Federal Spending under Jefferson

In a 1799 letter to a Massachusetts Republican, Jefferson summarized what would be the fiscal policies of his administration, if he were elected:

I am for a government rigorously frugal and simple, applying all the possible savings of the public revenue to the discharge of the national debt; and not for a multiplication of officers and salaries merely to make partisans, and for increasing, by every device, the public debt, on the principle of its being a public blessing.[3]

In his first inaugural address Jefferson explained that for him, “the sum of good government” was a “wise and frugal” one “which shall restrain men from injuring one another, [but] shall leave them otherwise free to regulate their own pursuits of industry and improvement, and shall not take from the mouth of labour the bread it has earned.”[4]

Jefferson opposed all but the most minimal taxes because he believed that taxes diminished public happiness by depriving individuals of a portion of their hard-earned money and hence of the means of supporting their families and improving their estates. He warned that “the general tendency” of the government party was “to increase expense[s] to the ultimate term of burden which the citizen can bear” and leave “to labor the smallest portion of its earnings on which it can subsist,” so that “government shall itself consume the residue of what it was instituted to guard.”[5]

Jefferson also was determined to pay off the national debt. He opposed public borrowing on a number of grounds. First of all, by enabling the government to increase its expenditures without calling on the people for increased taxes, it minimized public opposition to increased spending. Second, public borrowing shifted the burden of payment to posterity. Jefferson believed that imposing financial burden on future generations in order to pay for the profligacy of the present generation was a profoundly unrepublican and immoral act. Third, public borrowing created a class of bondholders who had a vested interest in funding and increasing the debt and opposing its discharge. Last, a public debt created a justification for keeping up taxes to pay the interest.[6]

Thus Jefferson and his Swiss-born secretary of the Treasury, Albert Gallatin, set out to reduce federal expenditures and federal taxes and pay off a considerable portion of the federal debt. Although the second goal appears to be in conflict with the third, Jefferson and Gallatin hoped that reductions in spending would compensate for the reduction in federal tax revenue.

In the State Department, Jefferson reduced the number of foreign missions to three—London, Paris, and Spain—one for each of the three great world powers. In the Treasury Department, he dismissed all of the collectors and inspectors of the internal revenue. This change alone reduced the number of federal employees by more than one-third. However, Jefferson and Gallatin planned on saving the most money in the War and Navy Departments. By early 1802, Jefferson had reduced the size of the regular army by almost half, from 6,000 men when he took office to 3,312. Federalist expenditures on the War Department averaged $1.9 million from 1793 through 1800. Jefferson reduced them to an average of $1.3 million for 1801 through 1808, which was a reduction of almost $600,000 a year. Federalist expenditures on the Navy Department had averaged $1.3 million a year from 1794 (the first year of the navy) through 1800. Jefferson actually spent a little more, averaging $1.5 million a year for his two terms. However, if one compares his naval expenditures to those of his immediate predecessor, John Adams, who averaged $2 million a year, Jefferson managed to reduce them by an average of almost $500,000 a year. He accomplished this by laying-up seven of the thirteen frigates built by the Federalists. Through such measures of economy, Jefferson managed to reduce government expenditures, minus interest and debt reduction, from $7.5 million for fiscal year 1800 to less than $5 million for 1801 and to an average of $4 million for the years 1802–1804. However, increased military expenditures after 1804 significantly raised overall spending during his second term. All in all, while Federalist expenditures averaged $7.1 million from 1793 through 1800, Republican expenditures actually averaged $8.7 million, an increase under Jefferson of $1.6 million a year.[7]