Albert Gallatin
made up his mind to leave the western country, which would necessarily
end his congressional career. His wife was forlorn in his absence, and
suffered so many hardships in her isolated residence that he felt no
reluctance to the change. To one of his wife's family he wrote at this
time:--
"As a political situation, the place of secretary of the treasury
is doubtless more eligible and congenial to my habits; but it is
more laborious and responsible than any other, and the same
industry which will be necessary to fulfill its duties, applied to
another object, would at the end of two years have left me in the
possession of a profession which I might have exercised either in
Philadelphia or New York. But our plans are all liable to
uncertainty, and I must now cheerfully undertake that which had
never been the object of my ambition or wishes."
Well might he hesitate as he witnessed the distress which had overtaken
the great party which for twelve years had held the posts of political
honor. Fortunately, perhaps for himself and certainly for his party and
the country, the proposition came at a time when he had definitively
determined upon a change of career. His situation was difficult. The
hostility of the Federal senators, and the great exertions which were
being made to defeat the appointment, led him to the opinion that, if
presented on March 4, it would be rejected. There was the alternative of
delay until after that date, which would involve a postponement of the
confirmation until the meeting of Congress in December, but there was no
certainty that it would then be ratified. Meanwhile he would be
compelled to remove to Washington at some sacrifice and expense. He
therefore at first positively refused "to come in on any terms but a
confirmation by the Senate first given." He was finally induced to
comply with the general wish of his political friends. The appointment
was withheld by the President that the feeling in the Senate might be
judged from its action on the rest of the nominations submitted. They
were all approved, and Mr. Dexter consented to hold over until his
successor should be appointed. Thus Mr. Gallatin's convenience was
entirely consulted. He remained in Washington a few days to confer with
the President as to the general conduct of the administration, and on
March 14 set out for Fayette to put his affairs in order and to bring
his wife and family to Washington. On May 14 Jefferson wrote to Macon,
"The arrival of Mr. Gallatin yesterday completed the organization of our
administration."
Mr. Gallatin soon realized the magnitude of his task. He did nothing by
halves. To whatever work he had to do, he brought the best of his
faculty. No man ever better deserved the epithet of "thorough." He
searched till he found the principle of every measure with which he had
concern and understood every detail of its application. This perfect
knowledge of every subject which he investigated was the secret of his
political success. As a committee man, he was incomparable. No one could
be better equipped for the direction of the Treasury Department than he,
but he was not satisfied with direction; he would manage also; and he
went to the work with untiring energy. A quarter of a century later he
said of it, in a letter to his son, "To fill that office in the manner I
did, and as it ought to be filled, is a most laborious task and labor of
the most tedious kind. To fit myself for it, to be able to understand
thoroughly, to embrace and control all its details, took from me, during
the two first years I held it, every hour of the day and many of the
night and had nearly brought on a pulmonary complaint. I filled the
office twelve years and was fairly worn out."
Mr. Gallatin first drew public attention to his knowledge of finance in
the Pennsylvania legislature. An extract from his memorandum of his
three years' service gives the best account of this incident. In it
appear the carefully matured convictions which he inflexibly maintained.
"The report of the Committee of Ways and Means of the session
1790-1791 (presented by Gurney, chairman) was entirely prepared by
me, known to be so, and laid the foundation of my reputation. I was
quite astonished at the general encomiums bestowed upon it, and was
not at all aware that I had done so well. It was perspicuous and
comprehensive; but I am confident that its true merit, and that
which gained me the general confidence, was its being founded in
strict justice without the slightest regard to party feelings or
popular prejudices. The principles assumed, and which were carried
into effect, were the immediate reimbursement and extinction of the
state paper money, the immediate payment in specie of all the
current expenses or warrants on the Treasury (the postponement and
uncertainty of which had given rise to shameful and corrupt
speculations), and provision for discharging, without defalcation,
every debt and engagement previously recognized by the State. In
conformity with this, the State paid to its creditors the
difference between the nominal amount of the state debt assumed by
the United States and the rate at which it was funded by the act of
Congress.
"The proceeds of the public lands, together with the arrears, were
the fund which not only discharged all the public debts, but left a
large surplus. The apprehension that this would be squandered by
the Legislature was the principal inducement for chartering the
Bank of Pennsylvania with a capital of two millions of dollars, of
which the State subscribed one half. This and similar subsequent
investments enabled Pennsylvania to defray out of the dividends all
the expenses of government without any direct tax during the forty
ensuing years, and till the adoption of the system of internal
improvement, which required new resources."
This report was printed in the Journal of the House, February 8, 1791.
The next year he made a report on the same subject which was printed
February 22, 1792.
But his equal grasp of larger subjects was shown in his sketch of the
finances of the United States, which he published in November, 1796. It
presents under three sections the revenues, the expenses, and the debts
of the United States, each subdivided into special heads. The arguments
are supported by elaborate tabular statements. No such exhaustive
examination had been made of the state of the American finances. The one
cardinal principle which he laid down was the extinguishment of debt. He
severely criticised Hamilton's methods of funding, and outlined those
which he himself later applied. He charged upon Hamilton direct
violations of law in the application of money, borrowed as principal, to
the payment of interest on that principal. The public funds he regarded
as three in number: 1st, the sinking fund; 2d, the surplus fund; 3d, the
general fund.
In July, 1800, Mr. Gallatin published a second pamphlet, "Views of the
Public Debt, Receipts, and Expenditures of the United States," the
object of the inquiry being to ascertain the result of the fiscal
operations of the government under the Constitution. The entire field of
American finance is examined from its beginning. He severely condemns
the mode of assumption of the state debts in Hamilton's original plan,
and no doubt his strictures are technically correct. The debts assumed
for debtor States were not due by the United States, nor was there any
moral reason for their assumption. But the assumption was sound
financial policy, and all the cost to the nation was amply repaid by the
order which their assumption drew out of chaos, and the vigor given to
the general credit by the strengthening of that of its parts. The course
of the Federalists and Republicans on this question shows that the
former had at heart the welfare of all the States, while the latter
confined their interest to their own body politic.
Had Mr. Gallatin never penned another line on finance, these two
remarkable papers would place him in the first rank of economists and
statisticians. There are no errors in his figures, no flaws in his
reasoning, no faults in his deductions. In construction and detail, as
parts of a complete financial system of administration, they are beyond
criticism. Opinions may differ as to the ends sought, but not as to the
means to those ends.
For a long period Mr. Gallatin found no more time for essays; he was
now to apply his methods. These may be traced in his printed treasury
reports, which are lucid and instructive. He was appointed to the
Treasury on May 14, 1801, as appears by the official record in the State
Department. Before he entered on the duties of the office he submitted
to Mr. Jefferson, March 14, 1801, some rough sketches of the financial
situation, and suggested the general outlines of his policy. He insisted
upon a curtailment in the appropriations for the naval and military
establishments, the only saving adequate to the repeal of all internal
duties; and upon the discharge of the foreign debt within the period of
its obligation. He estimated that the probable receipts and expenditures
for the year 1801 would leave a surplus of more than two millions of
dollars applicable to the redemption of the debt.
On taking personal charge of the Treasury Department, his first business
was to get rid of the arrears of current business which had accumulated
since the retirement of Wolcott; his next, to perfect the internal
revenue system, so far as it could be remedied without new legislation.
The entire summer of 1801 was passed in "arranging, or rather procuring
correct statements amongst the Treasury documents," a task of such
difficulty that he was unwilling, on November 15, to arrive at an
estimate of the revenue within half a million, or to commit himself to
any opinion as to the feasibility of abolishing the internal revenues.
In his "notes" submitted to Jefferson upon the draft of his first
message, there are several passages of interest which show Mr.
Gallatin's logical habit of searching out economic causes. Under the
head of finances, he remarks, "The revenue has increased more than in
the same ratio with population: 1st, because our wealth has increased in
a greater ratio than population; 2d, because the seaports and towns,
which consume imported articles much more than the country, have
increased in a greater proportion." The final paragraph in these "notes"
is a synopsis of his entire scheme of administration.
"There is but one subject not mentioned in the message which I feel
extremely anxious to see recommended. It is generally that Congress
should adopt such measures as will effectually guard against
misapplications of public moneys, by making specific appropriations
whenever practicable; by providing against the application of
moneys drawn from the Treasury under an appropriation to any other
object or to any greater amount than that for which they have been
drawn; by limiting discretionary power in the application of that
money; whether by heads of department or by any other agents; and
by rendering every person who receives public moneys from the
Treasury as immediately, promptly, and effectually accountable to
the accounting officer (the comptroller) as practicable. The great
characteristic, the flagrant vice, of the late administration has
been total disregard of laws, and application of public moneys by
the Department to objects for which they were not appropriate."
Outlines for a system of specific appropriations were inclosed.