adopted. The
resolutions providing for the assumption of the state debts, which he
embodied in his report, aroused an opposition still more formidable, and
it was not until August 4 that by political machinery this part of his
plan received the assent of Congress. To provide for the interest on the
debt and the expenses of the government, the import and navigation
duties were raised to yield the utmost revenue available; but, in the
temper of Congress, the excise law was not pressed at this session. The
secretary had securely laid the foundations of his policy. Time and
sheer necessity would compel the completion of his work in essential
accord with his original design. The President's message at the opening
of the winter session added greatly to the prestige of Hamilton's policy
by calling attention to the great prosperity of the country and the
remarkable rise in public credit. The excise law, modified to apply to
distilled spirits, passed the House in January. The principle of a
direct tax was admitted. On December 14, 1790, in obedience to an order
of the House requiring the secretary to report further provision for the
public credit, Hamilton communicated his plans for a national bank. Next
in order came the establishment of a national mint. Thus in two sessions
of Congress, and in the space of little more than a year from the time
when he took charge of the Treasury, Hamilton conceived and carried to
successful conclusion an entire scheme of finance.
One more measure in the comprehensive system of public credit crowned
the solid structure of which the funding of the debt was the
cornerstone. This was the establishment of the sinking fund for the
redemption of the debt. Hamilton conformed his plan to the maxim, which,
to use his words, "has been supposed capable of giving immortality to
credit, namely, that with the creation of debts should be incorporated
the means of extinguishment, which are twofold. 1st. The establishing,
at the time of contracting a debt, funds for the reimbursement of the
principal, as well as for the payment of interest within a determinate
period. 2d. The making it a part of the contract, that the fund so
established shall be inviolably applied to the object." The ingenuity
and skill with which this master of financial science managed the
Treasury Department for more than five years need no word of comment.
Nor do they fall within the scope of this outline of the features of his
policy. His reports are the textbook of American political economy.
Whoever would grasp its principles must seek them in this limpid source,
and study the methods he applied to revenue and loans. Well might
Webster say of him in lofty praise, "He smote the rock of national
resources, and abundant streams of revenue gushed forth; he touched the
dead corpse of Public Credit, and it sprung upon its feet."
On the resignation of Hamilton, January 31, 1795, Washington invited
Wolcott, who was familiar with the views of Hamilton and on such
intimate terms with him that he could always have his advice in any
difficult emergency, to take the post. Wolcott had been connected with
the department from its organization, first as auditor, afterwards as
comptroller of the Treasury. He held the Treasury until nearly the end
of Adams's administration. On November 8, 1800, upon the open breach
between Mr. Adams and the Hamilton wing of the Federal party, Wolcott,
whose sympathies were wholly with his old chief, tendered his
resignation, to take effect at the close of the year. On December 31 Mr.
Samuel Dexter was appointed to administer the department. But the days
of the Federal party were now numbered: it fell of its own dissensions,
"wounded in the house of its friends."
There is little in the administration of the finances by Wolcott to
attract comment. He managed the details of the department with integrity
and skill. On his retirement a committee of the House on the condition
of the Treasury was appointed. No similar examination had been made
since May 22, 1794. On January 28, 1801, Mr. Otis, chairman of the
committee, submitted the results of the investigation in an unanimous
report that the business of the Treasury Department had been conducted
with regularity, fidelity, and a regard to economy; that the
disbursements of money had always been made pursuant to law, and
generally that the financial concerns of the country had been left by
the late secretary in a state of good order and prosperity. During his
six years of administration of the finances Wolcott negotiated six
loans, amounting in all to $2,820,000. The emergencies were
extraordinary,--the expenses of the suppression of the Whiskey
Insurrection in 1794, and the sum required to effect a treaty of peace
with Algiers in 1795. To fund these sums Mr. Wolcott had recourse to an
expedient which marked an era in American finance. This was the creation
of _new stock_, subscribed for at home. No loan had been previously
placed by the government among its own citizens. Between 1795 and 1798,
four and a half, five, and six per cent. stocks were created. In 1798
the condition of the country was embarrassing. There was a threatening
prospect of war. Foreign loans were precarious and improvident; the
market rate of interest was eight per cent. Under these circumstances an
eight per cent. stock was created, not redeemable until 1809. An Act of
March 3, 1795, provided for vesting in the sinking fund the surplus
revenues of each year.
In the formation of the first Republican cabinet Mr. Gallatin was
obviously Mr. Jefferson's first choice for the Treasury. The appointment
was nevertheless attended with some difficulties of a political and
party nature. The paramount importance of the department was a legacy of
Hamilton's genius. Its possession was the Federalist stronghold, and the
Senate, which held the confirming power, was still controlled by a
Federalist majority. To them Mr. Gallatin was more obnoxious than any
other of the Republican leaders. In the few days that he held a seat in
the Senate (1793) he offended Hamilton, and aroused the hostility of the
friends of the secretary by a call for information as to the condition
of the Treasury. As member of Congress in 1796 he questioned Hamilton's
policy, and during Adams's entire administration was a perpetual thorn
in the sides of Hamilton's successors in the department. The day after
his election, February 18, 1801, Mr. Jefferson communicated to Mr.
Gallatin the names of the gentlemen he had already determined upon for
his cabinet, and tendered him the Treasury. The only alternative was
Madison; but he, with all his reputation as a statesman and party
leader, was without skill as a financier, and in the debate on the
Funding Bill in 1790 had shown his ignorance in the impracticability of
his plans. If Jefferson ever entertained the thought of nominating
Madison to the Treasury, political necessity absolutely forbade it. That
necessity Mr. Gallatin, by his persistent assaults on the financial
policy of the Federalists, had himself created, and he alone of the
Republican leaders was competent to carry out the reforms in the
administration of the government, and to contrive the consequent
reduction in revenue and taxation, which were cardinal points of
Republican policy. Public opinion had assigned Gallatin to the post, and
the newspapers announced his nomination before Mr. Jefferson was
elected, and before he had given any indication of his purpose. To his
wife Mr. Gallatin expressed some doubt whether his abilities were equal
to the office, and whether the Senate would confirm him, and said,
certainly with sincerity, 'that he would not be sorry nor hurt in his
feelings if his nomination should be rejected, for exclusively of the
immense responsibility, labor, etc., attached to the intended office,
another plan which would be much more agreeable to him and to her had
been suggested, not by his political friends, but by his New York
friends.' He was by no means comfortable in his finances, and he had
already formed a plan of studying law and removing to New York. He had