Economy in Government, Jeffersonian Style

Dr. Carson Is a specialist in American social and intellectual history. He is President of the Center for Individual and Family Enterprise. For further information, write him at Route 1, Box 13, Wadley, Alabama 36276.

Governments are under the same necessity as the rest of us for economizing in their transactions. The means available to them for providing such goods and services as they may offer are scarce, and economy is the universal prescription for dealing effectively with scarcity. Indeed, a case can be made that governments have even more compelling reasons for observing the rules of economy than do men in their private capacities. But let that wait for a bit.

For the past fifty years the United States government has acted as if the rules of economy did not apply to it. It could spend more than it took as revenue year in and year out. It could provide an ever larger array of expensive programs with no determined means of financing them from current or future income. It could go ever more deeply into debt with no provision for reducing or retiring it. More, there were some who had the training of economists who claimed that government spending could and would produce prosperity. With that prospect in view, the Treasury served as the fountain of a cornucopia of grants, subsidies, welfare payments, low interest loans, guarantees, insurance programs, and so on. Unbalanced budgets, deficit spending, and mounting debt were standard practices for nearly three generations.

There are some signs of a dawning awareness of the necessity for economy in government. When President Reagan delivered his “Economic Message” to Congress in February of 1981, he called attention to the fact that the debt of the federal government was now very close to $1 trillion. Indeed, Congress had, only days before that, increased the debt ceiling from approximately $935 to $985 billion. Mr. Reagan pointed out, too, that there is a connection between this mounting debt and such unwanted developments as high interest rates and the decline in the value of the currency. The government’s longtime neglect of the rules of economy has led to consequences which affect adversely the economic well-being of all of us. He promised to press for numerous economies in government with the aim of eventually achieving a balanced budget.

Principles of Economy Vigorously Applied

This message, coupled with a continuing debate over economies in government, prompted me to review American history in quest for guidelines and principles of economy in government. This quest led me to the Jeffersonians, who were surely the most determined economizers in American history. Moreover, they not only acted on the basis of principles but also applied them vigorously and generally succeeded in accomplishing what they set out to do.

Of course, the situation of the Jeffersonians was different in many respects from our own. They were writing on a nearly clean slate in charting the course of government, while ours is cluttered with almost two centuries of practice and malpractice. The Jeffersonians usually wrote out their messages by hand and made their own arithmetic calculations. Today, Presidents have every sort of personal assistance and numerous electronic devices to aid them in performing their duties. Circumstances change, but principles remain as valid as they ever were. And, it is their principles of economy in government on which we will focus our attention.

The Jeffersonians made the first major surge to economy in government in the history of the United States—and the most sustained one. To say this is not to accuse either the Washington or Adams administrations, which preceded them, with mismanagement or with carelessness toward economy. It is rather to recognize that the earlier Presidents faced the task of establishing the new government and that much of their business was more immediately pressing than was economy. Moreover, Alexander Hamilton, who occupied so central a role in the early years, tended to subordinate economy in government to his plan for a large role for the central government in the economy. The Jeffersonians, then, inherited a task to their liking, that of setting the government on a rigorous economical course.

Basics Observed by Jefferson, Madison, and Monroe

The Jeffersonians controlled and provided the leadership of the government from 1801 to 1825.[1] They comprised the administrations of Thomas Jefferson, James Madison, and James Monroe. They are called “Jeffersonians” because Jefferson founded their party—the first Republican party—and enunciated the basic principles to which they all adhered. In addition to being Republicans, all three were Virginians. They were the last of the men, too, who had a hand in founding the American republic who served in the presidency. The Constitution was still for them a plan that had to be made to work, and they were strict constructionists. They were also partially linked through the financial ideas and leadership of Albert Gallatin, who served under Jefferson for two terms as Secretary of the Treasury, and under Madison for one term. Gallatin was not only a dedicated economizer but also one of the most articulate and respected exponents of economic ideas in the early years of the Republic.

It is strange that Thomas Jefferson should have emerged as a political leader—a pre-eminent one at that. He had few of the traits and inclinations that are usually associated with leadership. He disliked formal occasions, preferring “republican simplicity” to pomp and show, avoided occasions for delivering speeches—sent “annual messages” to Congress rather than making State of the Union addresses—, and generally preferred the company of one person to that of a group. The key to Jefferson’s character is that he was at home in the realm of ideas, relished exchanging them with others, and even liked the intellectual clash over ideas. But he avoided, whenever possible, the contest of wills for dominance. He did not have regular cabinet meetings, preferred meeting cabinet members on a one on one basis, and on crucial questions usually asked for the opinions of involved cabinet members in writing. In most periods of history, Jefferson probably would not have been a leader of men. But this was an age of ideas, and Jefferson was a careful thinker and a master of the written word. As a man of ideas, he attracted others of the same character to his side.

In any case, Jefferson was a man of principle, and it is his principles of economy in government, and those of his followers, that concern us here. The following principles stand out clearly in their public statements and practices while in power.

1. Frugal Management of Public Affairs. The basics of this principle were set forth in Jefferson’s First Inaugural Address. He said, “Still one thing more, fellow-citizens—a wise and frugal Government, which shall restrain men from injuring one another, shall leave them otherwise free to regulate their own pursuits of industry and improvement, and shall not take from the mouth of labor the bread it has earned.”[2]

It might be supposed from the above and from his actions as President that Jefferson was personally miserly, a penny-pinching skinflint, no less, so devoted to economy that he would deny even himself the amenities. Actually, he was generous to a fault in his private life where his own possessions were concerned. (So, too, were many of his contemporaries.) Indeed, he was so generous, and improvident, that shortly after his death, the beautiful mansion, Monticello, along with its furnishings, was sold to pay his debts. Why his affairs were in such shape at his death is suggested by this account of his generosity in his later years: “Relatives, invited guests, and strangers filled Monticello (frequently beds were made for a score and more, sometimes for fifty); they stayed for days, weeks, even months, drank his choice French wines, kept their horses in his stables. For solitude he had to retire to a second home, constructed as a refuge.”[3]

But Jefferson distinguished between public and private affairs. What disposition he made of his own possessions was his own business, so long as he did no injury to others. Public affairs were another matter entirely. Governments depend upon taxation for their revenue. Sanctions may be used to collect the taxes, and taxes tend to “take from the mouth of labor the bread it has earned.” Taxation takes from the productive, as we would say, some portion of what they have earned to defray the expenses of government. These hard truths were the basic premise of Jefferson’s insistence on economy. Madison and Monroe operated on the same premise, as did the Jacksonians who eventually succeeded them in office.

2. Keep Taxes to a Minimum. In his “First Annual Message” to Congress Jefferson called for a reduction in taxes. In the same message he recommended the reduction of expenditures, but reduction in taxes was given priority both by its placement in the message and by the specific character of taxes listed. Gallatin had signalled this approach in a letter to Jefferson just weeks before the message was sent to Congress. He said that “if this Administration shall not reduce taxes, they never will be permanently reduced. To strike at the root of the evil and avert the danger of increasing taxes, encroaching government . . . . nothing can be more effectual than a repeal of all internal taxes, but let them all go, and not one on which sister taxes may be hereafter grafted.”[4] In more measured terms, Jefferson declared that “there is reasonable ground of confidence that we may now safely dispense with all the internal taxes, comprehending excise, stamps, auctions, licenses, carriages, and refined sugars . . .”[5] By the time Jefferson gave his Second Inaugural Address he could pro claim that the internal taxes which had covered “our land with officers” and opened “our doors to their intrusions,” thus beginning a “process of . . . vexation which once entered is scarcely to be restrained from reaching successively every article of property and produce” were no more. “What farmer, what mechanic, what laborer,” he asked, “ever sees a taxgatherer of the United States?”[6]

A Means to Curb Government

It should be clear from the above that Jefferson and Gallatin, in their desire to remove taxes, were concerned with more than the burden which these might be to the taxpayer. They were concerned with the violations of privacy and intrusion into the management of the affairs of citizens involved in some kinds of taxation. They were concerned to inhibit the expansive tendency of government itself, not only the expansion of taxes but also the expansion of government activities. They believed what history tends to prove, that governments will devise means to spend whatever they can take in, and use any established tax on one thing as a basis for taxing whatever may be analogous to it.

In the final analysis, the Jeffersonian thrust to remove taxes was a part of their effort to limit government and free people for the management of their own affairs. This was a goal apparently shared by many members of Congress, not only demonstrated by their willingness to remove taxes but also by their opposition to government regulation of private business. When a committee of the Congress considered legislation to regulate steamboats, it recommended against enactment, declaring that “in a free State, where every one is entitled to cultivate his own vineyard according to the dictates of his own judgment, to require that it should be done in a pre scribed form, and with a specific amount of labor, or power, would appear to be an interference with individual discretion, and an encroachment on the rights of the citizen . . . .”[7]

3. Hold Expenditures Down. Jefferson coupled his move to reduce taxes with an effort to reduce the expenses of the government. He pointed out in his “First Annual

Message” to Congress that there was no need for a vast Federal establishment since “the States themselves have principal care of our persons, our property, and our reputation, constituting the great field of human concerns.” That being the case, “we may well doubt whether our organization is not too complicated, too expensive; whether offices and officers have not multiplied unnecessarily and sometimes injuriously to the service they were meant to promote.” With this in mind he had already begun to reduce the number of personnel, he said. “The expenses of diplomatic agency have been considerably diminished. The inspectors of internal revenue who were found to obstruct the accountability of the institution have been discontinued. Several agencies created by Executive authority . . . have been suppressed . . .” In this connection, he recommended that Congress should act to regulate executive authority, so as to restrain Presidents from creating new offices on their own initiative. But since Congress had authorized most of the offices, it alone could reduce them, and Jefferson promised his full cooperation if they wished to review them with that object in view. Clearly, he hoped that it would, for he expressed his fear that otherwise the expense of government would mount as high as the citizens could stand, and “after leaving to labor the smallest portion of earnings on which it can subsist, Government shall consume the whole residue of what it was instituted to guard.”[8]

To the end that this should not happen, Jefferson proposed that “it would be prudent” for Congress “to multiply barriers” against spending by doing such things as “disallowing all applications of money varying from the appropriation in object or transcending it in amount; by reducing the undefined field of contingencies and thereby circumscribing discretionary powers over money, and by bringing back to a single department all accountabilities for money . . . .”[9]

Expenses Controlled

Much of this might have been so much eye wash, and in our day we might cynically expect that it would turn out that way, but there is much evidence that the Jeffersonians took seriously their expressed intentions to keep expenses down. In the Treasury, for example, the number of employees was not only reduced but also held down over the years. In 1801, when Gallatin took over, there were 1,285 employees. In 1826, the total stood at only 1,075. Moreover, one historian has noted that during the Jeffersonian years “New activities and new objects of expenditure were conspicuously absent.”[10]

How expenses were held down is well illustrated from the attitudes, activities, and reports of Albert Gallatin while he was Secretary of the Treasury. Shortly after Madison took office, Gallatin wrote to Jefferson, “I cannot, my dear sir, consent to act the part of a mere financier, to become a contriver of taxes, a dealer of loans, a seeker of resources for the purpose of supporting useless baubles, of increasing the number of idle and dissipated members of the community, of fattening contractors, pursers, and agents . . .”[11]

Not that Jefferson would have suspected him of such a role, for Gallatin had applied himself dill-gently to economizing for him. He kept a careful watch over the requests for appropriations of all departments. The Navy especially drew his attention, because of what he suspected as lavish requests. In a letter to Jefferson in 1803, Gallatin criticized the Navy’s request for $40,000 for contingencies, and reduced it to $10,000. Later that same year, he wrote: “I allow three hundred thousand dollars to the Secretary of the Navy for the equipment of the four additional frigates: he wants four hundred thousand dollars; but that is too much . . . .”[12]

4. The Constitution a Barrier to Public Expenditures. Although it has not been much noticed of late, the United States Constitution is an invaluable ally of those who would economize by keeping the expenses of government down. Nowadays, Federal funds are appropriated for all sorts of programs which are not authorized by any enumerated power in the Constitution. The Jeffersonians did not often have to appeal to this restraint, at least the Presidents didn’t, for Congress was little disposed to adventures in spending either, during this era. There were a few occasions, however, when they had opportunities to show how the Constitution is a barrier.

Most of them had to do with appropriations for internal improvements, specifically, improved roads. It is not clear that the Jeffersonians opposed spending Federal money for internal improvements. Earlier in his career, Jefferson had questioned the advisability of it, but as Presi dent he was apparently brought around to Gallatin’s view that the government should promote them. Jefferson came to the constitutional question in this way. By 1806, his programs to achieve economy had borne such fruit that he foresaw a continuing and mounting surplus in the Treasury. Rather than remove other taxes (mainly tariffs), he suggested to Congress that the surplus might be well spent for the “great purposes of the public education, roads, rivers, canals, and . . . other objects of public improvement . . . .” However, before these things could be done, he said, “I suppose an amendment to the Constitution, by consent of the States, necessary, because the objects now recommended are not among those enumerated in the Constitution, and to which it permits the public moneys to be applied.”[13] No such amendment was forthcoming, and nothing further was done during Jefferson’s term in of- rice.

Madison Uses Veto Power

James Madison, however, faced the question of appropriations for internal improvements head on. Just before he left office at the end of his second term he vetoed a bill which would have pledged funds for a general program of road, canal, and navigation improvements. His veto has special significance, for he had played a leading role in drawing up the Constitution and the first ten amendments to it. If anyone understood the intent of the Constitution he should have. Regarding the bill, he said, “I am constrained by the insuperable difficulty I feel in reconciling the bill with the Constitution of the United States to return it with that objection to the House of Representatives, in which it originated.”

He explained his reason for the veto this way: “The legislative powers vested in Congress are specified and enumerated in the eighth section of the first article of the Constitution, and it does not appear that the power proposed to be exercised by the bill is among the enumerated powers, or that it falls by any just interpretation within the power to make laws necessary and proper for carrying into execution those or other powers vested by the Constitution in the Government of the United States.”[14]

Monroe Sustains the Principle

James Monroe drove the point home in his veto of a bill which would have authorized the collection of tolls on the Cumberland Road to keep the road in repair. Since some money from the sale of lands in Ohio had much earlier been applied to the building of the road, it was at least plausible that Congress might now provide for its preservation and repair. Plausible or not, Monroe argued that the exercise of such a power was unconstitutional. He reached that position by inviting Congress to look at the matter whole. “A power to establish turnpikes with gates and tolls,” he wrote, “and to enforce the collection of tolls by penalties, ira-plies a power to adopt and execute a complete system of internal improvement.” But he denied that Congress had any such far-reaching authority. “If the power exist, it must be either because it has been specifically granted to the United States or that it is incidental to some power which has been specifically granted. If we examine the specific grants of power we do not find it among them, nor is it incidental to any power which has been specifically granted.”[15]

Monroe was not satisfied, however, with simply vetoing the measure. Later, he sent to Congress a lengthy paper in which he explored the question from many angles and buttressed with extensive argumentation his conclusions about the constitutional status of the matter. The crux of his argument is found in these words: “If then, the right to raise and appropriate the public money is not restricted to the expenditures under the other specific grants according to a strict construction of their powers respectively, is there no limitation to it? Have Congress a right to raise and appropriate money to any and to every purpose according to their will and pleasure? They certainly have not. The Government of the United States is a limited Government, in stituted for great national purposes, and for those only . . . .”[16]

That is the keystone of the Jeffersonian case for economy in government: “The Government of the United States is a limited Government.” Above all, it is limited, if it is limited, in its power to tax and to appropriate monies, for it is with these that it may extend its power and sway. The points at which they chose to draw the line may not impress us favorably today, but there should be no doubt that if the line is to be drawn, it must be drawn somewhere. They held that the Constitution fixed the line.

There were two more principles, however, which rounded out their guidelines for economy in government.

5. Balance the Budget. The Jeffersonians recognized that there would be occasions when revenue income would not meet extraordinary expenses. Jefferson approved going into debt to make the Louisiana Purchase. Madison accepted the necessity for borrowing for military expenses during the War of 1812. The Monroe administration had to borrow in the wake of the 1819 depression. A balanced budget, in the sense that the term is used today, was no fetish with them. Governments sometimes have to borrow, just as individuals do, and it is neither shameful nor a thing to be avoided at all costs.

Still, they took care that ordinarily income would equal or exceed expenses, and when it did, they considered that they had acquitted their offices well. Usually Jefferson was able to report a surplus in the Treasury at the end of an accounting period. Because of war, Madison was not. able to manage so well. Monroe, on the other hand, was able to make mostly successful reports.

Here is a fairly typical report of the financial situation of the government, made by President Monroe to Congress in late 1817: “In calling your attention to the internal concerns of our country the view which they exhibit is peculiarly gratifying. The payments which have been made into the Treasury show the very productive state of the public revenue. After satisfying the appropriations made by law for the support of the civil Government and of the military and naval establishment . . . . paying the interest of the public debt, and extinguishing more than eighteen millions of the principal, within the present year, it is estimated that a balance of more than $6,000,000 will remain in the Treasury on the 1st day of January applicable to the current serving of the ensuing year.”[17] The tone of his report suggests the pride he took in good stewardship.

6. Retire the Debt. In the early years of the Republic, in the heat of the debates over the funding of the national debt and assumption of certain of the state debts, there were apparently those who advanced the notion that “public debts are public blessings.” Indeed, Alexander Hamilton, who was in the forefront of the fight for funding and assumption, believed that the view had been im puted to him. He denied holding any such belief. However, he did maintain that “the funding of the existing debt of the United States would render it a national blessing.”[18] He based this claim on the fact that the value of United States securities would and did rise when it became clear that the government was pledged to pay them off upon maturity. From that, he concluded that the actual capital in the country was increased by the debt.

Albert Gallatin went to considerable pains to refute the notion that the debt in any way augmented the capital of the country.[19] In the first place, he pointed out, the war, which had been the occasion for the debt, had consumed an immense amount of potential capital. In the second place, he argued, funding did not increase the total capital of the country. True, those who held or purchased the bonds might experience an increase of capital when the bonds appreciated in value. But that was counterbalanced by the loss of potential capital by taxpayers who would have to pay the debt. More, it would be overbalanced by what would have to be raised by the payment of interest. Far from being enriched by debt, he declared, “every nation is enfeebled by a public debt. Spain, once the first power of Europe . . . . Holland, notwithstanding her immense commerce, still feel the effects of the debts they began to contract two centuries ago, and their present political weakness stands as a monument of the unavoidable consequences of that fatal system. Yet what are those instances when compared with that of France, where the public debt . . . has at last overwhelmed government itself!”[20]

Gallatin was arguing, of course, that government indebtedness should be retired as expeditiously as possible, and avoided, along with war which was the most common occasion for it, whenever practicable. Thus, the Jeffersonians devoted themselves with a right good will to making regular payments on the debt and usually looked forward to its retirement at the earliest possible date. Although the debt was not finally extinguished until the time when Jackson was President, the Jeffersonians pointed the direction and prepared the way.

These, then, were the rules, principles, and guidelines of the Jeffersonians for economy in government: Frugal Management of Public Affairs, Reduction of Taxes, Reduction of Expenditures, Observance of the Constitutional Barrier to Expenses, Balance the Budget, and Retire the Debt. Undoubtedly, it would require great imagination and tenacity to apply them in our time, but they do provide the guidelines for economy in government. []

1. Some historians include the administration of John Quincy Adams with that of the Jeffersonians. But his thrust was in a different direction, and he belongs with the Whigs, though the party had not been organized when he was elected President.

2. James D. Richardson, ed., A Compilation of the Messages and Papers of the Presidents, vol. I (New York: Bureau of National Literature, 1897), p. 311.

3. Encyclopedia Britannica, vol. XII (1955), p. 992.

4. E. James Ferguson, ed., Selected Writings of Albert Gallatin (Indianapolis: Bobbs-Merrill, 1967), p. 207.

5. Richardson, op. cit., p. 316.

6. Ibid., p. 367.

7. Quoted in Leonard D. White, The Jeffersonians: A Study in Administrative History, 1801- 1829 (New York: Macmillan, 1951), p. 24.

8. Richardson, op. cit., pp. 316-17.

9. Ibid., p. 317.

10. White, op. cit., p. 25.

11. Ferguson, op. cit., pp. 325-26.

12. White, op. cit., pp. 142-43.

13. Richardson, op. cit., pp. 397-98.

14. Ibid., vol. II, p. 569.

15. Ibid., pp. 711-12.

16. Ibid., p. 736.

17. Ibid., p. 584.

18. Richard B. Morris, ed., Alexander Harml-ton and the Founding of the Nation (New York: Dial, 1957), p. 319.

19. Ferguson, op. cit., pp. 34-35.

20. Ibid., p. 40.