The Writings of
Thomas Jefferson

editor H.A. Washington
New York :  H.W. Derby
To John W. Eppes. [son-in-law, Chairman of the Committee of Ways and Means of the House of Representatives]
Poplar Forest, September 11, 1813.

DEAR SIR,—I turn with great reluctance from the functions of a private citizen to matters of State.  The swaggering on deck, as a passenger, is so much more pleasant than clambering the ropes as a seaman, and my confidence in the skill and activity of those employed to work the vessel is so entire, that I notice nothing en passant, but how smoothly she moves.  Yet I avail myself of the leisure which a visit to this place procures me, to revolve again in my mind the subject of my former letter, and in compliance with the request of yours of ——, to add some further thoughts on it.  Though intended as only supplementary to that, I may fall into repetitions, not having that with me, nor paper or book of any sort to supply the default of a memory on the wane.

The objects of finance in the United States have hitherto been very simple;  merely to provide for the support of the government on its peace establishment, and to pay the debt contracted in the Revolutionary war, a war which will be sanctioned by the approbation of posterity through all future ages.  The means provided for these objects were ample, and resting on a consumption which little affected the poor, may be said to have been sensibly felt by none.  The fondest wish of my heart ever was that the surplus portion of these taxes, destined for the payment of that debt, should, when that object was accomplished, be continued by annual or biennial re-enactments, and applied, in time of peace, to the improvement of our country by canals, roads and useful institutions, literary or others ;  and in time of war to the maintenance of the war.  And I believe that keeping the civil list within proper bounds, the surplus would have been sufficient for any war, administered with integrity and judgment.  For authority to apply the surplus to objects of improvement, an amendment of the Constitution would have been necessary.  I have said that the taxes should be continued by annual or biennial re-enactments, because a constant hold, by the nation, of the strings of the public purse, is a salutary restraint from which an honest government ought not to wish, nor a corrupt one to be permitted to be free.  No tax should ever be yielded for a longer term than that of the Congress wanting it, except when pledged for the reimbursement of a loan.  On this system, the standing income being once liberated from the Revolutionary debt, no future loan nor future tax would ever become necessary, and wars would no otherwise affect our pecuniary interests than by suspending the improvements belonging to a state of peace.  This happy consummation would have been achieved by another eight years' administration, conducted by Mr. Madison, and executed in its financial department by Mr. Gallatin, could peace have been so long preserved.  So enviable a state in prospect for our country, induced me to temporize, and to bear with national wrongs which under no other prospect ought ever to have been unresented or unresisted.  My hope was, that by giving time for reflection, and retraction of injury, a sound calculation of their own interests would induce the aggressing nations to redeem their own character by a return to the practice of right.  But our lot happens to have been cast in an age when two nations to whom circumstances have given a temporary superiority over others, the one by land, the other by sea, throwing off all restraints of morality, all pride of national character, forgetting the mutability of fortune and the inevitable doom which the laws of nature pronounce against departure from justice, individual or national, have dared to treat her reclamations with derision, and to set up force instead of reason as the umpire of nations.  Degrading themselves thus from the character of lawful societies into lawless bands of robbers and pirates, they are abusing their brief ascendency by desolating the world with blood and rapine.  Against such a banditti, war had become less ruinous than peace, for then peace was a war on one side only.  On the final and formal declarations of England, therefore, that she never would repeal her orders of council as to us, until those of France should be repealed as to other nations as well as us, and that no practicable arrangement against her impressment of our seamen could be proposed or devised, war was justly declared, and ought to have been declared.  This change of condition has clouded our prospects of liberation from debt, and of being able to carry on a war without new loans or taxes.  But although deferred, these prospects are not desperate.  We should keep forever in view the state of 1817, towards which we were advancing, and consider it as that which we must attain.  Let the old funds continue appropriated to the civil list and Revolutionary debt, and the reversion of the surplus to improvement during peace, and let us take up this war as a separate business, for which, substantive and distinct provision is to be made

That we are bound to defray its expenses within our own time, and unauthorized to burden posterity with them, I suppose to have been proved in my former letter.  I will place the question nevertheless in one additional point of view.  The former regarded their independent right over the earth;  this over their own persons.  There have existed nations, and civilized and learned nations, who have thought that a father had a right to sell his child as a slave, in perpetuity;  that he could alienate his body and industry conjointly, and á fortiori his industry separately;  and consume its fruits himself.  A nation asserting this fratricide right might well suppose they could burden with public as well as private debt their "nati natorum, et qui nascentur at illis." But we, this age, and in this country especially, are advanced beyond those notions of natural law.  We acknowledge that our children are born free;  that that freedom is the gift of nature, and not of him who begot them ;  that though under our care during infancy, and therefore of necessity under a duly tempered authority, that ears is confided to us to be exercised for the preservation and good of the child only;  and his labors during youth are given as a retribution for the charges of infancy.  As he was never the property of his father, so when adult he is sui juris, entitled himself to the use of his own limbs and the fruits of his own exertions: so far we are advanced, without mind enough, it seems to take the whole step.  We believe, or we act as if we believed, that although an individual father cannot alienate the labor of his son, the aggregate body of fathers may alienate the labor of all their sons, of their posterity, in the aggregate, and oblige them to pay for all the enterprises, just or unjust, profitable or ruinous, into which our vices, our passions, or our personal interests may lead us.  But I trust that this proposition needs only to be looked at by an American to be seen in its true point of view, and that we shall all consider ourselves unauthorized to saddle posterity with our debts, and morally bound to pay them ourselves ;  and consequently within what may be deemed the period of a generation, or the life of the majority.  In my former letter I supposed this to be a little* over twenty years.  We must raise then ourselves the money for this war, either by taxes within the year, or by loans;  and if by loans, we must repay them ourselves, proscribing forever the English practice of perpetual funding;  the ruinous consequences of which, putting right out of the question, should be a sufficient warning to a considerate nation to avoid the example.

The raising money by Tontine, more practised on the continent of Europe than in England, is liable to the same objection, of encroachment on the independent rights of posterity;  because the annuities not expiring gradually, with the lives on which they rest, but all on the death of the last survivor only, they will of course over-pass the term of a generation, and the more probably as the subjects on whose lives the annuities depend, are generally chosen of the ages, constitutions and occupations most favorable to long life.

Annuities for single lives are also beyond our powers, because the single life may pass the term of a generation.  This last practice is objectionable too, as encouraging celibacy, and the disinherison of heirs.

Of the modes which are within the limits of right, that of raising within the year its whole expenses by taxation, might be beyond the abilities of our citizens to bear.  It is, moreover, generally desirable that the public contributions should be as uniform as practicable from year to year, that our habits of industry and of expense may become adapted to them;  and that they maybe duly digested and incorporated with our annual economy.

There remains then for us but the method of limited anticipation, the laying taxes for a term of years within that of our right, which may be sold for a present sum equal to the expenses of the year;  in other words, to obtain a loan equal to the expenses of the year, laying a tax adequate to its interest, and to such a surplus as will reimburse, by growing instalments, the whole principal within the term.  This is, in fact, what has been called raising money on the sale of annuities for years.  In this way a new loan, and of course a new tax, is requisite every year during the continuance of the war;  and should that be so long as to produce an accumulation of tax beyond our ability, in time of war the resource would be an enactment of the taxes, requisite to ensure good terms, by securing the lender, with a suspension of the payment of instalments of principal and perhaps of interest also, until the restoration of peace.  This method of anticipating our taxes, or of borrowing on annuities for years, insures repayment to the lender, guards the rights of posterity, prevents a perpetual alienation of the public contributions, and consequent destitution of every resource even for the ordinary support of government.  The public expenses of England during the present reign, have amounted to the fee simple value of the whole island.  If its whole soil could be sold, farm by farm, for its present market price, it would not defray the cost of governing it during the reign of the present king, as managed by him.  Ought not then the right of each successive generation to be guaranteed against the dissipations and corruptions of those preceding, by a fundamental provision in our Constitution? And, if that has not been made, does it exist the less;  there being between generation and generation, as between nation and nation, no other law than that of nature ? And is it the less dishonest to do what is wrong, because not expressly prohibited by written law? Let us hope our moral principles are not yet in that stage of degeneracy, and that in instituting the system of finance to be hereafter pursued, we shall adopt the only safe, the only lawful and honest one, of borrowing on such short terms of reimbursement of interest and principal as will fall within the accomplishment of our own lives.

The question will be asked and ought to be looked at, what is to be the resource if loans cannot be obtained ? There is but one, "Carthago delenda est." Bank paper must be suppressed, and the circulating medium must be restored to the nation to whom it belongs.  It is the only fund on which they can rely for loans;  it is the only resource which can never fail them, and it is an abundant one for every necessary purpose.  Treasury bills, bottomed on taxes, bearing or not bearing interest, as may be found necessary, thrown into circulation will take the place of so much gold and silver, which last, when crowded, will find an efflux into other countries, and thus keep the quantum of medium at its salutary level.  Let banks continue if they please, but let them discount for cash alone or for treasury notes.  They discount for cash alone in every other country on earth except Great Britain, and her too often unfortunate copyist, the United States.  If taken in time they may be rectified by degrees, and without injustice, but if let alone till the alternative forces itself on us, of submitting to the enemy for want of funds, or the suppression of bank paper, either by law or by convulsion, we cannot foresee how it will end.  The remaining questions are mathematical only.  How are the taxes and the time of their continuance to be proportioned to the sum borrowed, and the stipulated interest ?

The rate of interest will depend on the state of the money market, and the duration of the tax on the will of the legislature.  Let us suppose that (to keep the taxes as low as possible) they adopt the term of twenty years for reimbursement, which we call their maximum;  and let the interest they last gave of 7½ per cent. be that which they must expect to give.  The problem then will stand in this form.  Given the sum borrowed (which call s,) a million of dollars for example;  the rate of interest, .075 or 75/1000 (call it r—i) and the duration of the annuity or tax, twenty years, (=t,) what will be (a) the annuity or tax, which will reimburse principal and interest within the given term ? This problem, laborious and barely practicable to common arithmetic, is readily enough solved, Algebraically and with the aid of Logarithms.  The theorem applied to the case is a = tr—1x1/1—1/rt the solution of which gives a = $98,684.2, nearly $100,000, or one-tenth of the sum borrowed.

It may be satisfactory to see stated in figures the yearly progression of reimbursement of the million of dollars, and their interest at 7½ per cent. effected by the regular payment of ——dollars annually.  It will be as follows :

Borrowed, $1,000,000. 
Balance after          1st  payment,    $975,000
       "               2d       "        948,125
       "               3d       "        919,234
       "               4th      "        888,177
       "               5th      "        854,790
       "               6th      "        818,900
       "               7th      "        780,318 
       "               8th      "        738,841
       "               9th      "        694,254
       "              10th      "        646,324
       "              11th      "        594,800
       "              12th      "        539,410
       "              13th      "        479,866 
       "              14th      "        415,850
       "              15th      "        347,039 
       "              16th      "        273,068
       "              17th      "        193,548
       "              18th      "        108,064
       "              19th      "         16,169

If we are curious to know the effect of the same annual sum on loans at lower rates of interest, the following process will give it :

From the Logarithm of a, subtract the Logarithm r—i, and from the number of the remaining Logarithm subtract s, then subtract the Logarithm of this last remainder from the difference between the Logarithm a and Logarithm r—i as found before, divide the remainder by Logarithm r, the quotient will be t. It will be found that —— dollars will reimburse a million,

                                   Years.               Dollars.
At 7½ per cent. interest in 19.17, costing in the whole 1,917,000
   7     "          "       17.82,     "      "         1,782,000
   6½    "          "       16.67,     "      "         1,667,000
   6     "          "       15.72,     "      "         1,572,000
   5½    "          "       14.91,     "      "         1,491,000
   5     "          "       14. 2,     "      "         1,420,000
   0     "          "       10.        "      "         1,000,000

By comparing the first and the last of these articles, we see that if the United States were in possession of the circulating medium, as they ought to be, they could redeem what they could borrow from that, dollar for dollar, and in ten annual instalments;  whereas, the usurpation of that fund by bank paper, obliging them to borrow elsewhere at 7½ per cent., two dollars are required to reimburse one.  So that it is literally true that the toleration of banks of paper discount, costs the United States one-half their war taxes ;  or, in other words, doubles the expenses of every war.  Now think, but for a moment, what a change of condition that would be, which should save half our war expenses, require but half the taxes, and enthral us in debt but half the time.

Two loans having been authorized, of sixteen and seven and a half millions, they will require for their due reimbursement two millions three hundred and fifty thousand dollars of the three millions expected from the taxes lately imposed.  When the produce shall be known of the several items of these taxes, such of them as will make up this sum should be selected, appropriated, and pledged for the reimbursement of these loans.  The balance of six hundred and fifty thousand dollars, will be a provision for six and a half millions of the loan of the next year; and in all future loans, I would consider it as a rule never to be departed from, to lay a tax of one-tenth, and pledge it for the reimbursement.

In the preceding calculations no account is taken of the increasing population of the United States, which we know to be in a compound ratio of more than 3 per cent. per annum ;  nor of the increase of wealth, proved to be in a higher ratio by the increasing productiveness of the imports on consumption.  We shall be safe therefore in considering every tax as growing at the rate of 3 per cent. compound ratio annually.  I say every tax, for as to those on consumption the fact is known;  and the same growth will be found in the value of real estate, if valued annually;  or, which would be better, 3 per cent. might be assumed by the law as the average increase, and an addition of one thirty-third of the tax paid the preceding year, be annually called for.  Supposing then a tax laid which would bring in $100,000 at the time it is laid, and that it increases annually at the rate of 3 per cent. compound, its important effect may be seen in the following statement :

The 1st year 103,090, and reduces the million to $972,000
    2d   "   106,090,       "       "             938,810
    3d   "   109,273,       "       "             899,947
    4th  "   112,556,       "       "             854,896 
The 5th year 115,920, and reduces the million to $803,053
    6th  "   119,410,       "       "             743,915
    7th  "   122,990,       "       "             676,719
    8th  "   126,680,       "       "             600,793
It yields the 9th year $130,470, and reduces it to $515,382
             10th  "    134,390,    "       "       419,646
             11th  "    138,420,    "       "       312,699
             12th  "    142,580,    "       "       193,517
             13th  "    146,850,    "       "        61,181
             14th  "    151,260, over pays,          85,491

This estimate supposes a million borrowed at 7½ per cent.; but, if obtained from the circulation without interest, it would be reimbursed within eight years and eight months, instead of fourteen years, or of twenty years, on our first estimate.

But this view being in prospect only, should not affect the quantum of tax which the former circulation pronounces necessary.  Our creditors have a right to certainty, and to consider these political speculations as make-weights only to that, and at our risk, not theirs.  To us belongs only the comfort of hoping an earlier liberation than that calculation holds out, and the right of providing expressly that the tax hypothecated shall cease so soon as the debt it secures shall be actually reimbursed;  and I will add that to us belongs also the regret that improvident legislators should have exposed us to a twenty years' thraldom of debts and taxes, for the necessary defence of our country, where the same contributions would have liberated us in eight or nine years ;  or have reduced us perhaps to an abandonment of our rights, by their abandonment of the only resource which could have ensured their maintenance.

I omit many considerations of detail because they will occur to yourself, and my letter is too long already.  I can refer you to no book as treating of this subject fully and suitably to our circumstances.  Smith gives the history of the public debt of England, and some views adapted to that ;  and Dr. Price, in his book on annuities, has given a valuable chapter on the effects of a sinking fund.  But our business being to make every loan tax a sinking fund for itself, no general one will be wanting ;  and if my confidence is well founded that our original import, when freed from the revolutionary debt, will suffice to embellish and improve our country in peace, and defend her in war, the present may be the only occasion of perplexing ourselves with sinking funds.

Should the injunctions under which I laid you, as to my former letter, restrain any useful purpose to which you could apply it, I remove them ;  preferring public benefit to all personal considerations.  My original disapprobation of banks circulating paper is not unknown, nor have I since observed any effects either on the morals or fortunes of our citizens, which are any counterbalance for the public evils produced ;  and a thorough conviction that, if this war continues, that circulation must be suppressed, or the government shaken to its foundation by the weight of taxes, and impracticability to raise funds on them, renders duty to that paramount to the love of ease and quiet.

When I was here in May last, I left it without knowing that Francis was at school in this neighborhood.  As soon as I returned, on the present occasion, I sent for him, but his tutor informed me that he was gone on a visit to you.  I shall hope permission for him always to see me on my visits to this place, which are three or four times a year.

* A lapse of memory, not having the letter to recur to.