Deficits, the National Debt, and Economic Growth: What many politicians don't want you to know.
Debt is the wrong enemy.  Growth is our forgotten friend.
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Even great ones change their minds.

"I wish it were possible to obtain a single amendment to our constitution… I mean an additional article, taking from the federal government the power of borrowing."
--Thomas Jefferson, 1798

 
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Thomas Jefferson's Reversal
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Jefferson's rhetoric

One of my favorite Presidents, Thomas Jefferson, wished (...in 1798 anyway) that the federal government did not have the power to borrow money. In other words, he was saying he hated deficits and debt. That kind of rhetoric is common among politicians. In general, it goes something like this:

Set up deficits or debt as the bogeyman, then
Promise to conquer the bogeyman if elected.
Feigned frugality is a tried-and-true vote-getter. Even Thomas Jefferson, one of our greatest Presidents, was not immune to using such powerful rhetoric. Fortunately for the USA, he didn't follow through on it. Take a look at Thomas Jefferson's actions five years later, after he had become President…

Jefferson comes to his senses

In 1803 (...five years later), President Thomas Jefferson bought the Louisiana Territory from France's cash-hungry emperor, Napoleon. How did Jefferson come up with the cash? That's right -- he borrowed it.

Two quotes regarding the USA's 1803 purchase of the Louisiana Territory:

"It was the greatest land bargain in U.S. history. The purchase doubled the size of the United States, greatly strengthened the country materially and strategically, provided a powerful impetus to westward expansion, and confirmed the doctrine of implied powers of the federal Constitution."
- Encyclopedia Britannica

"President Jefferson's greatest achievement, the purchase of Louisiana, was made possible only by foreign loans, which would not have been forthcoming if Hamilton had not established the credit of the United States so solidly."
-- Hugh Brogan, The Penguin History of the United States of America

The Louisiana Purchase caused the national debt to skyrocket from $77.1 million (1802) to $86.4 million (1803). In other words, Jefferson piled up 12 percent additional debt in one single year - 1803 - to fund the deal. [Increasing the debt by that much in this day and age would mean adding $650 billion to it in one year -- think of the field day the debt-phobes would have with that one!]

The Louisiana Territory: One of our best-ever investments

Three cents an acre to double the size of our country. Would you call that a good investment? I would, too. Napoleon was desperate for cash to fund his military adventures; Jefferson's agents, Robert Livingston and James Monroe, knew this, and they wisely drove home the bargain, knowing full well that the United States of America would have to borrow the money to fulfill the agreement.

Moreover, they knew we'd be able to borrow it, too. By that time, Alexander Hamilton, our first Secretary of the Treasury, had successfully established the good credit of the fledgling federal government. As a result, countries who had money to lend us viewed the USA as a safe-enough place to invest their money, and correctly viewed the Louisiana Territory as a good investment for America. In short, they were happy to lend Jefferson the money for such a good, safe investment. Both the lenders and the borrowers in 1803 knew, just as well as we do today, that borrowing or lending for a good investment is sound financial practice.

Jefferson's wisdom

Purchasing the Louisiana Territory from France was an excellent infrastructure investment decision which defined the zenith of Thomas Jefferson's Presidency. No wonder our history books shower unanimous praise on him and his agents for acting swiftly and decisively in Paris in April and May of 1803. In spite of his prior anti-borrowing rhetoric, Jefferson demonstrated through his actions that he understood very well what's really important: making good investments.

Conclusion

I sure am glad Thomas Jefferson reversed his anti-borrowing position, aren't you? He ended up doing the right thing, in spite of his prior anti-borrowing rhetoric. (I wish some of today's politicians would follow his lead.)

Borrowing the necessary money for a good investment is the right thing to do. Jefferson seems to have figured this out just in time to make one of the best investments in the history of our nation.

End of this article
Last update of this page: June 24, 2001
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