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Debt & Taxes

Most bad government has grown out of too much government.
                                                       —Thomas Jefferson

We must not let our rulers load us with perpetual debt.

                                                                            —Thomas Jefferson


When Thomas Jefferson won the third US presidency in 1800, he was determined to wrench back the nation to its founding purity and undo the social dysfunctions unintentionally created by the federal debt and taxes implemented during the Washington and Adam’s administrations. In order to restore what one Virginian called the “pristine health” of the Constitution, Jefferson focused on limiting the scope of government. He moved quickly to dismantle the institutions responsible for corrupting republican virtue, telling Congress that the federal government should restrict itself to the “external and mutual relations only of these states.” Everything else, he said, that related to the “care of our persons, our property, and our reputation,” should be left to the states, local “wards,” or individual citizens:


I am for a government rigorously frugal and simple.

Jefferson was not alone in his commitment to return government to its frugal origins. Most reformers of the time were convinced that federal expenditures were out of control and endorsed Jefferson’s program to eliminate waste. Jefferson saw “expenses . . . for jobs not seen; agencies upon agencies in every part of the earth, and for the most useless or mischievous purposes, and all of these opening doors for fraud and embezzlement far beyond the ostensible profits of the agency.” His efforts to slash the government’s budget were relatively straightforward and unopposed by ordinary Americans since Jefferson’s cuts impacted little more than a bloated bureaucracy (the modern federal welfare state did not exist until the 20th century). It was not long before government finances were reduced and simplified to such an extent that, said Jefferson, they were “capable of being understood by common farmers.” 


Jefferson’s ruthless reduction of public expenditures had but one primary purpose: To apply “all possible savings of the public revenue to the discharge of the national debt . . . .” Jefferson made clear in 1792 that “No man is more ardently intent to see the public debt soon and sacredly paid off than I.” He went on to say that the issue of perpetual debt “exactly marks the difference between Colonel Hamilton’s views and mine . . . . I would wish the debt to be paid tomorrow; he wishes it never to be paid off but always a thing wherewith to corrupt and manage the legislature.” Hamilton defended himself arguing “a national debt, if it is not excessive, will be to us a public blessing.” But Jefferson’s fanatical stance against public debt resonated with the public’s repudiation of Hamilton’s technocratic beliefs—the electorate knew the nation’s character was at risk and could feel the moral impulses behind Jefferson’s position. When he used words like “sacred” to describe eliminating debt, he invoked spiritual consequences, inspiring the ever-delicate Madison to declare debt a “curse”:

I go on the principle that a public debt is a public curse.
                                                                      —James Madison


With Jefferson’s dedication to the principles of natural philosophy, it was no surprise that he found the courage to eliminate the country’s debt by invoking natural law. He rhetorically questioned what was “to hinder” government “from creating perpetual debt?” “The law of nature,” he answered, imposes “no obligation on one generation to pay the debt of the previous one.” For Jefferson this was a principle that “ought to be acted on by honest government,” so much so that in 1798 he recommended amending the Constitution by “taking from the federal government the power of borrowing.”

Other natural philosophers and politicians of the time agreed. David Hume (1711–1776), who was oft quoted by Hamilton in support of “vigorous government,” had warned in 1742, the year before Jefferson was born, that perpetual debt led to oppressive taxes until it usurped liberty:


The source of degeneracy, which may be remarked in free governments, consists in practice of contracting debt, and mortgaging the public revenues, by which taxes may, in time, become altogether intolerable, and all the property of the state be brought into the hands of the public.

Jefferson’s fellow Founder, Ben Franklin, made borrowing personal by explaining: “when you run into debt, you give another power over your liberty . . . . Preserve your freedom, and maintain your independency: Be industrious and free; be frugal and free.”


Shrinking the federal debt went to the heart of the Republican belief in limited government, and Jefferson was its standard-bearer. Rallying his administration by declaring, “discharge of the debt . . . is vital to the destinies of our government.” Within eight years he cut the federal debt to half of what it had been when he was taking office, even when including the massive Louisiana Purchase. Not only did his “extinguishment of the public debt” improve the economic “fortune of our republic,” but it also choked off the patronage and political influence that had corrupted John Adams’s administration.

The purse of the people is the real seat of sensibility.
                                                           —Thomas Jefferson


Jefferson was equally committed to the virtue of low taxes. He understood that few acts of government can more readily excite the public than heavy-handed taxation. This was demonstrated when the taxes of Britain’s Intolerable Acts ignited the American Revolution, Shay’s Rebellion provoked the Constitutional Convention of 1787, and then the Whiskey and Fries’ Rebellions challenged the tax policies of the country’s first two administrations. It is not a stretch of the imagination to say that the reaction to unfair taxes was the impetus behind much of our nation’s political evolution during its most formative years. So while Jefferson advised “never to borrow a dollar without laying a tax in the same instant . . . .”, the reverse was also true; a reduction in expenses and borrowing would permit lower taxes. Thus Jefferson’s successful reduction of the federal budget and halving the public debt allowed him to eliminate direct taxes and require no other revenue beyond excise fees.

Jefferson saw the threat of unlimited taxes born from decisions made eight years prior. During 1791–1792 he warned Washington by letter and in private that Hamilton’s expansive interpretation of the Constitution’s General Welfare clause would give Congress virtually unlimited power. If Hamilton succeeded in establishing a precedent for national taxes to support the federal debt, national bank, expanded bureaucracies, and other initiatives, Congress would soon “take every thing under their management they should deem for the public welfare, and which is susceptible to the application of money.” There will be “no limits of their authority,” Jefferson decried. He considered the Constitution’s Welfare Clause as restricting tax power only to “pay for the debts and provide for the common defense and general welfare of the United States.” The Constitution, he said, did not give Congress the authority to do “anything they please to provide for the general welfare,” and warned that expansively interpreting this provision would be “instituting a Congress with power to do whatever would be for the good of the United States and as they would be the sole judges of good or evil, it would be also a power to do whatever evil they pleased.”


Jefferson’s interpretation of the General Welfare clause was supported by the writings of Enlightenment philosophers, most noticeably those of John Locke. Locke (1632–1704) reasoned that in the natural world, property was constantly at risk, making the primary purpose of men “uniting into commonwealths, and putting themselves under government . . . for the preservation of their property.” Thus, Jefferson’s arguments that the Constitution’s taxing and spending powers were limited to protecting personal property, and any taxation beyond that narrow scope, was forbidden by the Constitution.

James Madison supported Jefferson’s contention that the Constitution’s original intent was to prevent “seizures of one class of citizens for the service of the rest.” And so he agreed that using taxes to “take from one, because it is thought that his own industry and that of his fathers has acquired too much, in order to spare others . . . is to violate arbitrarily the first principle of association—the guarantee to every one of his industry and fruits acquired by it.” Unequal property distribution was a natural condition Jefferson reasoned and “a law of nature, while extra-taxation violates it.” Even well-intentioned programs to help the poor were prohibited, not only by Constitutional enumeration, but also by moral arguments made by Ben Franklin: “I fear giving mankind a dependence on any thing for support in age or sickness . . . doing so tends to . . . encourage idleness and prodigality, and thereby to promote and increase poverty, the very evil it was intended to cure.”

Jefferson and his compatriots’ views of limited taxation survived over a century until overturned by the 16th Amendment in 1913, to extend Congress’s taxing and spending authority beyond the Constitution’s original intent and eventually create a welfare state. Jefferson saw this coming and warned: “I hope our courts will never countenance the sweeping pretensions which have been set up under the words ‘general defense and public welfare’ . . . . They could not be so awkward in language as to mean, as we say, ‘all and some.’ And should this construction prevail, all limits to the federal government are done away . . . . I should consider more ominous than any thing than has occurred.”