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Category Archives: Federal finances

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
for adding a unique element to the conference program.”
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.

“Your contribution … added immeasurably to the success of the workshop.
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.

“Thanks once again for your OUTSTANDING presentation
at our annual meeting!”
VP-Operations, Association of Illinois Electric Cooperatives
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1 Comment Posted in Federal finances, Miscellaneous Tagged , , , , , , |

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.

“We heard nothing but praise from audience members.”
Policy Director, Washington State Association of Counties

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1 Comment Posted in Congress, Debt, Federal finances Tagged , , , , , , , |

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

Thomas Jefferson will maintain a high standard for your audience!
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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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Utah Council of Land Surveyors

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Leave a comment Posted in Federal finances, Taxes Tagged , , , , , |

Tax collectors & plagues of locusts have what in common?

At home, fellow citizens, you best know whether we have done well or ill. The suppression of unnecessary offices, of useless establishments and expenses, enabled us to discontinue our internal taxes. These covering our land with officers, and opening our doors to their intrusions, had already begun that process of domiciliary [home] vexation [harassment] which, once entered, is scarcely to be restrained from reaching successively every article of produce and property.
Second Inaugural Address, March 4, 1805

Patrick Lee’s Explanation
Careful leaders know unrestrained government will overwhelm its citizens.
As President Jefferson began his second term, he reported on accomplishments of the first four years. This excerpt deals with the scope of government and the taxes necessary to support it.

He asked his fellow citizens to judge how well they’d done at reducing unnecessary government functions and expenses. Less government meant the need for fewer taxes. The end of “internal taxes,” those imposed on goods and services within the country, was proof of their success.

Note the harm Jefferson attached to growing government and rising taxes. If not checked, the time would come when “every article of produce and property” would be subject to taxation.

If not internal taxes, from where and whom would government raise its necessary revenue? That will be subject of the next post.

“You are an amazingly talented man.
What an incredible portrayal you gave us … in Washington, D.C.”
President, National Speakers Association

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Leave a comment Posted in Federal finances, Protecting ourselves, Taxes Tagged , , , , , |

Are you strict …. or loose? Does it make any difference?

The Constitution says, “Congress shall have power to lay and collect taxes, duties, imposts, and excises, to pay the debts, &c., provide for the common defence and general welfare of the United States”. I suppose the meaning of this clause to be, that Congress may collect taxes for the purpose of providing for the general welfare, in those cases wherein the Constitution empowers them to act for the general welfare. To suppose that it was meant to give them a distinct substantive power, to do any act which might tend to the general welfare, is to render all the enumerations useless, and to make their powers unlimited.
Opinion on Fugitive Slaves, 1792, 3392

Patrick Lee’s Explanation
The language Jefferson quotes is from Article 1, Sect. 8 of the U.S. Constitution. It is commonly known as the “general welfare clause.” What constitutes “general welfare” has been debated and battled over since the nation’s founding.
Strict constitutional constructionists like Jefferson looked to Amendment 10, and claimed the national government’s authority is only what is specifically granted by the Constitution. All other authority belongs to the states. Thus, “general welfare” can mean only those specific responsibilities. National funds could not be spent on roads, canals, education, welfare, medical care, disaster relief, etc., because the Constitution does not give that authority to the national government. These folks support limited taxation and government.
Loose constructionists like Alexander Hamilton maintained that if an action could be interpreted to promote the “general welfare” of the nation, taxes could be levied to support it. Thus, roads, canals, education, welfare, medical care, disaster relief, etc., which do benefit the nation, are justifiable activities for the national government. These folks support a more activist government and the taxation necessary to support it.
Jefferson believed that if the constitutional limits weren’t really limits after all, then the national government’s powers were limitless. He feared an all-powerful government.

What value does “strict construction” have for your audience today?
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Leave a comment Posted in Congress, Constitutional issues, Federal finances

Thomas Jefferson (aka Patrick Lee) speaking on “no cooking the books”.mp4

A video post: http://bit.ly/JEdZ80
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, & every man of any mind in the Union, should be able to comprehend them, to investigate abuses,and consequently, to control them.
Thomas Jefferson to Albert Gallatin, Secretary of the Treasury, 1802, 40

Patrick Lee’s Explanation
No explanation needed.
Only this: How would you answer the questions Jefferson posed at the end of the video?

How would Thomas Jefferson challenge your audience?
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Leave a comment Posted in Federal finances

Thomas Jefferson on understanding the federal budget

How well do you understand the federal budget?
The accounts of the United States ought to be, and may be made, as simple as those of a common farmer, and capable of being understood by common farmers.
Thomas Jefferson to James Madison, March 6,1796, 39

Patrick Lee’s Explanation
Jefferson had been off the national scene for three years. His ongoing conflict with Treasury Secretary Alexander Hamilton led him to resign as President Washington’s Secretary of State in 1793. Hamilton continued in his role until 1795, and his influence continued even after he left office.
Jefferson didn’t approve of anything Hamilton believed or did, including Hamilton’s “accounting” for federal funds. Read a little more about his style of bookkeeping in this previous post.
No doubt, Jefferson could not be objective about anything Hamilton. Jefferson saw in the other man the mirror opposite of everything republican (note the small “r”). Using federal accounts to confuse and obscure was one more way for Hamilton to set himself above or apart from others.
For a better treatment of Hamilton in only 50 pages, I recommend Chapter 4 of Thomas Fleming’s excellent book, “The Intimate Lives of the Founding Fathers.”
For an entertaining and cleverly done video of Hamilton, see PBS’s “Rediscovering Alexander Hamilton.”

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Leave a comment Posted in Agriculture, Federal finances