Jefferson and Hamilton (40 page)

One week after he took office, the House of Representatives gave Hamilton a deadline 110 days away to prepare a plan for coping with the nation’s indebtedness. Now thirty-four, he worked daily throughout that autumn to complete his Report on Public Credit, often toiling deep into the night in his tiny, unadorned office. A foreign visitor described Hamilton, in “a long gray linen jacket,” working at a pine desk covered with a simple green cloth; files were strewn about, the guest said, and the few items of furniture in the office could not have cost more than ten dollars.
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The ideas that went into his report were not especially new, though they had to be substantiated with evidence, and he had a comptroller, assistant secretary, and thirty clerks to help with the research. (Counting inspectors, revenue collectors, and assorted other officials, the Treasury Department consisted of about 350 employees, nearly ten times the number allotted to War and State.) Clearly, Congress saw indebtedness as the nation’s greatest problem.

Hamilton’s forty thousand word report submitted in January 1790 was the first accurate reckoning of the extent of indebtedness. The debt of the United States totaled about $52 million. Roughly 20 percent of it—$11.6 million—was owed to foreign nations (nearly 15 percent of that in arrears of interest), while the remaining obligations were to the holders of bonds, IOUs, and currency issued by Congress and the army. Hamilton calculated the debts owed by the states to be $25 million. He estimated the total federal and state debt at a par,
or face, value of $79 million. The figures provided by Hamilton were not surprising. Nor was anyone startled to learn that the annual interest payments on the national debt exceeded the revenues of the federal government. However, some were taken aback by two aspects of the plan he proposed for dealing with the debt. First, he called for the United States to assume the debts of the states, a notion that had not been widely bandied about prior to 1789. Second, instead of proposing that all indebtedness be retired, he recommended that the new federal government “fund” it—today, it would be called “refinancing”—which is to say that Hamilton urged the creation of a new debt through which to pay off the old.
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After years of rhetoric about a debt crisis, Hamilton had called for making the debt permanent. His idea was that new federal securities would be issued, replacing the total principal of all old securities. Investors would purchase these securities—hence they would become creditors who were making a loan to the United States—and the revenue raised from their sale would go toward retiring the old debt. The new bonds that Hamilton proposed would never mature, their average interest rate would be about 4 percent, and their holders were to receive from the Treasury a specified dollar amount annually.
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The funding scheme that Hamilton recommended was not unheard of. It was an idea that had been discussed years before in Morris’s day.

However, neither funding nor the assumption of state debts had been noised about during the campaign for the Constitution. Some of Hamilton’s scheme was not as apparent then as now, or as it would come to be before the decade ran its course. He believed that consolidating state and national indebtedness would exhibit the power of the federal government. (He had said in
The Federalist
that the more the government engages in matters “which touch the most active springs of the human heart, the greater … it will conciliate the respect and attachment of the community.”)
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More important, Hamilton wished to attach the wealthiest Americans—those who could afford to purchase Treasury securities—to the new national government. He knew that nothing would strengthen the government more than the loyalty of wealthy and propertied creditors. That, in turn, would enhance America’s credit rating and entice European investors. Finally, although Hamilton remained silent on this point, he saw consolidation and funding as merely the first step in a calibrated formula that would transform America into a powerful national state capable of defending itself and expanding its boundaries.

Jefferson had not stopped in London to see Maria Cosway, and after a twenty-six-day crossing, he landed at Norfolk late in November. On disembarking, Jefferson learned that Washington had nominated him to be secretary of
state and that the Senate had already confirmed the appointment, even though he had not been consulted. Less mystery surrounds Washington’s selection of Jefferson than his choice of Hamilton. Only four men had been major players in American diplomacy, and Washington easily eliminated two of them: Franklin was now eighty-three and Adams was the vice president. The third was John Jay, who had been in charge of foreign policy since shortly after the war ended. But like Hamilton, Jay was a New Yorker. Washington could not have two New Yorkers and no Southerner in his cabinet. The president nominated Jay as chief justice of the Supreme Court and turned to Jefferson, his fellow Virginian.
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Jefferson did not want the job. He hoped to sail for Paris in early April, after spending some seventy-five days at Monticello. He told the president that he wished to remain in his post in France, adding that he not only dreaded the public “criticisms and censures” that a cabinet officer would inevitably face but that he also feared he lacked the skills to run the Department of State. (In those days, State was responsible both for foreign policy and for what now is handled by the Department of the Interior.) However, Jefferson did not close the door. It “is not for an individual to chuse his post,” he said, adding that he understood the president had to “marshal us as may best be for the public good.” When Washington asked him a second time to take the position, Jefferson accepted.
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During his ten weeks at Monticello, Patsy married her cousin, Thomas Mann Randolph Jr., following a whirlwind courtship. Less happily, while at home Jefferson saw firsthand the deterioration his farms had suffered during his lengthy absence, and he learned that his indebtedness now totaled a staggering £7,500. As early as 1785, while he was living in Paris, Jefferson’s attorney in Virginia had sold thirty-one of his client’s slaves to satisfy creditors. Having seen what he called his “deranged” property, Jefferson knew that transaction had been merely the tip of the iceberg. He would have to sell more slaves, and some of his land, simply to service the interest on his debt.
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Jefferson finally arrived in New York on March 21, more than two months after the House of Representatives received Hamilton’s plan. He rented a house on Maiden Lane, and as he had done with both residences in Paris, embarked on a remodeling project. He lived in a boardinghouse for several weeks while the house was refurbished. During this period, Jefferson drew closer than ever to Madison. When the two first met is unknown, but a relationship flowered in 1779 while Madison served on the Governor’s Council, becoming one of Jefferson’s trusted advisors. They grew still closer four years later when both were in Philadelphia, Madison serving in Congress and Jefferson awaiting a diplomatic appointment. Before sailing to France, Jefferson
even tried to persuade Madison to purchase “a little farm” near Monticello so they could visit frequently. They corresponded during Jefferson’s long stay in France, exchanging important letters concerning the French Revolution and American constitutional issues. They were reunited for the first time in nearly six years only days after Jefferson returned to Monticello in 1789, a visit that included a discussion of the post of secretary of state. Either then or soon after Jefferson’s arrival in Manhattan, the two became political confederates and collaborators. Well-educated, intellectually curious Virginia planters, the two had much in common, and the warm relationship between them flourished unabated for the remainder of Jefferson’s life.
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On arriving in Manhattan, Jefferson immediately plunged into his diplomatic and administrative responsibilities by day, while seemingly every night he enjoyed the social whirl of the capital. One occasion was a welcome-home dinner provided by the president. Hamilton and Knox attended as well, and this was probably the first time that the three cabinet members were in one another’s presence. Jefferson also renewed his acquaintance with John and Abigail Adams, who were living at Richmond Hill, an elegant home situated a mile north of the city on a tall bluff overlooking the Hudson River.

Jefferson was still dressing as he had while a diplomat in Paris. Attired in “a suit of silk, ruffles, and an elegant topaz ring,” he attended parties hosted by important New Yorkers nearly every evening. He was struck by how little of the American Revolution’s radical spirit had taken root among Manhattan’s upper crust. Filled with “wonder and mortification” at learning of their “preference of kingly over republican government,” Jefferson responded by dressing in a simpler manner, donning what he called “a more republican garb.”
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Surprisingly, Hamilton, who owned a house and entertained regularly, appears to have never invited Jefferson to his home, though once Jefferson was situated, he entertained Hamilton on a least two occasions. During one dinner, Hamilton gazed at Jefferson’s portraits of John Locke, Sir Isaac Newton, and Sir Francis Bacon. He asked the identity of the subjects, to which Jefferson replied that they were “the three greatest men the world had ever produced.” Hamilton responded: “The greatest man that ever lived was Julius Caesar.” If he did not already know it, Jefferson discovered in that instant the yawning chasm in sensibilities that separated Hamilton and himself.
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Jefferson socialized with members of Congress as well, and one left a cogent description of the Secretary of State:

Jefferson is a slender man; has rather the air of stiffness in his manner; his clothes seem too small for him; he sits in a lounging manner, on one hip commonly, and with one of his shoulders elevated much above the other;
his face has a sunny aspect; his whole figure has a loose, shackling air. He had a rambling, vacant look, and nothing of that firm, collected deportment which I expected would dignify the presence of a secretary or minister. I looked for gravity, but a laxity of manner seemed shed about him. He spoke almost without ceasing. But even his discourse partook of his personal demeanor. It was loose and rambling, and yet he scattered information wherever he went, and some even brilliant sentiments sparkled from him.
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The social whirlwind that Jefferson enjoyed came to a sudden end around May 1. He fell ill with another headache. This bout was one of the worst he ever experienced. He was confined to his residence for nearly a month, and in bed for a good portion of that time.

Jefferson’s lengthy illness and heavy workload—his duties were now far more time-consuming than his ministerial responsibilities had been—took him out of play during most of the roiling battle ignited by Hamilton’s report on funding. Hamilton anticipated opposition, but he was startled when Madison, his friend and former colleague who now was the leading figure in the House of Representatives, challenged the notion of funding the domestic debt at face value.
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Under Hamilton’s plan, those who owned Continental securities were to exchange their notes for the new federal securities. Madison objected, insisting that the original holders—soldiers, farmers, and suppliers who had helped win the war—should receive a portion of the current market value of the paper. Madison was not alone. “Congress have been much divided,” Jefferson said, and in fact the opposition included both northern and southern representatives. Many feared that Hamilton’s program would result in an undue influence of the executive on the legislative branch, while some—recollecting the warning of radical English Whigs—saw in his plan the embryo of monarchy and aristocracy.
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Hamilton fought hard for his program. One observer said that no British prime minister ever worked harder, adding that Hamilton and his associates resorted to “nightly Visits” to many congressmen, offering “promises—compromises—Sacrifices—& threats.” A member of the Pennsylvania delegation noted that Hamilton had built a faction within the House; it “is now established beyond a doubt,” he continued, that the treasury secretary “guides the movements of the eastern phalanx,” that is, the congressmen from the mid-Atlantic and New England states. It was said that Hamilton was “moving heaven and earth” to secure the adoption of his program, and that he had dispatched what various onlookers called his “gladiators,” “machines,” and “cabals” to lobby the members of Congress. These included those who worked in the Treasury Department, but also what one called Hamilton’s “New York
junto
,” important businessmen and former army officers who now were members of the Society of the Cincinnati. Robert Morris, who sat in the Senate, circulated among colleagues with whom he had rarely spoken in order to praise Hamilton, labeling him “damned sharp.” Some in Congress were as alarmed by Hamilton’s tactics as by his program, fearing that the end game would be the corruption of Congress, much as Parliament had supposedly been corrupted by diabolical British prime ministers. Senator William Maclay of Pennsylvania, in fact, thought some heads were being turned by offers of pecuniary gain, which led him to predict that Hamilton “will soon overwhelm us.”
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Hamilton was doing nothing illegal. He was playing superb politics, though some were put off by him. Thinking him arrogant, Maclay referred to the treasury secretary as “his Holiness,” a view seconded by a newspaper essayist who said that Hamilton would not speak to or acknowledge those he encountered on New York’s busy streets. Vice President Adams regarded Hamilton as “insolent,” and later claimed that only a little wine at dinner caused him to be “silly” and boastful of his exploits “like a young girl about her brilliants and trinkets.”
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