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Category Archives: Federal finances

My friend, I am so sorry I had to fire your brother.

the act of duty which removed your brother from office, was one of the most painful and unwilling which I have had to perform. very soon after our administration was formed, the situation of his accounts … the failure to render accounts periodically, the disagreement among those he did render, gave reason to believe he was imprudently indulging himself in the use of the public money. what were the circumstances which led him to this, was not an enquiry permitted to us.
To Elbridge Gerry, August 28, 1802

Patrick Lee’s Explanation
Effective leading sometimes requires personally painful decisions.
Gerry (1744-1814) was a well-regarded Massachusetts politician, friend and ally of Jefferson. His brother, Samuel, had been appointed years before by President Washington to be a customs (tax) collector in Massachusetts. Samuel mismanaged the office and had not remitted all the taxes due of him. He’d been given opportunity to account for his affairs and pay what was owed and had not done so.

Elbridge Gerry wrote an incredibly long and impassioned letter to Jefferson on behalf of his brother. (3,500 words! By contrast, the Declaration of Independence is just over 1,300 words.) Nonetheless, Jefferson, who hated confrontation, removed Samuel Elbridge from his position. He responded to his friend’s plea, explaining how painful it was to fire his brother. Samuel could have made the situation right and did not. There was no alternative.

Elbridge Gerry was Governor of Massachusetts in 1812 when he reluctantly approved a new redistricting plan for the state legislature. Some new districts had very unusual shapes, created to favor republicans. One senatorial district was so convoluted as to resemble a salamander in shape. Combining the governor’s name with that amphibian gave rise to the term gerrymander, still used today to describe ill-shaped legislative districts created to benefit one party over another.

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Meeting Planner, County Commissioners Association of Pennsylvania
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We said we would do it, and we kept our word!

the session of the first congress, convened since republicanism has recovered it’s ascendancy [in the election of 1800], is now drawing to a close. they will pretty compleatly fulfil all the desires of the people … the people are nearly all united, their quondam [former, i.e. Federalist] leaders infuriated with the sense of their impotence … and all is now tranquil, firm and well as it should be. I add no signature because unnecessary for you.
To Tadeusz Kosciuszko, April 2, 1802

Patrick Lee’s Explanation
A measure of true leadership is accomplishing what you said you would do.
With the republicans (small r) in control of the Congress and Presidency, they worked together to accomplish the goals Jefferson had laid before the people. Deleted from this excerpt, but available in full at the link above, those successes were:
1. Reduced the army and navy to only what was necessary for defense
2. Curtailed the President’s patronage powers and cut Executive Branch offices in half.
3. Suppressed taxes on ordinary citizens
4. Economized in a way that would still honor payments on the national debt and eliminate that debt in 18 years
5. Reduced the size of the judicial branch, enlarged pre-1801 to increase Federalist power
6. Welcomed refugees from other countries
7. Eliminated all public governmental ceremonies patterned after England’s

Jefferson claimed near unity of the citizenry, to the fury of their former leaders.

He didn’t sign this letter, saying Kosciuszko would know who wrote it. There was another reason. Political opponents regularly pilfered the mails. Since Jefferson apparently could not send this letter by private courier, his preferred method, he would omit his name so his straightforward assertions could not be used against him.

“Thank you so much for the great job you did as Thomas Jefferson …
I really appreciated the way you did the research on our association.”
Missouri Mappers Association
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Everyone should have a clue! Especially YOU. Part 2 of 2

we might hope to see the finances of the Union as clear and intelligible as a merchant’s books, so that every member of Congress, and every man of any mind in the Union should be able to comprehend them, to investigate abuses, and consequently to controul them. our predecessors have endeavored by intricacies of system, and shuffling the investigator over from one officer to another, to cover every thing from detection. I hope we shall go in the contrary direction and that by your honest and judicious reformations we may be able, within the limits of our time to bring things back to that simple & intelligible system on which they should have been organised at first.—
To Albert Gallatin, April 1, 1802

Patrick Lee’s Explanation
Honest leaders encourage transparency and want citizen oversight.
In the first post from this letter, Jefferson complained that former Treasury Secretary Hamilton had so complicated federal financing that Congress and the President had no idea what was happening. That labyrinth grew to where Hamilton himself could figure it out.

In that post, Jefferson wanted his Treasury Secretary to simplify the nation’s books so every member of Congress could understand them. In this post, going even further, he wanted a system so clean and transparent that any thinking person could understand them. Where previous administrations wanted to conceal and confuse, he wanted citizens empowered to investigate and control abuses.

Jefferson proposed what should have been created a dozen years before at the nation’s founding, a “simple & intelligible system” for the government’s receipts and disbursements.

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Boone County Historical Society
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No one has a clue, not even the author! Part 1 of 2

I think it an object of great importance, to be kept in view, and to be undertaken at a fit season, to simplify our system of finance, and bring it within the comprehension of every member of Congress. Hamilton set out on a different plan. in order that he might have the entire government of his machine, he determined so to complicate it as that neither the President or Congress should be able to understand it, or to controul him. he succeeded in doing this, not only beyond their reach, but so that he at length could not unravel it himself.
To Albert Gallatin, April 1, 1802

Patrick Lee’s Explanation
Great leaders SIMPLIFY.
A year into his Presidency, he hoped to up-end the incomprehensible financing system created by a previous Treasury Secretary, Alexander Hamilton. He wanted Gallatin, now in that role, to simplify that system to the point where every member of Congress could understand it.

There was no love lost between Jefferson and Hamilton. The new President thought the former Secretary wanted to control the entire government. To do that, Hamilton had deliberately created a system so obtuse “that neither the President or Congress should be able to understand it.”

It followed that no one would be able to control the one person, Hamilton, who understood the whole process. Eventually it backfired, Jefferson claimed, becoming so convoluted that Hamilton “could not unravel it himself.”

“On behalf of the Missouri Council …
I would like to express my deepest gratitude for your inspirational presentation …”
Conference Chair, Missouri Federation Council for Exceptional Children
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The taxman cometh NO MORE!

At home, fellow-citizens … the suppression of unnecessary offices, of useless establishments and expences, enabled us to discontinue our internal taxes. these covering our land with officers, & opening our doors to their intrusions, had already begun that process of domiciliary vexation, which, once entered, is scarcely to be restrained from reaching successively every article of property & produce.
Second Inaugural Address, March 4, 1805

Patrick Lee’s Explanation
Empowering leaders free their constituents from harrassment.
After foreign affairs, Jefferson turned his attention to taxes, a key issue on the domestic front. He thought the national government had expanded far beyond its authority. It took a lot of taxes on its citizens to run those operations. That, in turn, necessitated tax collectors “covering our land.”

What he called “domiciliary vexation” was taxation within one’s home and property. It had begun under the previous administration, and he put a stop to it. Otherwise, it would extend until “every article of property and produce” was taxed.

”I would like to sincerely thank you … We received a number of compliments
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Co-Conference Coordinator, Natural Areas Association
Unique – It could be Thomas Jefferson’s middle name!
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5 steps to maintain public trust over public money

In our care too of the public contributions entrusted to our direction, it would be prudent to multiply barriers against their dissipation, by appropriating specific sums to every specific purpose susceptible of definition; by disallowing all applications of money varying from the appropriation in object, or transcending it in amount; by reducing the undefined field of Contingencies, & thereby circumscribing discretionary powers over money; and by bringing back to a single department all accountabilities for money, where the examinations may be prompt, efficacious, & uniform.
First Annual Message, November 27, 1801

Patrick Lee’s Explanation
Responsible leaders know the importance of protecting taxpayers’ money.
Deciphering this challenging passage, Jefferson laid out to Congress specific strategies for making sure that taxes weren’t wasted:
1. Set amounts of money should be appropriated for specific purposes
2. No spending for anything outside those purposes
3. No spending in excess of what was agreed upon
4. Minimize undefined purposes, limiting discretionary power over spending
5. Have one department responsible for accounting for all funds in a timely and uniform manner, to assure items 1 through 4 were carried out.

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We hope to be able to work with you in the future.”
Missouri Department of Corrections
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It always costs more than you expect!

I consider … the making a good gravel road from the New bridge on Rock creek along the Pensylva & Jersey avenues to the Eastern branch as the most important objects for ensuring the destinies of the city which can be undertaken … 4000. D. for 4 miles of road were then estimated to be sufficient. but from your statement 3695.99 D have been expended, and half the distance (tho not half the work) remains to be finished.
To the District of Columbia Commissioners, August 29, 1801

Patrick Lee’s Explanation
What do honest leaders do in the face of cost overruns?
Washington City was still mostly a rural village being carved out of a Potomac River swamp during Jefferson’s administration. (John Adams was the first executive to live in the President’s house, moving in just 10 months before this letter.) New gravel roads were the most basic infrastructure element, a considerable improvement from dirt or plank roads.

Two of the projected four miles of paving had been completed, but it did not represent one-half of the work. So, less than half done, they’d already spent 92% of their budget.

Rather than continuing the work regardless, Jefferson proposed:
1. Postpone one portion of the road where a lesser road already existed
2. Apply the small balance left to the most important segment
3. Consider what portion of a $20,000 Navy appropriation could be applied to roads
4. Complete an accurate estimate of the cost to finish the four miles
5. Assess what additional city funds might be available.

Jefferson was too liberal in spending his own money (see the last post on 500 gallons of wine for an example!) but tight-fisted with federal funds. In this example, it was strictly pay-as-you-go.

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It doesn’t have to be complicated!

I have read and considered your report … and entirely approve of it, as the best plan on which we can set out. … I think it an object of great importance … to simplify our system of finance, and bring it within the comprehension of every member of Congress … we might hope to see the finances of the Union as clear and intelligible as a merchant’s books, so that every member of Congress, and every man of any mind in the Union, should be able to comprehend them to investigate abuses, and consequently to control them.
To Albert Gallatin, April 1, 1802
(Second letter down)

Patrick Lee’s Explanation
Objective leaders simplify to help people to understand.
Gallatin was Jefferson’s Treasury Secretary for eight years. Together, they wanted to replace the indecipherable finances and bookkeeping of the previous Secretary, Alexander Hamilton.  One year into Jefferson’s Presidency, he commented favorably on Gallatin’s plan to do that.
The goal of their plan was simple. The nation’s finances should be so straightforward that every member of Congress and every thinking person could understand them, “investigate abuses,” and thus control those abuses.

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Policy Director, Washington State Association of Counties

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He is TRYING to confuse us, and it’s working!

… I do not at all wonder at the condition in which the finances of the US. are found. Ham[ilton]’s object from the beginning was to throw them into forms which should be utterly undecypherable. I ever said he did not understand their condition himself. I ever said he did not understand their condition himself, nor was able to give a clear view of the excess of our debts beyond our credits, nor whether we were diminishing or increasing the debt.  … The accounts of the US. ought to be, and may be, made, as simple as those of a common farmer, and capable of being understood by common farmers.
To James Madison, March 6, 1796

Patrick Lee’s Explanation
Careful leaders want the finances clear to every citizen.
Jefferson, retired as Secretary of State and a year before becoming Vice President, expressed these thoughts to Madison, a member of the House of Representatives:
1. Treasury Secretary Hamilton intended to confuse the nation’s finances.
2. Succeeding at that, he created a system even he didn’t understand.
3. It was impossible to understand the nature or extent of our debt.
4. Always fond of the farmer, Jefferson used him as the measuring stick. The nation’s finances should be understandable by “common farmers.”

Jefferson expressed the same thoughts five years later to his Albert Gallatin, who would serve as his
Treasury Secretary for eight years. He eventually credited Gallatin with creating the first clear record of the nation’s finances since its founding.

Too bad Jefferson couldn’t be as tough on his personal finances! From the late 1780s on, he continually spent money he didn’t have. He often had to borrow more to pay debts as they came due. In 1825, at age 81, near the end of his life and hopelessly indebted, he would write to a youngster, “Never spend your money before you have it.”

“Clearly the visits with President Jefferson and Captain Clark
have set the standard for future conferences.”
Indiana Historical Society, Director of Education

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WHO should pay taxes? WHY? HOW?

The remaining revenue on the consumption of foreign articles, is paid cheerfully by those who can afford to add foreign luxuries to domestic comforts, being collected on our seaboards and frontiers only, and incorporated with the transactions of our mercantile citizens, it may be the pleasure and pride of an American to ask, what farmer, what mechanic, what laborer, ever sees a tax-gatherer of the United States? These contributions enable us to support the current expenses of the government…
2nd Inaugural Address, March 4, 1805

Patrick Lee’s Explanation
Self-limiting leaders restrict taxation to those who can afford it.
The previous post detailed Jefferson’s efforts to reduce the size of government and the taxes necessary to support it. Those were internal taxes, ones imposed on everyday people and things.  Those everyday people could now delight in asking, “what farmer, what mechanic, what laborer, ever sees a tax-gatherer of the United States?”

On what, then, was tax imposed?  On “the consumption of foreign articles,” i.e. imports.
On whom was the tax imposed? On “those who can afford to add foreign luxuries to domestic comforts,” i.e. the middle class, the wealthy, those who had money to spend on extras.
That limited taxation to edges of the country, the sea coast and the frontier. The tax was collected by merchants as they sold the goods.

He went on to write that any surplus was to be applied “to our public debts.” Once the debt was paid, he suggested that a Constitutional amendment to allow sharing federal funds with the states for the purposes of “rivers, canals, roads, arts, manufactures, education, and other great objects within each state.”

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