Economy in Government; C. Carson

346 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 re tiring 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, wel fare 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 ECONOMY IN GOVERNM}i~NT, JEFFERSONIAN STYLE 347 awareness of the necessity for econ omy in government. When Presi dent Reagan delivered his ~~Eco nomic Message" to Congress in February of 1981, he called atten tion 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 con nection 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 conse quences 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 bal anced budget.

Principlesof Economy VigorouslyApplied This message, coupled with a con tinuing debate over economies in government, prompted me to review American history in quest for guide lines 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 prin ciples but also applied them vigor ously and generally succeeded in accomplishing what they set out to do. Of course, the situation of the Jef fersonians was different in many re spects 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 mal practice. The Jeffersonians usually wrote out their messages by hand and made their own arithmetic cal culations. Today, Presidents have every sort of personal assistance and numerous electronic devices to aid them in performing their duties.

Circumstances change, but princi ples 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 govern ment in the history of the United States-and the most sustained one. To say this is not to accuse either the Washington or Adams. adminis trations, which preceded them, with mismanagement or with careless~ ness 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 immedi ately pressing than was economy. Moreover, Alexander Hamilton, who occupied so central a role in the early years, tended to subordinate econ omy in government to his plan for a large role for the central govern348 THE FREEMAN June ment in the economy. The Jefferson ians, then, inherited a task to their liking, that of setting the govern ment on a rigorous economical course.

BasicsObservedby Jefferson, Madison,and Monroe The Jeffersonians controlled and provided the leadership of the gov ernment from 1801 to 1825. 1 They comprised the administrations of Thomas Jefferson, James Madison, and James Monroe. They are called HJeffersonians" because Jefferson founded their party-the first Re publican party-and enunciated the basic principles to which they all ad hered. In addition to being Republi cans, all three were Virginians. They were the last of the men, too, who had a hand in founding the Ameri can republic who served in the pres idency. The Constitution was still for them a plan that had to be made to work, and they were strict con structionists. They were also par tially linked through the financial ideas and leadership of Albert Gal latin, who served under Jefferson for two terms as Secretary of the Treasury, and under Madison for one term. Gallatin was not only a dedi cated economizer but also one of the most articulate and respected expo nents of economic ideas in the early years of the Republic.

It is strange that Thomas Jeffer son should have emerged as a political leader-a pre-eminent one at that. He had few of the traits and inclinations that are usually associ ated with leadership. He disliked formal occasions, preferring ((repub_ lican 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 oth ers, 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 ques tions 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 charac ter 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.

1981 .ECONOMY IN GOVERNMENT, JEFFERSONIAN STYLE 349 1. Frugal Management of Public: Affairs. The basics of this principle' were setforth in Jefferson's First In augural Address. He said, ((Still one thing more, fellow-citizens-a wise' and frugal Government, which shall restrain men from injuring one an-, other, shall leave them otherwise~ free to regulate their own pursuits of industry and improvement, and. shall not take from the mouth ofla-, bor the bread it has earned."2 It might be supposed from the above and from his actions as Presi·, dent 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 gener·, ous to a fault in his private life where his own possessions were concerned. (So, too, were many of his contem-, poraries.) Indeed, he was so gener-, ous, and improvident, that shortly after his death, the beautiful man-, sion, Monticello, along with its fur·, nishings, was sold to pay his debts., Why his affairs were in such shape!

at his death is suggested by this ac·, count of his generosity in his later' years: ((Relatives, invited guests, and strangers filled Monticello (fre·, quently 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 soli-, tude he had to retire to a second. home, constructed as a refuge."3 But J effetson distinguished be tween 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. Sanc tions 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 op erated 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 Con gress Jefferson called for a reduction in taxes. In the same message he recommended the reduction of ex penditures, but reduction in taxes was given priority both by its place ment in the message and by the spe cific character of taxes listed. Galla tin had signalled this approach in a letter to Jefferson just weeks· before the message was sent to Congress. He said that ((ifthis 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, 350 THE FREEMAN June encroaching government ... , noth ing can be more effectual than a re peal 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 ttthere 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 Sec ond Inaugural Address he could pro claim that the internal taxes which had covered ttour land with officers"

and opened ttour doors to their intru sions," thus beginning a ttprocess of . . . vexation which once entered is scarcely to be restrained from reach ing successively every article of property and produce" were no more. ttWhat farmer, what mechanic, what laborer," he asked, ((ever sees a taxgatherer of the United States?"6 A Meansto Curb Government It should be clear from the above that Jefferson and Gallatin, in their desire to remove taxes, were con cerned with more than the burden which these might be to the tax payer. 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 in hibit the expansive tendency of gov ernment itself, not only the expansion of taxes but also the expansion of government activities. They be lieved 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 J effer sonian thrust to remove taxes was a part of their effort to limit govern ment and free people for the man agement 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 op position to government regulation of private business. When a committee of the Congress considered legisla tion to regulate steamboats, it rec ommended against enactment, de claring that ttin a free State, where every one is entitled to cultivate his own vineyard according to the dic tates 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 ap pear to be an interference with in dividual discretion, and an en croachment on the rights of the citizen ..."7 3. Hold Expenditures Down. Jef ferson coupled his move to reduce taxes with an effort to reduce the expenses of the government. He pointed out in his ((First Annual 1981 ECONOMY IN GOVERNM}I~NT, JEFFERSONIAN STYLE 351 Message" to Congress that there was no need for a vast Federal establish ment since ((the States themselves have principal care of our persons, our property, and our reputation, constituting the great field of hu man concerns." That being·the case, ~~we may well doubt whether our or ganization is not too complicated, too expensive; whether offices and officers have not multiplied unnec essarily 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. (~heexpenses of diplomatic agency have been con siderably diminished. The inspec tors of internal revenue who were found to obstruct the accountability of the institution have been discon tinued. Several agencies created by Executive authority . . . have been suppressed ... " In this connection, he recommended that Congress should act to regulate executive au thority, 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 J effer son 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 re ducing the undefined field of contin gencies and thereby circumscribing discretionary powers over money, and by bringing back to a single de partment all accountabilities for money.... "9 ExpensesControlled 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 Trea sury, 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 ttNew activi ties and new objects of expenditure were conspicuously absent."lO How expenses were held down is well illustrated from the attitudes, 352 THE FREEMAN June activities, and reports of Albert Gal latin 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 be

come a contriver of taxes, a dealer of loans, a seeker of resources for the purpose of supporting useless bau bles, of increasing the number of idle and dissipated members of the community, of fattening contra_c tors, pursers, and agents .... "11 Not that Jefferson would have suspected him of such a role, for Gallatin had applied himself dili gently to economizing for him. He kept a careful watch over the re quests for appropriations of all de partments. 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 re duced it to $10,000. Later that same year, he wrote: ((I allow three hun dred thousand dollars to the Secre tary of the Navy for the equipment of the four additional frigates: he wants four hundred thousand dol lars; but that is too much .... "l2 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 J efferson ians did not often have to appeal to this restraint, at least the Presi dents 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 ap propriations for internal improve ments, 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 sug gested 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, HI suppose an amendment to the Constitution, by 1981 ECONOMY IN GOVERNMENT, JEFFERSONIAN STYLE 353 consent of the States, necessary, be! cause the objects now recommended are not among those enumerated in the Constitution, and to which it permits the public moneys to be ap plied."13 No such amendment was forthcoming, and nothing further wa.s done during Jefferson's term in of fice.

MadisonUses Veto Power James Madison, however, faced the question of appropriations for inter nal improvements head on. Just bei fore he left office at the end of his second term he vetoed a bill which would have pledged funds for a gen eral 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 under stood the intent of the Constitution he should have. Regarding the bill, he said, t1 am constrained by the in superable difficulty I feel in recon ciling the bill with the Constitution of the United States to return it with that obj~ction to the House of Rep resentatives, in which it originated." He explained his reason for the veto this way: ttThe legislative pow' ers vested in Congress are specified and enumerated in the eighth sec tion of the first article of the Constll tution, and it does not appear tha.t 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."l4 MonroeSustainsthe 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 re pair. Plausible or not, Monroe ar gued that the exercise of such a power was unconstitutional. He reached that position by inviting Congress to look at the matter whole. ttA power to establish turnpikes with gates and tolls," he wrote, ttand to enforce the collection of tolls by penalties, im plies a power to adopt and execute a complete system of internal im provement." But he denied that Congress had any such far-reaching authority. ((Ifthe power exist, it must be either because it has been specif ically 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 354 THE FREEMAN June which has been specifically granted. "15 Monroe was not satisfied, how ever, with simply vetoing the mea sure. Later, he sent to Congress a lengthy paper in which he explored the question from many angles and buttressed with extensive argumen tation his conclusions about the con stitutional 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 expen ditures under the other specific grants according to a strict con struction of their powers respec tively, is there no .limitation to it? Have Congress a right to raise and appropriate money to any and to ev ery 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 J effer sonian case for economy in govern ment: HThe Government of the United States is a limited Govern ment." 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 im press 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 Constitu tion fixed the line.

There were two more principles, however, which rounded out their guidelines for economy in govern ment. 5. Balance the Budget. The Jeffer sonians recognized th8;t there would be occasions when revenue income would not meet extraordinary ex penses. Jefferson approved going into debt to make the Louisiana Pur chase. Madison accepted the neces sity for borrowing for military ex penses during the War of 1812. The Monroe administration had to bor row in the wake of the 1819 depres sion. 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 ordinar ily income would equal or exceed ex penses' and when it did, they consid ered that they had acquitted their offices well. Usually Jefferson was able to report a surplus in the Trea sury at the end of an accounting pe riod. 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 gov ernment, made by President Monroe 1981 ECONOMY IN GOVERNMENT, JEFFERSONIAN STYLE 355 to Congress in late 1817: ttIn calling your attention to the internal con·· cerns of our country the view which they exhibit is peculiarly gratifying .. The payments which have been made into the Treasury show the very pro·· ductive state of the public revenue .. After satisfying the appropriations made by law for the support of the civil Government and of the mili·· tary and naval establishment ... :, paying the interest of the public debt:, and extinguishing more than eigh·· teen 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 th€~ 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 cer·· tain of the state d~bts, there were! apparently those who advanced the! notion that ttpublic debts are public: blessings." Indeed, Alexander Ham ilton, who was in the forefront oftha fight for funding and assumption, believed that the view had been im puted to him. He denied holding any such belief. However, he did main tain that ttthe funding of the exist ing 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 matu rity. From that, he concluded that the actual capital in the country was increased by the debt. Albert Gallatin went to consider able 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 in crease the total capital of the coun try. True, those who held or pur chased the bonds might experience an increase of capital when the bonds appreciated in value. But that was counterbalanced by the loss of po tential capital by taxpayers who would have to pay the debt. More, it would be overbalanced by what would have to be raised by the pay ment of interest. ·Far from being en riched by debt, he declared, ttevery nation is enfeebled by a public debt.

Spain, once the first power of Europe ... , Holland, notwithstanding her immense commerce, still feel the ef fects of the debts they began to con tract two centuries ago, and their present political weakness stands as a monument of the unavoidable con sequences of that fatal system. Yet what are those instances when com356 THE FREEMAN pared with that of France, where the public debt . . . has at last over whelmed government itselfl"20 Gallatin was arguing, of course, that government indebtedness should be retired as expeditiously as possi ble, and avoided, along with war which was the most common occa sion 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 possi ble 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, prin ciples, and guidelines of the J effer sonians for economy in government: Frugal Management of Public Af fairs, 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. i Clarence Manion IDEAS ON -FOOTNOTESlSome historians include the administration of John Quincy Adams with that of the Jeffer sonians. But his thrust was in a different di rection, and he belongs with the Whigs, though the party had not been organized when he was elected Presi<ient. 2James D. Richardson, ed., A Compilation of the Messages and Papers of the Presidents, vol. I (New York: Bureau of National Literature, 1897), p. 31l. 3Encyclopedia Britannica, vol. XII (1955), p.

992. 4E. James Ferguson, ed., Selected Writings of Albert Gallatin (Indianapolis: Bobbs-Mer rill, 1967), p. 207. 5Richardson, Ope cit., p. 316. 6Ibid., p. 367. 7Quoted in Leonard D. White, The Jefferson ians: A Study in Administrative History, 1801-1829 (New York: Macmillan, 1951), p. 24. 8Richardson, Ope cit., pp. 316-17. 9Ibid., p. 317. lOWhite,Ope cit., p. 25. llFerguson, Ope cit., pp. 325-26. 12White,Ope cit., pp. 142-43. 13Richardson, Ope cit., pp. 397-98. 14Ibid.,vol. II, p. 569. 15Ibid.,pp. 711-12. 16Ibid.,p. 736. 17Ibid.,p. 584. 18Richard B. Morris, ed., Alexander Hamil ton and the Founding ofthe Nation (New York: Dial, 1957), p. 319. 19Ferguson, Ope cit., pp. 34-35. 2OIbid.,p. 40. LIBERTY WE couldn't get along without government, because we are a benighted race. But at the same time, unless you keep government as you keep fire, under control, checked and balanced, separated, divided, tied down, government will destroy you.