The Secretary of State from Paris
ON OCTOBER 8, 1789, Thomas Jefferson departed from Le Havre for America. Like many trans-Atlantic voyagers, he had to sail from the French port on a packet ship and rendezvous with an America-bound merchant ship at the English port of Cowes. The envoy went ashore and bought some British newspapers, hoping to stay in touch with the ongoing drama of the French Revolution.
The papers described the dramatic events of October 4–5, when the Paris mob surged into Versailles, slaughtered the bodyguards of the king and queen and forced them to return to Paris as virtual prisoners. Jefferson was unperturbed by this violence. He wrote cheerfully to Thomas Paine: “I have no news but what is given under that name in the English papers. You know how much of these I believe. So far I collect from them that the king, queen, and National Assembly are removed to Paris. The mobs and murders under which they dress this fact are like the rags in which religion robes the true god.” Along with revealing his dislike of traditional Christianity, Jefferson was again keeping the murderous side of the French Revolution at arm’s length, lest it damage his transcendent faith in its future.1
Elsewhere in England, Edmund Burke, the American Revolution’s former champion, reacted with horror to the mob’s invasion of Versailles. He focused with special intensity on Queen Marie Antoinette’s ordeal. He portrayed “this gentle soul” forced to flee her rooms “almost naked” while her guards were being butchered before her eyes. Did a single person, beyond these personal protectors, rise to her defense? Not one. Burke found it hard to believe that in a nation of men of honor, “ten thousands swords” had not “leaped from their scabbards to avenge even a look that threatened her with insult.”
These words were from an essay that Burke had begun composing, “Reflections on the Revolution in France.” It would soon detonate with a large political impact in Britain and America, changing minds and hearts in both countries.2
On the day Jefferson sailed, James Madison wrote him an earnest letter, urging him to accept President Washington’s offer to become his secretary of state. “It is of infinite importance that you should not disappoint the public wish on this point,” Madison declared. “The Southern and Western country have it particularly at heart. To every other part of the Union it will be entirely acceptable.” The ex-councillor was still trying to assuage the psychological wound Jefferson had received as Virginia’s wartime governor.3
Jefferson never received this letter. His ship docked at Norfolk in late November and there he learned from the newspapers that Washington had asked him to be secretary of state. Jefferson promptly wrote to the President, admitting that when he compared his present post with the large and uncharted waters a secretary of state would navigate, he preferred to remain a diplomat.
Jefferson also admitted that he would enter upon the new appointment “with gloomy forebodings from the criticisms and censures of a public just indeed in their intent but sometimes misinformed and misled.” But he simultaneously admitted “it is not for an individual to choose his post. You are to marshal us as may be best for the public good.”
Washington firmly but cordially declined to play the general and give him an order. “It must be your option,” he wrote, making it clear that he would have no objection if Jefferson wished to continue to serve “abroad.”4
Part of Jefferson’s ambivalence reflected his knowledge of the current political situation in Virginia, as his many correspondents had described it to him. Thanks to Patrick Henry, a large portion of the state’s electorate remained hostile to the federal government. This was particularly true in the Piedmont section of the state, which included Jefferson’s home county of Albermarle.
Not long after Christmas, Congressman Madison and Thomas Jefferson shook hands at Monticello after a five-year separation. There is little doubt that Madison reiterated the advice he had written in his undelivered letter of October. As he saw it, Jefferson’s role in the new government was far more important than his own. The symbolic power of his name would do much to win support in Virginia and elsewhere.
Madison had been unable to mount a satisfying counterattack against Patrick Henry in the House of Representatives. But he had pushed through the Bill of Rights, defeated John Adams’s call for resounding presidential and vice presidential titles, and emerged as the informal leader of the new Congress. He assured Jefferson that he would remain a strong ally if new disputes with Henry arose. Nevertheless, the envoy remained dubious about the wisdom of accepting the President’s offer.
With typical energy and shrewdness, Madison proceeded to orchestrate a letter writing campaign to change Jefferson’s mind. One of his first recruits was President Washington, who told the reluctant candidate that “the secretary of state would play a very important role in the successful administration of the general government.” This, the President added, was “of almost infinite consequence to the future happiness of the citizens of the United States.”
Madison followed up these resounding presidential words with a letter of his own, reporting “a universal anxiety is expressed for your acceptance.” By way of further persuasion, Madison recruited James Monroe to head an Albermarle County Committee that sent Jefferson an address of welcome in which they declared “America still has occasion for your services.”5
These words stirred deep emotions in Jefferson. He replied to his neighbors that he would never forget that they had been the first to summon him to serve “in the holy cause of freedom,” and he pledged himself ready to bow “to the will of my country.” Two days later, Jefferson accepted Washington’s offer and promised to be at the President’s service as soon as he could prepare his neglected farms and mansion for another extended absence.
After his meeting with Madison, Jefferson read over the long letter he had written in Paris describing the idea that had seized his mind, the earth belongs to the living. He found nothing to change and mailed it to New York, where Madison was back in Congress. When Madison found time to reply, he was torn between friendship and candor. The latter emotion soon prevailed. He diplomatically conceded that the idea was “a great one.” But he was skeptical of its value as a political lodestar. He “regretfully” found it “not very compatible with the course of human affairs.”
Madison broke the theory into four parts:
1. The living generation can only bind itself.
2. A generation spans nineteen years.
3. A generation’s actions are limited to that term, and, to be valid, have to be expressly enacted by its congress or parliament.
4. In every society, the will of the majority binds the minority.
Madison calmly demolished each of these propositions, mostly on the basis of their impracticability. After the ordeal he and George Washington had endured to create the Constitution and the new government, he was especially opposed to the idea of each generation revising all its laws and customs every nineteen years. Such a government would lose “those prejudices in its favor which antiquity inspires.” Worse, every revision would arouse pernicious factions.
Even weaker was the contention that the new generation had no obligation to honor the debts of the previous generation. “Debts may be incurred principally for the benefit of posterity,” Madison wrote. A good example was the present debt of the United States, which was incurred to win a war bestowing freedom on the next generation and hopefully on all those that would follow it.
Instead of splitting the generations apart, Madison found that the “nature of things” tends to bind them together. In this unity, the principle of “tacit assent”—rather than literal reenactment of all the laws—was indispensible. If explicit assent had to be obtained for every principle and idea in a nation every nineteen years, there was a danger of “subverting the foundation of civil society.” As for the majority binding the minority, Madison could find no law of nature that supported the idea.
The Congressman attempted to soothe his friend by assuring him that he was not trying to “impeach either the utility of the principle [that the earth belongs to the living] in some particular cases.” But this was a pleasure he had little hope of enjoying. “The spirit of philosophic legislation has never reached some parts of the Union, and is by no means the fashion here [in New York] either within or without Congress.” Those last words were very close to being sarcastic. But Madison was confident that Jefferson’s friendship was strong enough to tolerate it.6
Jefferson never replied to Madison’s letter. But he also never abandoned his idea that the earth belongs to the living, and its corollary, the overriding importance of majority rule. From the perspective of two hundred-plus years, it is obvious that the two men had very different political philosophies.
While Jefferson was making up his mind to become secretary of state, Congressman Madison was discovering the importance of another member of President Washington’s cabinet—Secretary of the Treasury Alexander Hamilton. Born on the small West Indian island of Nevis, Hamilton had survived a troubled childhood. He and his brother were sons of a common-law marriage, which ended when his headstrong mother, Rachel Fawcett Lavien, threw her feckless Scottish-born husband, James Hamilton, out of her bed and house. Thereafter, she had so many affairs with various men, a local court condemned her as a common prostitute. When Alexander was thirteen, she succumbed to one of the many fevers that made life in the West Indies so precarious. A prosperous local merchant, who may have been Hamilton’s real father, hired the boy as a clerk.
Young Alexander displayed so much intelligence and self-reliance in the art of buying and selling, his employer persuaded other merchants plus a warm-hearted Presbyterian minister to send him to New York to complete his education. When the Revolution exploded, Hamilton wrote a fierce essay supporting it and organized a company of artillerymen. He soon attracted General Washington’s attention and was invited to join his staff as an aide. There, he swiftly became the general’s chief ghostwriter and frequent advisor.
In 1780, Hamilton grew ambivalent about the aide’s invisible role. His exposure to General Washington had stirred a desire to achieve a reward that only leaders of nations could hope to merit: fame. Hamilton was the first of the founders to articulate this spiritual and psychological goal. In 1778, he wrote an essay under the pen name “Publius” declaring that every American of virtue and ability should rejoice that the Revolution was giving him a chance to help found an “empire” that “would…promote human happiness” and win him the fame that was the topmost rung in the ladder of worldly glory.
Hamilton was echoing the opinions of Sir Francis Bacon, the British Renaissance philosopher, whose Essays were extremely popular with the Founding Fathers. Thomas Jefferson displayed a painting of Bacon wherever he happened to be living, not unlike devout Catholics mounted portraits of favorite saints.
After the war, Washington saw or heard little from Hamilton until the ferment for a new Constitution arose. At the Philadelphia convention, he made a long angry speech, calling for a president who would rule for life. This extreme solution went far beyond Washington’s desire for a strong executive. “Not having compared ideas with you, sir,” Hamilton wrote from New York after that intemperate speech “I cannot judge how far our sentiments agree.” The formal tone made it clear he had had little contact with the civilian Washington, and still thought as a general’s aide. But Hamilton’s exertions on behalf of the Constitution, above all his masterful performance at New York’s ratifying convention, restored their close wartime relationship.7
The Treasury Secretary faced a challenge that stirred President Washington’s deepest interest—what was the best way to restore America’s ruined credit abroad, and place the infant United States on the road to prosperity? Although Washington was not a student of international finance, he was a savvy businessman, who had run Mount Vernon’s farms with a keen eye for turning his lands into profitable ventures. He had abandoned tobacco farming for wheat and other grains and sold the harvests to the overcrowded islands of the West Indies. He had launched a distillery which prospered for several years, and has recently been revived for those with a penchant for historic hangovers.
Washington—and others, notably Robert Morris—had acquired an early respect for Hamilton’s thinking on finance. In 1782, when he was a mere twenty-four years old, he had published a series of essays entitled “The Continentalist,” that laid out a plan to fund the federal government. The essays revealed that Hamilton had read and thought deeply about the problems and perils of financing a nation.
In a letter to Robert Morris around this time, Hamilton condensed his ideas around a central concept: a national bank. This would be a unifying force, both politically and economically. Above all, it would attract wealthy investors, who would buy shares in the bank that would pay them hefty interest. The bank could loan money to the federal government and absorb the huge debts piled up by the eight years of the Revolutionary War.
The new nation’s leading merchant was so impressed with the young man’s expertise, he told Hamilton that any suggestion from him would “always command the attention of Robert Morris.”8
During the summer of 1789, Congress organized the executive branch of the new government. There was little dispute about the powers and responsibilities of the secretary of state, secretary of war, and attorney general. But the Treasury made the politicians uneasy for several reasons. As the chief tax collector, the secretary would have the most direct impact on the people. He would supervise the collection of revenue at the nation’s ports—the chief—in fact, the only—immediate hope of financing the federal government. Some congressmen feared the office was too powerful to trust to a single man; there was talk of a three-man committee.
Congressman John Page, an old friend of Thomas Jefferson, thought the House of Representatives should come up with a plan for restoring public credit. Ceding it to the Treasury secretary was “a dangerous innovation” that could create a moneyed aristocracy or “a detestable monarchy.” Madison came to the rescue, declaring that such dangers were far less than the menace of the House’s bungling in a field that most congressmen understood dimly if at all. Fisher Ames of Massachusetts heartily agreed, declaring government finance was “a deep, dark and dreary chaos.”9
There was not a trace of Jeffersonian-style hesitation in Hamilton’s acceptance of his appointment. The President had discussed it with him not long after his inauguration, and Hamilton had immediately accepted. But everyone had to wait until Congress passed the bill that created the department. Washington signed the legislation on September 2, 1789, and appointed Hamilton on September 11. The new cabinet officer immediately gave the President a list of five well-qualified assistants. The Senate confirmed him and the assistants without even the hint of a debate. They were all at work in a matter of hours.
Hamilton’s first act was to borrow $50,000 from the Bank of New York, which he had helped to found. The next day was Sunday, but that did not prevent the new secretary from dispatching assistant treasurer William Duer to Philadelphia with orders to borrow an additional $50,000 from Robert Morris’s Bank of North America, another institution that owed much to Hamilton’s ideas. Little more than a week later, an impressed House of Representatives asked the Secretary for a report on how to fund the federal government.
While Jefferson was sailing home from Paris, Hamilton was at his desk in the Treasury Department offices in Federal Hall, toiling over the first installment of his plan to create a prosperous nation. He sought advice from James Madison and several other people, but he relied chiefly on his own wide reading and thinking about the arcane world of public finance.
In the midst of this daunting task, Hamilton received a visit from Major George Beckwith, a veteran British intelligence officer. In 1780, he had succeeded the unfortunate Major John Andre as leader of the British secret service in America. (Andre had been captured and hanged for his role in the plot with the traitor general, Benedict Arnold.) Technically on the staff of General Sir Guy Carleton (Lord Dorchester), the governor general of Canada, Beckwith had come directly from England, landing in New York in late September 1789. The quondam spy wanted to find out if there was any chance that James Madison’s attempt to launch a policy of discrimination against British imports might be revived. If so, Beckwith had orders to warn the Americans that Britain would retaliate ferociously.
Hamilton assured Beckwith that there was little chance of such a policy being adopted by the Senate, no matter how persuasive Madison might be in the House of Representatives. Personally, he would use his utmost influence to defeat it. The Treasury Secretary grandly declared that he favored its polar opposite—a commercial treaty that would attract more British goods and money into the country. President Washington, he added, was of the same opinion. It was the quickest way to start funding the federal government via the tariffs that would flow to the Treasury’s coffers.
As for Madison’s attempt at discrimination, Hamilton said, there was no doubt that his Virginia friend was a brilliant thinker on government. But he lacked a certain worldly wisdom that occasionally led him astray. A pleased Beckwith hurried a report of this conversation to Lord Dorchester in Canada, where it swiftly crossed the Atlantic to London. To protect Hamilton from potential political enemies, Beckwith gave him a code name, Number 7.
Two hundred years later, some historians would seize on this device to prove that Hamilton was a British agent. Other historians have researched the matter and decided that Hamilton was negotiating with Beckwith and his superiors using a tough mixture of threats and reminders. He boasted that the United States was on its way to great prosperity—and power. Britain would be wise to avoid antagonizing her. Hamilton demanded the right to trade with the West Indies, and insisted the two nations would never have normal relations as long as the British refused to evacuate the forts they still garrisoned in the Northwest Territory–the area north of the Ohio River and east of the Mississippi River. When the Secretary provided Washington with summaries of his meetings with Beckwith, there was no hint of disapproval from the President’s side.10
Meanwhile, Hamilton continued to write his report on how to fund the federal government, which aroused stronger interest with each passing day. More and more wealthy Americans, and some not so wealthy, acting for foreign investors, were buying up the paper certificates that Congress and state governments had issued to pay for their purchases during the Revolutionary War. Madison became aware of this financial ferment when he returned to Congress on January 20, 1790. In a letter to Jefferson, he remarked that speculation in the public securities was rampant, and had sent their value soaring. He sourly added: “Emissaries [of the speculators] are still exploring the interior and distant parts of the Union in order to take advantage of the ignorance of holders.”11
By this time, Hamilton had completed his report, which combined proposals for dealing with the national debt, and pungent arguments defending his solutions. The debt totaled $79 million—over a billion dollars in today’s money. About two-thirds was owed by the federal government and a third by the states. Instead of undertaking the Herculean task of paying it all as swiftly as possible, Hamilton proposed “funding” it, setting aside revenues for this purpose, and paying off the debt at regular intervals, convincing creditors that eventually they would be paid in full. Meanwhile, the debt would be “a national blessing.” The government would issue new securities to existing creditors, with generous rates of interest. Wealthy investors could trade these bonds for cash, or use them to purchase land or launch businesses.
To achieve this goal, Hamilton urged Congress to make some difficult decisions. Perhaps the toughest was the Secretary’s recommendation that the current holders of government certificates should be paid in full, without any consideration of how or when they acquired them. Such a policy was crucial to restoring faith in the nation’s credit. At first glance it seemed to penalize the men to whom the certificates had been issued, and who, in the intervening years, had sold them to speculators for far less than their original worth.
Even more unnerving to many congressmen was Hamilton’s next recommendation. Instead of repudiating the debts incurred by the states, as some people were suggesting, Hamilton wanted them to be consolidated with the federal debt, making the nation as a whole responsible for them. This, too, was part of the Secretary’s conviction that the nation’s credit could only be restored by regarding every debt as a sacred obligation that must—and would—be paid.
The Secretary also saw consolidating the two debts as a giant step toward making a unified nation out of the thirteen previously semi-independent states. At the same time, Hamilton made it clear that he did not favor a perpetual debt. In his report, he called for the creation of a “sinking fund”—revenue exclusively devoted to the gradual retirement of the debt.
The audacity—and complexity—of Hamilton’s system at first stunned his listeners. But not for long. Rumblings came from southerners and westerners as they watched speculators dispatching agents to their sections of the country to buy up old certificates. Pennsylvania Senator Maclay, the quintessential spokesman for anti-federalist suspicions, was soon calling it “a villainous business” and darkly declaring certain congressmen were among the eager buyers. Hamilton denied this claim in a note to President Washington, and incidentally defended the speculators. He thought it strange that men should be “deemed corrupt and criminal for investing in the funds of their country.”
Congressman James Jackson of Georgia added to the turmoil by denouncing the speculators on the floor of the House: “My soul arises indignant at the avaricious and immoral turpitude which so vile a conduct displays,” he bellowed. Topping him was a blast from Dr. Benjamin Rush in Philadelphia, who fancied himself a political sage. Rush accused Congress of legislating “for British subjects.” He denounced the very idea of a public debt, as if his opinion would automatically make it disappear. Hamilton was introducing “European vices into our infant republic,” the political physician cried.12
In spite of his incoherence, Dr. Rush touched on a crucial aspect of Hamilton’s plan that was obvious to many people. It was modeled on the British system, which funded the nation’s debt in the same way and sold shares to investors on the open market. For British-haters, who were still numerous among American voters, the mere fact of this similarity was proof that it was evil.
Throughout these first acrimonious weeks, James Madison remained silent. On February 11, 1790, he rose in the House—and stunned Hamilton and President Washington by joining the critics. He declared himself in favor of “discrimination”—finding the original holders of the certificates and paying them a just share of their total value. Madison, like good politicians before and since, was paying attention to his Virginia constituents, who shared his dislike of speculators. Madison said he favored paying those who had purchased certificates what they were worth at their current market value plus accrued interest. The difference between the current value and the certificates’ full face value should go to the original owners, who had sold them under duress.
A huge argument exploded in both houses of Congress. Hamilton’s backers said the task of finding the original owners was virtually insuperable. Madison tartly replied that if Congress put as much effort into the task as the speculators were devoting to buying the certificates, it might be accomplished quite easily. This was an answer that solved nothing and the issue was put to a vote on February 22, 1790.
Early that day, Senator Maclay and his allies thought they saw an opportunity to impose a totally different solution on the nation. Maclay visited Madison and proposed slashing the interest on the entire debt from 6 percent to 3 percent—and making public lands in the west the only payment. Such a move would be a total repudiation of Hamilton’s report.
Madison did not even bother to read Maclay’s resolutions. He had convinced himself and others that he was only asking for justice for the original owners. He was not trying to reduce the amount the country owed, or indulging in tricks to somehow repudiate part of the debt. The Pennsylvanian went away damning “His Littleness” for refusing to change his ideas.
That afternoon, the House gave Madison a shock; they voted down his proposal, 36–13. Nine of the thirteen negative votes came from Virginia—a good indication of why the Congressman had gone out on this controversial limb.13
President Washington’s silence throughout the debates in Congress had made it clear to almost everyone that he favored Hamilton’s approach. Some outraged critics now accused him of betraying the soldiers of the Continental Army, who held a large share of the original debt certificates. Washington’s defenders pointed to advice he had given the men when the certificates were issued to them in 1783. He had cautioned the soldiers against “the foolish practice…of disposing of their notes and securities at a very great discount.” Nevertheless, numerous people with anti-federalist leanings were quick to impugn Washington’s integrity. The Pennsylvania Gazette published a hostile poem with the following sneer as its centerpiece:
In war to heroes let’s be just
In peace we’ll write their toils in the dust.14
President Washington was soon writing to friends in Virginia, expressing his concern about his native state. “Your description of the public mind in Virginia gives me pain,” he told one man. “It seems to be more irritable, sour and discontented than it is in any other state in the Union.” He—and Madison—were both being forced to confront the baleful negativity of Patrick Henry, who continued to warn all and sundry against the federalist plot to “consolidate” the states out of existence.
Madison was as unhappy about Henry as was the President. Around this time he wrote a letter to one of his older Virginia friends, asking if Henry’s contributions to the Revolution were exaggerated. It suggests he was thinking about launching a campaign of political extermination.15
On March 21, 1790, Thomas Jefferson finally arrived in New York. He had been delayed for several reasons. Among the less pleasant was a trip to Richmond to arrange payment of the interest on the 7,500 pounds he owed British merchants. (About 600,000 modern dollars.) Much more pleasant was supervising the marriage of his seventeen-year-old daughter, Martha, to her cousin, Thomas Mann Randolph.16
Another delay slowed the secretary of state–elect on the trip to New York. Madison explained it to a mutual friend as a recurrence of Jefferson’s “periodical head-Ach.” These migraine-like attacks were by this time obviously linked to the performance of a task in which Jefferson’s feelings were divided. Politics was about to deepen these divisions in ways that would also divide the nation.