Albert Gallatin
That the mission of Jefferson's administration was the reduction of the
debt, Gallatin set forth in his next letter of November 16, 1801. "I am
firmly of opinion that if the present administration and Congress do not
take the most effective measures for that object, the debt will be
entailed on us and the ensuing generations, together with all the
systems which support it, and which it supports." On the other hand he
says, "If this administration shall not reduce taxes, they never will be
permanently reduced." To reduce both the debt and the taxes was as much
a political as a financial problem. To solve it required the reduction
to a minimum of the departments of War and Marine. But Mr. Jefferson was
not a practical statesman. His individuality was too strong for much
surrender of opinion. He stated the case very mildly when he wrote in
his retirement that he sometimes differed in opinion from some of his
friends, from those whose views were as "pure and as sound as his own."
It was not his habit to consult his entire cabinet except on general
measures. The heads of each department set their views before him
separately. Under this system Mr. Gallatin was never able to realize
that harmonious interdependence of departments and subordination of ways
to means which were his ideal of cabinet administration.
The successful application of Mr. Gallatin's plan would have
subordinated all the executive departments to the Treasury. The theory
was perfect, but it took no account of the greed of office, the
jealousies of friends, the opposition of enemies, and the unknown factor
of foreign relations. A speck on the horizon would cloud the peaceful
prospect, a hostile threat derange the intricate machinery by which the
delicate financial balance was maintained. Mr. Gallatin was fast
realizing the magnitude of his undertaking, in which he was greatly
embarrassed by the difficulty of finding faithful examining clerks, on
whose correctness and fidelity a just settlement of all accounts
depends. The number of independent offices attached to the Treasury made
the task still more arduous. He wrote to Jefferson at this time, "It
will take me twelve months before I can thoroughly understand every
detail of all these several offices. Current business and the more
general and important duties of the office do not permit me to learn the
lesser details, but incidentally and by degrees. Until I know them all I
dare not touch the machine." One of the acquirements which he considered
indispensable for a secretary of the treasury was a "thorough knowledge
of book-keeping." The recollection of his persistent demands for
information from Hamilton and Wolcott during his congressional career
would have stung the conscience of an ordinary man. But Gallatin was not
an ordinary man. He asked nothing of others which he himself was not
willing to perform. His ideal was high, but he reached its summit. It
seems almost as if, in his persistent demand that money accountability
should be imposed by law upon the Treasury Department, he sought to set
the measure of his own duty, while in the requirement that it should be
extended to the other departments, he pledged himself to the perfect
accomplishment of that duty in his own.
In his first report to Congress,[11] made December 18, 1801, Mr.
Gallatin submitted his financial estimate for the year 1802.
REVENUE. EXPENDITURES.
Imposts $9,500,000 Int. on debts. $7,100,000
Lands } 450,000 Civil List 980,000
Postages } Army 1,420,000
Internal Rev. 650,000 Navy 1,100,000
---------- ----------
$10,600,000 $10,600,000
Mr. Wolcott, in his last report to the Commissioners of the Sinking
Fund, stated the amount in the Treasury to its credit at $500,718. Mr.
Gallatin denied that there was any such surplus, but said that instead
of a credit balance the treasury books showed a deficiency of $930,128
on the aggregate revenue from the establishment of the government to the
close of the year 1799. Elliott, in his "Funding System," said
concerning this once vexed controversy, that it was difficult to
reconcile such a diversity of opinion on so intricate a subject; and
concerning the official statements of Hamilton and Wolcott, that it was
hardly to be credited that they were so superficial or imperfect. Mr.
Gallatin himself furnishes the apology that the difference might arise
from "entries made or omitted on erroneous principles." To the Federal
financiers the palliation was as offensive as the charge, and rankled
long and sore. If it were not possible, when Elliott made an
examination, to arrive at the precise facts, it is certainly now a
secret as secure from discovery as the lost sibylline leaves.
Mr. Gallatin stated the debt of the United States--
On January 1, 1801, at $80,161,207.60
On January 1, 1802, at 77,881,890.29
---------------
Reduction $2,279,317.31
This difference was the amount of principal paid during the year 1801,
the result of the management of his predecessors. On December 18, 1801,
Mr. Gallatin entered upon an examination of the time in which the total
debt might be discharged, and showed that, by the annual application of
$7,300,000 to the principal and interest the debt would in eight years,
_i. e._ on January 1, 1810, be reduced (by the payment of $32,289,000 of
the principal) to $45,592,739, and that the same annual sum of
$7,300,000 would discharge the whole debt by the year 1817. The revenues
of the Union he found sufficient to defray all the current expenses. In
his report to Congress at the beginning of the session he designated
this sum of $7,300,000 to be set aside from the revenues, and Congress
gave the requisite authority. An extract from a tabular statement
submitted to the House of Representatives, April 16, 1810, will show how
nearly Mr. Gallatin approached the result at which he aimed, and the
nature of the embarrassment he encountered on the path.
------+--------------+--------------+---------------+-------------+
| Amount of | Payments | Debt | Annual |
Years.| Public Debt | on | Contracted. | Increase. |
| January 1st. | Principal. | | |
------+--------------+--------------+---------------+-------------+
1802 |$80,712,632.25| $3,657,945.95| - | - |
1803 | 77,054,686.30| 5,627,565.42| $15,000,000* |$9,372,434.58|
1804 | 86,427,120.88| 4,114,970.38| - | - |
1805 | 82,312,150.50| 6,588,879.84| - | - |
1806 | 75,723,270.66| 6,504,872.02| - | - |
1807 | 69,218,398.64| 4,022,080.67| - | - |
1808 | 65,196,317.97| 8,173,125.88| - | - |
1809 | 57,023,192.09| 3,850,889.77| - | - |
1810 | 53,172,302.32| - | - | - |
------+--------------+--------------+---------------+-------------+
-----------------
Annual
Decrease.
-----------------
$3,657,948.95
-
4,114,970.38
6,588,879.84
6,504,872.02
4,022,080.67
8,173,125.88
3,850,889.77
-
-----------------
* Louisiana purchase.
1802 $80,712,632.25 Decrease $36,912,764.51
1810 53,172,302.32 Increase 9,372,434.58
-------------- --------------
$27,540,329.93 Decrease in 8 yrs. $27,540,329.93
From this it appears that, notwithstanding the extraordinary increase of
the principal by the amount of the Louisiana purchase, Mr. Gallatin
contrived a reduction of $27,540,329. But if to this be added the true
reduction for the year 1803, namely, the difference between the
Louisiana debt, $15,000,000, and the increase for that year, by reason
of that purchase, $9,372,434, say $6,627,565, the reduction is found to
be, and but for that disturbing cause would have reached, $34,167,895,
a sum exceeding by $1,878,895 that estimated by Mr. Gallatin in his
report of 1801 as the amount of eight years' reduction, namely,
$32,289,000.
The ways and means of this remarkable example of financial management
appear in the following extracts from Elliott's synoptical statement
(table given on page 194).
The purchase of Louisiana was the extraordinary financial measure of
Jefferson's first presidential term. Though the new obligation for the
consideration money, fifteen millions of dollars, was a large sum in
proportion to the total existing debt of the United States, it did not
in the least derange Gallatin's plan of funding and reduction, but was
brought without friction within his general scheme. With the terms of
the contract Gallatin had nothing to do. They were arranged by
Livingston and Monroe, the American commissioners; the intervention of
the houses of Hope and the Barings being a part of the understanding
between the commissioners and the French government. These bankers
engaged to make the money payments and take six per cent. stock of the
United States at seventy-eight and one half cents on the dollar. With
this price Mr. Gallatin does not seem to have been satisfied, though of
course he interposed no objection to the terms; but to Jefferson he
wrote, August 31, 1803, that the low price at which that stock had been
sold, was "not ascribable to the state of public credit nor to any act
of your administration, and particularly of the Treasury Department;"
and he adds in a postscript, "at that period our threes were in England
worth one per cent. more at market than the English."
RECEIPTS.
------------------+----------------+---------------+-------------+
Four years | Customs. | Internal | Direct |
ending | | Revenue. | Taxes. |
December 31. | | | |
------------------+----------------+---------------+-------------+
Adams, 1800 | $30,347,093.62 | $2,808,382.37 | $734,223.97 |
+--------------- +-------------- +------------ +
Jefferson, 1804 | 44,766,997.61 | 1,936,053.30 | 862,986.46 |
1808 | 59,813,257.40 | 63,110.73 | 131,539.54 |
+--------------- +-------------- +------------ +
| 104,580,255.01 | 1,999,146.03 | 994,526.00 |
------------------+----------------+---------------+-------------+
------------------+-------------+--------------+---------------+
Four years | Postage. | Public | Loans and |
ending | | Lands. | Treasury |
December 31. | | | Notes. |
------------------+-------------+--------------+---------------+
Adams, 1800 | $223,000.00 | $95,947.46 | $7,055,791.25 |
+-------------+--------------+---------------+
Jefferson, 1804 | 157,427.26 | 1,009,556.56 | 25,255.00 |
1808 | 60,074.90 | 2,419,541.86 | 179,534.81 |
+-------------+--------------+---------------+
| 217,502.10 | 3,429,098.42 | 205,089.81 |
------------------+-------------+--------------+---------------+
------------------+--------------+----------------+----------------
Four years | Dividends | Miscellaneous. | Total.
ending | and sales of | |
December 31. | Bank Stock. | |
------------------+--------------+-------------- -+----------------
Adams, 1800 | $607,220.00 | $168,971.76 | $42,040,630.45
+--------------+----------------+----------------