The Life of Albert Gallatin

Mr. Gallatin’s report, which was sent in on the 25th November, was equally cautious. For the past year the Treasury showed a surplus of over $5,000,000, owing to the large importations under the system of open trade previous to February, 1810; but for the next year the estimated expense of increased armaments and the diminished receipts under the non-intercourse with England would cause a deficit of over one million dollars and necessitate a loan.

The public debt of the United States extinguished between the 1st April, 1801, and the 31st December, 1811, amounted to the sum of $46,022,810, and there remained on the 1st January, 1812, $45,154,189 of funded debt, bearing an annual interest of $2,222,481. This represents all that was directly accomplished by Mr. Gallatin towards his great object of the extinction of debt. This result had been accompanied by the abandonment of the internal taxes and the salt tax, but also by the imposition of the 2½ per cent. ad valorem duties known as the Mediterranean Fund. “It therefore proves decisively,” said the report, “the ability of the United States with their ordinary revenue to discharge in ten years of peace a debt of forty-two millions of dollars; a fact which considerably lessens the weight of the most formidable objection to which that revenue, depending almost solely on commerce, appears to be liable. In time of peace it is almost sufficient to defray the expenses of a war; in time of war it is hardly competent to support the expenses of a peace establishment. Sinking at once under adverse circumstances from fifteen to six or eight millions of dollars, it is only by a persevering application of the surplus which it affords in years of prosperity to the discharge of the debt, that a total change in the system of taxation, or a perpetual accumulation of debt, can be avoided.”

The report went on to discuss the provision to be made for ensuing years. The present revenue, under existing circumstances, was estimated at $6,600,000; the expenditure at $9,200,000. To provide for the deficiency an addition of fifty per cent. to the existing duties on imports would be required, and was preferable to any internal tax. “The same amount of revenue would be necessary, and, with the aid of loans, would, it is believed, be sufficient in case of war.” By inadvertence, Mr. Gallatin made here an important omission. He was speaking only of “fixed revenue,” sufficient to defray the ordinary expenses of government; and, as he was afterwards obliged to explain, this expression was wrongly applied to the case of war. He omitted to add that with each loan, provision to meet its interest must be made by increasing taxation; this fact had already been pointed out in the financial paragraph of the President’s message, quoted in a previous part of the report, but the oversight gave rise to subsequent sharp attacks upon the Secretary.

He then came to the question of loans, and expressed the opinion that in case of war “the United States must rely solely on their own resources. These have their natural bounds, but are believed to be fully adequate to the support of all the national force that can be usefully and efficiently employed;” but it was to be understood that if the United States wished to borrow money it must pay for it: “It may be expected that legal interest will not be sufficient to obtain the sums required. In that case the most simple and direct is also the cheapest and safest mode. It appears much more eligible to pay at once the difference, either by a premium in lands or by allowing a higher rate of interest, than to increase the amount of stock created, or to attempt any operation which might injuriously affect the circulating medium of the country;” and he proceeded to show that “even” if forty millions were borrowed, the difference between paying eight and six per cent. would be only $800,000 a year until the principal was reimbursed.

These were the chief points of the report, and taken with the tone of the message they indicate clearly enough that the Administration, now as heretofore, whatever the private feelings of its members might be, was prepared to accept any distinct policy which Congress might lay down. One of the main grounds of attack upon Mr. Gallatin was that he had habitually alarmed the public with the poverty of the Treasury, and by doing so had checked energetic measures of defence. The charge was so far true that Mr. Gallatin had never concealed or attempted to color the accounts of the Treasury. On this occasion he probably aimed, as was always his habit, at furnishing Congress with as favorable an estimate as the truth would permit, with a view to obtaining united and cordial co-operation between the Executive and Congress. His only mistake was in accepting the estimates of war expenditure then current. He himself could not wish for war, and still hoped to avoid it; he knew that the Treasury, in its present situation, could not stand the burden, but he had suffered too much from the charge of attempting to direct legislation, to allow of his again exposing himself to it without necessity.

The President and the Secretary of the Treasury were therefore in perfect accord; they did not recommend war, but they recommended immediate and energetic preparation. The President advised Congress to provide troops; the Secretary recommended increased taxes and a loan of $1,200,000, to pay these troops and support them. This was the extent of their recommendations, and it remained for Congress to act.

Congress did indeed act; within a very short time it was clear that Mr. Madison had no control over its proceedings. To Mr. Gallatin the action of Congress was merely a sign that, as his influence in the Senate had long since vanished, his influence in the House had now followed it, and that for the future he could expect no friendly co-operation from the Legislature. At first, indeed, the proceedings of both bodies were in outward accord with the Executive recommendations; the reports of committees, and the House bill introduced in pursuance of them, were such as Mr. Madison had suggested; the only warlike measure proposed was that of permitting merchant vessels to arm. The Senate, however, very soon returned to its old tactics. Mr. Madison, as was well understood, asked only for an army of ten thousand men, and his recommendations were referred to a committee, of which Mr. Giles was the chairman, who immediately reported a bill for raising twenty-five thousand men, and in a speech on the 17th December fairly took the ground that his principal motive was to annoy the Secretary of the Treasury. Mr. Giles declared himself a friend of peace; no man more deprecated war; but “if war should now come, it would be in consequence of the fatal rejection of the proposed measures of preparation for war.” The only reason for rejecting them he averred to be “the decrepit state of the Treasury and the financial fame of the gentleman at the head of that Department.” He launched into a bitter attack upon Mr. Gallatin, thoroughly in the spirit of Duane and the Aurora. Considering that he was playing with such tremendous interests, and that the national existence, to say nothing of private life and fortune, was dancing on the edge of this precipice of war at the mercy of Mr. Giles’s personal malignity towards Mr. Gallatin, Mr. Madison, and Mr. Monroe, there is actually something dramatic and almost classic in the taunts he now flung out. “Until now the honorable Secretary has had no scope for the demonstration of his splendid financial talents.” “If, then, reliance can be placed upon his splendid financial talents, only give them scope for action; apply them to the national ability and will.” “All the measures which have dishonored the nation during the last three years are in a great degree attributable to the indisposition of the late and present Administration to press on the Treasury Department and to disturb the popularity and repose of the gentleman at the head of it.” In order to give sufficient occupation to the splendid financial talents of the Secretary of the Treasury, Mr. Giles had done all that was in his power to do; he had thwarted every plan of policy; wasted every dollar of money; struck from the hands of government every resource and every financial instrument he could lay hold on; and all this was not enough. The Secretary still had reputation; he had popularity; he had, if not repose, at least dignity. The Senator from Virginia was equal to the occasion; there are few oratorical taunts on record which echo more harshly than this, that as yet “the Secretary has had no scope for the demonstration of his splendid financial talents;” war alone could do those talents justice, and war the Secretary should have.

Mr. Giles carried his bill through the Senate; Clay and Lowndes carried it through the House. The war spirit meanwhile was rapidly rising; resolutions poured in from the State Legislatures; Congress hurried into further measures. What Mr. Madison thought of these is shown in a letter of his to Mr. Jefferson, dated February 7, 1812: “The newspapers give you a sufficient insight into the measures of Congress. With a view to enable the Executive to step at once into Canada, they have provided, after two months’ delay, for a regular force, requiring twelve to raise it, on terms not likely to raise it at all for that object. The mixture of good and bad, avowed and disguised motives accounting for these things, is curious enough, but not to be explained in the compass of a letter.”

Although Mr. Gallatin had lost his old control in the House, he still preserved his influence with the Committee of Ways and Means and its chairman, Ezekiel Bacon, of Massachusetts. To this committee the annual report of the Secretary of the Treasury was referred, and when it became clear that war was really imminent, the committee, early in December, requested Mr. Gallatin to appear before them to discuss the question of war taxes. Mr. Gallatin at once complied, and gave his opinions explicitly and emphatically: “I do not,” said he, “feel myself particularly responsible for the nation being in the position in which it now finds itself; it might perhaps have been avoided by a somewhat different course of measures, or the ultimate issue longer deferred. But, placed as it is, I see not how we can now recede from our position with honor or safety. We must now go on and maintain that position with all the available means we can bring to bear on the enemy whom we have selected, and we should in my judgment resort immediately to a system of taxation commensurate with the objects stated in my annual report and by the President in his message at the opening of the session.”110 Very soon afterwards, on December 9, the committee, through its chairman, wrote Mr. Gallatin a letter asking for a written statement of his views, and a month later Mr. Gallatin sent in a paper, which was to all intents and purposes a war budget.

This was a remarkable – for Mr. Gallatin’s calm temper, almost a defiant – document, written, said Mr. Bacon, “to the great disobligement, as we had reason to know, of some of his strong political friends at that time,” and intended to force Congress into an honest performance of its financial duties. This intent was marked by a defence of his own course which could not but read as a severe criticism of the course pursued by Congress.

1812.

“It was stated,” said Mr. Gallatin, “in the annual report of December 10, 1808, that ‘no internal taxes, either direct or indirect, were contemplated even in the case of hostilities carried against the two great belligerent powers;’ an assertion which renders it necessary to show that the prospect then held out was not deceptive, and why it has not been realized.

“The balance in the Treasury amounted at that time to near fourteen millions of dollars; but aware that that surplus would in a short time be expended, and having stated that the revenue was daily decreasing, it was in the same report proposed ‘that all the existing duties should be doubled on importations subsequent to the 1st day of January, 1809.’… If the measure then submitted had been adopted, we should, after making a large deduction for any supposed diminution of consumption arising from the proposed increase, have had at this time about twenty millions of dollars on hand, – a sum greater than the net amount of the proposed internal taxes for four years.

“In proportion as the ability to borrow is diminished, the necessity of resorting to taxation is increased. It is therefore also proper to observe that at that time the subject of the renewal of the charter of the Bank of the United States had been referred by the Senate to the Secretary of the Treasury, nor had any symptom appeared from which its absolute dissolution, without any substitute, could have then been anticipated. The renewal in some shape and on a more extensive scale was confidently relied on; and accordingly, in the report made during the same session to the Senate, the propriety of increasing the capital of the bank to thirty millions of dollars was submitted, with the condition that that institution should, if required, be obliged to lend one-half of its capital to the United States. The amount thus loaned might without any inconvenience have been increased to twenty millions. And with twenty millions of dollars in hand, and loans being secured for twenty millions more, without any increase of the stock of the public debt at market, internal taxation would have been unnecessary for at least four years of war, nor any other resource been wanted than an additional annual loan of five millions, a sum sufficiently moderate to be obtained from individuals and on favorable terms.”

Leaving Congress to reflect at its leisure upon the criticisms implied in these remarks, the Secretary went on to lay down the rules now made necessary by the refusal to follow his previous advice. After doubling the imposts and reimposing the duty on salt, he could promise a net revenue of only $6,000,000 for war times. The committee assumed that annual loans of 110,000,000 would be required during the war, which left an annual deficiency, to be provided for by taxation, amounting to $5,000,000, calculated to cover the interest of the first two loans only, after which additional taxes must be imposed to provide for the interest of future loans.

Five millions a year, therefore, must be raised by internal taxes, and Mr. Gallatin proposed to obtain three millions by a direct tax and two millions by excise, stamps, licenses, and duties on refined sugar and carriages. A few remarks on loans and Treasury notes closed the letter.

This communication startled the House, and even produced an excitement of no ordinary nature. Congress suddenly awoke to the fact that the Secretary was in earnest, and that, if war came, Congress must learn to take advice. The faction that followed Mr. Giles and General Smith were not quick in learning this lesson, and fairly raved against the Secretary. What so exasperated them may be gathered best from a speech by Mr. Wright, of Maryland, one of the most extreme of the Smith connection. On March 2, 1812, he spoke thus:

“Sir, at the last session, when the question for rechartering the odious British bank was before us, we had to encounter the influence of the Secretary of the Treasury… Now at this session he has told us that, if we had a national bank, we should have no occasion to resort to internal taxes; thereby calling the American people to review the conduct of their representatives in not continuing that bank, and thereby to fix the odium of these odious taxes on the National Legislature. Now a system of taxes is presented truly odious, in my opinion, to the people, to disgust them with their representatives and to chill the war spirit. Yet it is, under Treasury influence, to be impressed on the Committee of Ways and Means, and through them on the House. Sir, I, as a representative of the people, feel it my duty to resist it with all my energies… Sir, is there anything of originality in his system? No! It is treading in the muddy footsteps of his official predecessors in attempting to strap round the necks of the people this odious system of taxation, adopted by them, for which they have been condemned by the people and dismissed from power… And now, sir, with the view of destroying this Administration; with this sentence of a dismissal of our predecessors in office before our eyes, a sentence not only sanctioned, but executed by ourselves, we are to be pressed into a system known to be odious in the sight of the people, and which, on its first presentation in a letter from the Secretary of the Treasury to the Committee of Ways and Means, and by them submitted to us, produced such an excitement in the House.”

The “invisibles,” however, were not the only class of men upon whom the war-budget fell with startling effect. Mr. Gallatin’s old friends with whom he had acted in 1792, when at the unlucky Pittsburg meeting they had united in declaring “that internal taxes upon consumption, from their very nature, never can effectually be carried into operation without vesting the officers appointed to collect them with powers most dangerous to the civil rights of freemen, and must in the end destroy the liberties of every country in which they are introduced;” men like William Findley, his old colleague, were so deeply shocked at the reintroduction of the excise that they would not vote even for the printing of this letter. They looked upon Mr. Gallatin as guilty of flagrant inconsistency. They did not stop to reflect that, if inconsistency there were, it dated as far back as 1796, when, in his “Sketch of the Finances,” Mr. Gallatin had taken essentially the same view of the excise as now;111 and again in 1801, when he had refused to recommend the repeal of the internal taxes.

It was assumed that the Secretary of the Treasury could discover unknown resources; the Aurora dreamed of endless wealth in the national lands; but in point of fact this letter of Mr. Gallatin’s erred only in calling for too little. He began by accepting the committee’s estimate that loans to the extent of $50,000,000 would carry on a four years’ war. The war lasted two years and a half, and raised the national debt from $45,000,000 to $123,000,000, or at the rate of somewhat more than $30,000,000 a year, nearly three times the estimate. Had Mr. Gallatin foreseen anything like the truth in regard to the coming contest, his demand for resources would have appeared absurd, and he would have lost whatever influence he still had.

For once, however, Gallatin was master of the situation. He could not force his enemies to vote for the taxes, but he could force them to vote for or against, and either alternative was equally unpleasant to them. The honest supporters of war found little difficulty in following Mr. Gallatin’s lead, but the mere trimmers, and the men who supported a war policy because the Administration opposed it, were greatly disturbed. Mr. Bacon brought in a report with a long line of resolutions, and seriously proceeded to force them through the House. Nothing, one would think, could have given Mr. Gallatin keener entertainment than to see how his enemies acted under this first turn of the screw which they themselves had set in motion. It was a sign that government was again at work, and that the long period of chaos was coming to an end; but the struggle to escape was desperate, and it was partially successful. At first, indeed, Mr. Gallatin carried his point. On the 4th resolution, for a tax of twenty cents a bushel on salt, the House rebelled, and refused the rate by a vote of 60 to 57, but the next day the whip was freely applied, and Mr. Wright and his friends were overthrown by a vote of 66 to 54. This settled the matter for the time, and the House meekly swallowed the whole list of nauseous taxes, and ordered Mr. Bacon’s committee, on the 4th March, 1812, to prepare bills in conformity with the resolutions. This was done, but the bills could not be got before the House till June 26, when there remained but ten days of the session. As it was out of the question to get these taxes adopted by the House and Senate in that short time, Mr. Gallatin was obliged to consent to their going over till November. Congress, however, was quite ready to authorize loans, and promptly began with one of eleven millions, which, small as it was, Mr. Gallatin found difficulty in negotiating, even with the active and valuable assistance of Mr. John Jacob Astor, who now became a considerable power in the state.

The attitude of the Administration towards the war during the winter of 1811-12 seems to have been one of passive acquiescence. Nothing has yet been brought to light, nor do the papers left by Mr. Gallatin contain the smallest evidence, tending to show that Mr. Madison or any of his Cabinet tried to place any obstacle in the way of the war party. That they did not wish for war is a matter of course. Their administrative difficulties even in peace were so great as to paralyze all their efforts, and from war they had nothing to expect but an infinite addition to them. The burden would fall chiefly upon Mr. Gallatin, who knew that the Treasury must break down, and upon the Secretary of War, Eustis, who was notoriously incompetent. Yet even Mr. Gallatin accepted war as inevitable, and wrote in that sense to Mr. Jefferson.

GALLATIN TO JEFFERSONWashington, 10th March, 1812.

Dear Sir, – …You have seen from your retreat that our hopes and endeavors to preserve peace during the present European contest have at last been frustrated. I am satisfied that domestic faction has prevented that happy result. But I hope, nevertheless, that our internal enemies and the ambitious intriguers who still attempt to disunite will ultimately be equally disappointed. I rely with great confidence on the good sense of the mass of the people to support their own government in an unavoidable war, and to check the disordinate ambition of individuals. The discoveries made by Henry will have a salutary effect in annihilating the spirit of the Essex junto, and even on the new focus of opposition at Albany. Pennsylvania never was more firm or united. The South and the West cannot be shaken. With respect to the war, it is my wish, and it will be my endeavor, so far as I may have any agency, that the evils inseparable from it should, as far as practicable, be limited to its duration, and that at its end the United States may be burthened with the smallest possible quantity of debt, perpetual taxation, military establishments, and other corrupting or anti-republican habits or institutions.

Accept the assurances of my sincere and unalterable attachment and respect.

Nevertheless there has always been something mysterious about Mr. Madison’s share in causing the final declaration. This letter of Mr. Gallatin, dated March 10, shows that he already considered war to be unavoidable. On the 3d April, only three weeks later, Mr. Madison wrote to Mr. Jefferson that the action of the British government in refusing to repeal the orders in council left us nothing to do but to prepare for war, and that an embargo for sixty days had been recommended. The embargo was accordingly imposed, and on June 1 Mr. Madison finally sent in his message recommending a declaration of war against Great Britain, which took place on June 18.

The Federalist party, however, always maintained that Mr. Madison was dragooned into the war by a committee of Congress. The assertion is that the President, though willing to accept and sign a bill declaring war, was very far from wishing to recommend it, and that to overcome his reluctance a committee headed by Clay waited upon him to announce that he must either recommend the declaration or lose the nomination for the Presidency which was then pending; that he yielded; received the nomination on May 18, and sent in his message on June 1.

This story, openly told in Congress soon afterwards, and as openly and positively denied by Mr. Clay and his friends, has crept into all the principal histories, and in spite of contradiction has acquired much of the force of established fact. It has even been supported by an avowal of James Fisk, a prominent member from Vermont, that he was himself a member of the committee. The charge, such as it is, has been the principal stain on the political history of Mr. Madison, and also by consequence upon that of Mr. Gallatin, who, according to Mr. Hildreth,112 “clung with tenacity to office” and “did not choose to risk his place by openly opposing what he labored in vain by indirect means to prevent,” at a time when Mr. Gallatin would probably have been only too happy to find any honorable way of escaping from office.