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Category Archives: Debt

Death. Diversion. Duty.

I have heard of your misfortune and lament it, but will say nothing, ha[ving] learnt from experience that time, silence, & occupation are the only medicines… I should have regretted the necessity of writing to you on a subject of business, did I not believe it useful to withdraw the mind from what it is too apt to brood over, to other objects.
You know the importance of our being enabled to announce in the message that the interest of the Louisiana purchase (800,000. D) can be paid without a new tax … to be quite secure. the [budget] estimate recieved from your office, which I inclose you, amounts probably to 770, or 780. & were it possible to reduce it to 600. it would place us at ease.
To Robert Smith, October 10, 1803

Patrick Lee’s Explanation
Leaders know life goes on even when it does not.
In a recent post, the President encouraged Secretary of the Navy Smith’s attendance at an important Cabinet meeting about the purchase of Louisiana and its funding, but acknowledged the illness in Smith’s family demanded his attention. Shortly after that request, Smith’s youngest daughter died.

Jefferson had experienced the death of four of his six children. (A fifth would die six months hence.) He knew from experience there was nothing he could say to his friend that would help. He would have preferred not to write at all, except that there was important business at hand, and he knew a diversion from tragedy was sometimes helpful.

The United States had only half of the $800,000 interest payment required by the new debt for the purchase of Louisiana. Asking Congress for a new tax would probably scuttle the sale. Thus, the President asked each of his department secretaries to tighten their belts to free up the needed cash. Other secretaries had done so. Jefferson asked Smith to cut $180,000 from his budget.

Not only did the President eventually get the funds he needed, he gave his friend a difficult task to distract his mind.

“…our Education Department received glowing reports for every attendee ..
Our members were thrilled.”
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Read my lips. NO new taxes!

[There was a hiccup in cyberspace, or in my brain, because this notice didn’t go out as it should have. Maybe this time?]

… the purchase of Louisiana will require the aid of all our resources to pay the interest of the additional debt without laying a new tax, and of course call for the adoption of every possible economy.
To Tobias Lear, July 14, 1803

Patrick Lee’s Explanation
Bold initiatives don’t always require tax increases.
Lear (1762-1816) was best known as George Washington’s personal secretary for the last 15 years of Washington’s life. Lear’s reputation was a checkered one, but he also served President Jefferson as commercial agent in St. Domingo and then as Consul General to several North African city-states. Lear’s duties in Algiers and Tripoli included ongoing negotiations to protect American shipping in the Mediterranean Sea. That protection was secured, in part, by annual payments to those nations. The President was intent on holding the line on, if not decreasing, those payments.

Why? In part, because he wanted to pay the interest on new debt for the purchase of Louisiana without a new tax. To do so would obviously require “every possible economy.”

“Again, it was a delight working with you,
and I wish you much continued success!”
Executive Vice President, Carolina-Virginias Telephone Membership Association
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My debt keeps me from helping you now. Maybe later.

my great object at present is, within the course of my present term of office to get compleatly thro’ the old debts of mr Wayles’s estate & my own … if by the end of my second term of office (which will certainly be my last) I can see all of us out of debt, and my mill & farms in such a state as to supply the expences of living … if March 1809. can see me in that condition all my desires will be crowned with contentment to myself, and I hope to leave the public circumstances so much improved from what they were in March 1801. as to carry into retirement the contentment of the public.
To Thomas Mann Randolph, July 5, 1803

Patrick Lee’s Explanation
Debt cripples everyone’s capacity to act, leaders included.
After reporting to his son-in-law about America’s fortuitous opportunity to buy all of Louisiana from France, the President turned to a personal matter, Randolph’s request for financial help. Jefferson was in no position to assist, because his own situation was strained.

More than 25 years before, Jefferson inherited heavily indebted lands from his father-in-law (“mr. Wayles estate”). He sold some of the land and with the proceeds, paid the English-held debt into escrow, awaiting the end of America’s war for independence. Though complicated to explain, the escrowed funds became worthless, and he had to pay the debt a second time. That debt, with its accrued interest, was still dogging him a quarter century later, as were the debts of his own making.

Jefferson thought his cash crops, tobacco and wheat, plus proceeds from his nail-making and grain-milling operations at Monticello, plus whatever he could spare from his own salary would see him debt free by the end of a second term in early 1809. He hoped to leave office, not only debt-free but with sufficient income for his retirement years, and to enjoy the public’s approval for the work he’d done.

He would be disappointed. His public standing in 1809, while generally  good, was considerably diminished from what it was in 1803. His personal debt was still far from being eliminated.

Personal money-management is not what Thomas Jefferson brings to your meeting,
but his many other skills merit your attention!
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I will deal with the devil if I have to.

you mentioned that the receipt of the 400. D. in March would be quite sufficient, or even later if it should be inconvenient to me. I am not yet certain how that will be; but either then, if I have it not in hand, or at any other moment when your calls require it, I can get it from the bank here; but that being in the hands of federalists, I am not fond of asking favors of them. however I have done it once or twice when my own resources have failed, and can do it at all times.
To John Wayles Eppes, February 21, 1803

Patrick Lee’s Explanation
Indebted leaders are humbled by their financial insecurity.
Eppes was married Maria Jefferson, the President’s younger daughter. Always solicitous of his two daughters and their families, Jefferson was quick to come to their financial aid, even when his own resources were lacking.

There was little cash in circulation. Financing was most often by credit – personal loans, advances on future tobacco and wheat crops, and mortgages on property, plus the buying and selling of the “paper” created by those advances. Borrowing money from one source to pay another was a common practice, one Jefferson had been forced into since his ambassadorship to France in the late 1780s. Only those prudent enough to buy only with cash, or “ready money,” had control over their financial health. Jefferson was rarely in that category.

Eppes had $400 coming due in March and had asked his father-in-law for help in meeting those “calls.” Jefferson didn’t have the cash and didn’t know if he would when the time came. If so, he would go to the bank for another advance. He hated that last resort, as the bank was controlled by his political opponents. Whether they charged him harsher terms or simply exulted in humbling the President or both is unknown, but his liberal personal spending, coupled with political and economic reverses he had no control over, left him at their mercy.

“Your presentation as Thomas Jefferson was a definite highlight
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Associate Executive Director, Arkansas Bar Association
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Is this shrewd or underhanded?

the cheapest & most effectual instrument we can use for preserving the friendship of the Indians: is the establishment of trading houses among them. if we could furnish goods enough to supply all their wants, and sell them goods so cheap that no private trader could enter into competition with us, we should thus get rid of those traders who are the principal fomenters of the uneasiness of the Indians: and by being so essentially useful to the Indians we should of course become objects of affection to them. there is perhaps no method more irresistable of obtaining lands from them than by letting them get in debt, which when too heavy to be paid, they are always willing to lop off by a cession of lands.
To Henry Dearborn, August 13, 1802

Patrick Lee’s Explanation
What’s a leader to do?
Dearborn (1751-1829) was Jefferson’s Secretary of War. This letter dealt with issues surrounding whites and Indians living on either side of the lower Ohio River. Whites were continually moving further west into Indian lands, and the President had to deal with the conflict that inevitably arose. He tried to do that in two ways, first to pacify the Indians and second, to encourage (or force) them to transfer ownership of some (or all) of their lands.

Here, Jefferson proposed an approach he favored for many years:
1. Establish trading stores for the Indians.
4. Drive out competition from private traders who stirred up trouble among the Indians.
2. Sell necessities at low prices, encouraging Indians to become farmers like the white men.
3. Be so helpful to the Indians they would come to like the white men.

The final sentence is uncharacteristic for this humane man. He proposed creating indebtedness in the Indians and then forgiving that debt in return for their relinquishing some of their land.

“The presentation was very educational,informative
and the details seemed to come to life …”
Director of Member Services, Association of Louisiana Electric Cooperatives
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I loaned YOUR money to ME.

… From this portion of my personal condition, I must turn to another of unpleasant hue, and apologize to you for what has given me much mortification … [a debt of] ten or twelve thousand Dollars … [what my agent] mr Barnes suggested that … the 4500.D. of yours … would entirely relieve my remaining deficiency. the proposition was like a beam of light; & I was satisfied that were you on the spot to be consulted the kindness of your heart would be gratified, while recieving punctually the interest for your own subsistence, to let the principal be so disposed of for a time, as to lift a friend out of distress …
To Tadeusz Kosciuszko, February 26, 1810

Patrick Lee’s Explanation
A debt-burdened leader is a conflicted leader.
Jefferson ended his long letter with an embarrassing admission. While he had hoped to finish his Presidency with his personal debt near zero, he found he still owed $10-12,000. His friend, President Madison, co-signed for 2/3 of that debt, but he had no access to more credit.

Jefferson was executor for the American portion of Koscuiszko’s estate when the Pole returned to Europe. At his death, that money was to free and educate slaves, and Jefferson was to make sure it happened. In the meantime, the money was invested.

The indebted former President, at his business agent’s suggestion, loaned Koscuiszko’s money to himself. He rationalized that Koscuiszko didn’t care who paid his interest, so long as it was paid. The principal of the estate covered the remainder of Jefferson’s large debt.

The Polish leader replied, “I approve of everything that you have done with my fund. I have complete confidence in you. I only ask that the interest be paid regularly …”

Koscuiszko later wrote other wills which conflicted with the one governing his American estate. He died in 1817, and Jefferson could not probate the slavery-relief funds. They remained part of his indebtedness and were never used for their intended purpose. Koscuizsko’s complicated estate wasn’t finally settled until several decades after Jefferson’s death in 1826.

“The California Chamber of Commerce would highly recommend you …”
President, California (MO) Chamber of Commerce
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To promise what I cannot deliver is immoral.

I have considered your proposition of yesterday to endorse a bill of 500.D. [co-sign a loan] … it would be immoral for me to engage to pay 500.D. in 60 days on your failure to do it, when I know that it would be out of my power. it may be said indeed that you will not fail. I am sure you do not mean nor expect to fail in doing it. but circumstances not under your controul may put it out of your power, just as similar circumstances now embarrass your paiments to me. but for me deliberately to engage to do a thing in any event which I know it will be out of my power to do, is irreconcileable to my ideas of right.
To Jonathan Shoemaker, December 26, 2017

Patrick Lee’s Explanation
Honest leaders should say no when no is all they can offer.
We have met Mr. Shoemaker before. He had leased Jefferson’s wheat-grinding mill, turned it over to his negligent sons, and had paid none of the agreed-to rent. In continuing distress, he now wanted Jefferson to co-sign a $500 loan for him. Jefferson was short of funds himself. He was in no position to guarantee Shoemaker’s loan.

Shoemaker assured Jefferson he was good for the money. Jefferson knew otherwise, since the other man was already delinquent in payments to him.

Co-signing loans was a common practice. Jefferson claimed the moral high ground with Shoemaker. He should have done the same thing in 1818, but for honor could not, when Cary Nicholas, his wealthy friend and father-in-law of his grandson Jeff, asked him to co-sign his $20,000 note. Nicholas lost everything in the economic panic the next year. The additional debt was the death blow for Jefferson’s already-precarious finances.

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VP-Operations, Association of Illinois Electric Cooperatives
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We must subdue the debt, or it will subdue us!

I consider the fortunes of our republic as depending, in an eminent degree, on the extinguishment of the public debt, before we engage in any war. because, that done, we shall have revenue enough to improve our country in peace, & defend it in war, without recurring either to new1 taxes or loans, but if the debt shall2 once more be swelled to a formidable size, it’s entire discharge will be despaired of, and we shall be committed to the English career of debt, corruption & rottenness, closing with revolution.
To Albert Gallatin, October 11, 1809

Patrick Lee’s Explanation
Far-sighted leaders know growing debt is a ticking time bomb.
Swiss-born Gallatin (1761-1849) was Jefferson’s Secretary of the Treasury for eight years, and he was filling the same role for President Madison. Jefferson had utmost confidence in Gallatin’s skill, crediting him with bringing the nation’s indecipherable financing from opaque under Presidents Washington and Adams to transparent in his administration.

The former President thought America would stand or fall according to its national debt. If it were paid off, the resulting surplus could be used for internal improvements in peace time or defense if war came, without more borrowing or increased taxes. However, if the debt were allowed to grow to the point where paying it off was impossible, we would become like the British. There, perpetual debt led to “corruption & rottenness,” and the inevitable result would be “revolution.”

Curiously, Jefferson didn’t apply the same rigor to his own finances. His personal debt grew throughout his life to the point where it was unmanageable.

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The feedback from our conferees has been overwhelmingly favorable …”
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The chickens WILL come home to roost.

It is with real mortification that, instead of a remittance … now due, I am obliged to send you this letter. … I have now been for 13. or 14. years a customer … and have never failed beyond a few days over the term of remittance … my [cash] income is mainly from the produce or the rents of tobacco & wheat farms … we have no banks here to relieve disappointments, & little money circulation. all is barter … I have trespassed on you with these details, that you may perfectly understand my situation, & ascribe a failure, not to a want of faith, but of those accomodations which do not exist here…
To Jones & Howell, August 10, 1809

Patrick Lee’s Explanation
A leader in debt is a compromised one.
Jones & Howell were iron merchants who provided the iron rod that Jefferson’s slave boys turned into nails. It had been profitable when he managed it directly but not during the eight year absence of his Presidency. He hoped to resurrect the business. He needed more raw material but had not paid for his last order.

The man who leased his wheat-grinding mill for $1,200/year had paid him nothing in the last two years. Prospects for future payments were iffy.

There were no banks to provide cash for transactions like buying iron. Everything was bartered. Jefferson had no cash and nothing to trade.

He frequently lived beyond his means. As early as the 1780s, as ambassador to France, his expenses regularly exceeded his income, and he would borrow to cover the shortfall. Then he would borrow more to pay back previous loans.

He often had reasons for his inability to pay his debts … absences while serving in government, bad weather, falling land prices, low crop prices, unfaithful tenants, no banks. Rarely if ever did he identify himself as part of the cause.

In his 1825 “Decalog of Canons for Observation in Practical Life,” 10 points of advice that summarized his life experience, point # 3 was, “Never spend your money before you have it.” It was a lesson he learned too late.

“Thank you for your appearance at Jefferson College last week …
It was extremely enjoyable and educational.”
President, Jefferson College
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What in the world do SHEEP have to do with this?

… I wish I were able to assist you in doing it, as I should do it with great pleasure. but the heavy debt, which on winding up my affairs at Washington, I found I had contracted there, has placed me under great difficulties, & will keep me long in a crippled state, as I have to pay it out of the profits of my estate, & the sale of a part of it, which I am endeavoring to effect …
To Joseph Dougherty, June 26, 1809

Patrick Lee’s Explanation
Wise leaders know: “Never spend your money before you have it.”
The line above is from Jefferson’s “Decalogue of Canons for Observation in Practical Life,” 10 points of advice he wrote late in life. Unfortunately, he never followed it himself.

Dougherty had asked Jefferson’s help in building a flock of Merino sheep, a breed both men preferred. The retired President gave some practical advice but declined to invest any money in the operation, citing his “heavy debt” from his years in Washington City.

Some of his financial difficulties were not of his making. Some very definitely were. Taken together, they had rendered this naturally generous man unable to help. His money woes, which began in the 1770s with circumstances imposed by the Revolutionary War, compounded through the decades. By the late 1780s, he was borrowing money to pay off previous loans. At his death in 1826, he was about $100,000 in debt, necessitating the sale of Monticello and most of his possessions.

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