Jefferson Crosses the Rubicon: Not All Founding Fathers Were Federalists

Washington feared, with some justification, the National Bank decision had weakened his popularity in the South, and, in a more fundamental way, had driven a serious wedge between the South and the other regions. In the Spring of 1791 he went on an extended tour of the South, traveling more than 1800 miles, by horseback and coach. By all indications, crowd size, the trip was a success. More serious, however, was speculation in selling of the bank shares that soon followed (July 4, 1791) launched tons of rumors, and over 26,000 bids to purchase were made. The entire subscription for the National Bank sold out within one hour. By August, the original sale price ($400 a share, $25 to purchase an option (script)) “entered the stratosphere” according to Thomas Fleming [99] Thomas Fleming, the Great Divide, p.106, and it was apparent a speculative bubble in National Bank shares had developed.

The bubble was exactly what these two had thought would happen. Madison wrote to Jefferson expressing concern “the stock-jobbers will become the praetorian band of government, at once its tool and tyrant“, and the atmosphere it engendered “would not set bounds to the daring depravity of the times“. Jefferson responded that “Several merchants from Richmond [VA] … were here [in Philadelphia] lately. I suspect it was to dabble in federal filth[99] Thomas Fleming, the Great Divide, p. 106. Sore losers these fellows! Hamilton, with Washington’s express support, tried to talk the price down, and Hamilton got his close friends in the Bank of New York to purchase goodly sums and in time the bubble deflated. The real damage was not the short-term bubble speculation, but the effect it had on Jefferson and Madison–and others who thought like them.

But something deeper than that had been triggered. But to understand it, one had to be familiar with the course of British politics, formation of its political parties, and American perception of the nature of its policy systems

Without delving into great detail on the then one hundred year plus history of British political parties, I summarize it as having evolved into “a (royal) court-based” political party contesting against a “country-side-based political party”. The “country” party, among other features, was shocked and determined to terminate what they perceived as the “corruption” so prevalent within the policy-making associated with the “court” political party. I introduce this country versus court political party because that distinction–and the actual label– will be relevant to American ED policy-making for the next half-century. Whigs, for example, would think of themselves as a country party, but so would the Jacksonian Democrats and the Virginia Tidewater Democrat-Republicans. Each would think the other the court party. As we shall see, economic development, and in particular, state/nation chartered corporations were central to that distinction. The National Bank had, frankly predictably, triggered a cultural reaction, just as it had done a decade earlier in Pennsylvania.

Fleming relates an exchange that occurred precisely during this time–when Washington was on his southern tour in the Spring of 1791–when the Cabinet and V.P. Adams met informally at supper  (in April) to coordinate various affairs, as instructed by Washington. After business, a conversation ensued on “what constituted the best government” (these guys really knew how to party!). Adams, typically, mouthed off and set the tone, but concluded that the great deficiency with the British model was the power of court-politics which produced corrupt and bad decisions, and permeated into Parliament. Hamilton, apparently almost instinctively, intensely countered Adams criticism, in particular observing that the British economy and British Empire had done very well indeed under that system–concluding the government Adams described was in fact “the most perfect government that ever existed”.

The essentials, and the immense impact of that cocktail conversations, have been accepted by historians of considerably diverse perspective. That the conversation proved to be the final tipping point in the conflict between Hamilton and Jefferson, is commonly acknowledged. What issues and values were salient in that conflict, however are critical for understanding why Jefferson broke not just with Hamilton, but Washington, and in the process Jefferson departed fundamentally from the prevailing Federalist Tribe consensus. The issues and values unleashed by that cocktail conversation, a conversation in which Jefferson merely listened but did not participate, I suggest become cornerstones of the Democratic-Republican Tribe he was to organize. These issues and values overlapped and tapped into those that inspired the great series of chronic populist outbursts that led to the American Revolution and which periodically erupted to that very fateful night of the cocktail conversation. In that sense that cocktail conversation, and the thoughts, fears, and values it touched upon, served as a metaphor (not a casual determinant) for one of the most important turning points in the entire of America’s history.

Jefferson, sitting at the table, apparently did not participate in the discussion, but Fleming concluded the tale with an observation that summarized Jefferson’s thoughts and reactions: “Hamilton’s words were a veritable confession of his admiration for the ruthless men and evil deeds that would eventually snuff out all traces of liberty [in English political life] … For Jefferson the behavior of the first investors in the Bank of the United States confirmed his judgment with a certainty that would dominate his mind for the rest of his life[99] Thomas Fleming, the Great Divide, p. 109. Herein lies the nub of why Jefferson was uneasy with the advance of capitalism; it was not capitalism per se, nor manufacturing intruding upon the world of agricultural yeoman, it was the wealth that capitalism generated that flowed into the hands of a a corrupt elite who through schemes and and sheer muscular use of power controlled politics, imposing a tyranny over politics and individuals alike. In the words of Bernard Bailyn Jefferson “believed it had all happened before, early in the [18th] century in Walpole’s buildup of the power of the British Treasury in collaboration with Britain’s new, high-flying, ruthless banking and commercial interests. That alliance, he knew, had allowed Walpole to buy the votes he needed in the House of Commons, overthrow the famed separation of powers of the government, and usher in an age of limitless greed and political squalor” [99] Bernard Bailyn, To Begin the World Anew (Vintage Books, 2003), p. 51

Jefferson himself conceded as much as he described that period in his semi-autobiography, the Anas  from which Bailyn summarized. As he “recalled his return to the United States in 1789 to become secretary of state, and his shocked discovery of Hamilton’s plan for the federal government to assume the debts of the states. There was no mistaking Hamilton’s purpose … Hamilton’s plan would pump money into the hands of  profiteering state creditors in order to pile up ‘additional recruits’ to the ‘phalanx of the Treasury’. And that was not the end of the plans of the ‘stock-jobbing herd’. Though Hamilton and his ‘votaries” had already become–as Walpole had been–‘master of every vote in the legislature … the machine was not compleat … Some engine of influence more permanent must be contrived’ and that engine was the [national] Bank of the United States[99] Bailyn,To Begin the World Anew   p. 50. Jefferson went on {as summarized by Bailyn] that bank was a horror. Not only would it issue “a flood” of dreaded paper money that inevitably led to wild speculation and financial bubbles, but would also create a “moneyed aristocracy” which itself lived on the chronic indebtedness of the federal government, but would in time make that Bank powerful, perhaps dominant in financial policy. Through its financial tentacles that Bank could control voting in the Legislature, “corrupt the Constitution and reshape it on the model of England“.

Bailyn, however, ends his summary with the tension that the Bank created in Jefferson’s mind. The Bank would, at least in the short term create prosperity, economic growth and therefore wealth accumulation for all–which Jefferson desired. “His republicanism had never been ‘naively” classical to the exclusion of vigorous economic development …, nor did his emphasis on civic virtue preclude the basic value of personal property, its preservation and enhancement. Gradually,  he came to value–if not the full range of entrepreneurial efforts that Hamilton had earlier promoted, or his methods [the Bank]–policies strangely familiar to those of the Federalists[99] Bailyn, To Begin the World Anew, p. 51.

That was what drove Jefferson to become an American Revolutionary, to write the Declaration of Independence: to break away from a cesspool of corrupt politics practiced by a “court-dominated” public policy system imposed on the colonies by an unchecked king and corrupt wealthy (traditional/land and capitalist) elites. When push came to shove in 1791, Jefferson was more populist than Federalist. For him the ultimate goal, the chief criterion of a government was how well it kept such corruption in check and in so doing preserved individual rights, fundamental civil equality, that permitted all classes to participate in the rewards and prosperity generated by an open society and productive economy. As for economics, all Jefferson asked for was an equality of opportunity, that each in their own way, to the degree they desired, could participate in, and derive the benefits of, economic growth and prosperity.

For Jefferson the American Revolution and the government it subsequently produced  was all about politics and policy-making,  civil and political rights; for Hamilton, Washington and the Tribe of Federalists their reference point was economics, growth, wealth-generation as a means to success and individual happiness (a stake in the economy), and secondarily political and civil rights. In the distinction between these two divergent value sets American economic development would follow two equally distinct paths–at least until that dawn of the 21st Century.

Fleming left out one theme brought up in that infamous cocktail party conversation–corruption at the remote and distant national level where checks on policy-making by the people were weakest, and the power of wealthy elites the greatest. As the Federalists sought to empower a national government, a government susceptible, if not predisposed, in Jefferson’s mind to corruption , Jefferson saw vigorous empowerment of states as a desirable and natural check–both levels of government served as checks on the other. Economic efficiency gave way to limited government which best preserved individual rights, freedom and civil liberties. There was no presumption on Jefferson’s part that  national government sovereignty was superior to the sovereignty of states, Rather the opposite the rise of a powerful national government was the ultimate in his fear that a corrupt wealthy elite would take over and tyrannize the nation’s politics and make its policy-making within a very closed and non-transparent system.  In this line of thinking, we can now hear what was not heard at that conversation table that night: the then-silent crash of what today we call “states rights” had landed on that cocktail party’s table. States were Jefferson’s chief instrument in the preservation of American freedom, and the check against corrupt politics by wealthy elites.

The Die is Cast

That Spring (1791), just a couple of months after the Bank decision, and weeks after after the supper conversation, Jefferson, Madison, and a small group of like-minded associates took a trip to northern (upstate Albany) New York. Jefferson called it  a “botanical tour“, and wrote to Washington that “it was a remedy for headaches that kept disturbing his health“. The trip included  associates as Robert Livingston (head of a powerful Hudson Valley family, later venture capitalist for Fulton’s Claremont), Senator Aaron Burr (who had recently defeated Hamilton’s father-in-law (Senator) Philip Schuyler, and Governor George Clinton. The trip and meetings had been in discussion since early February, previous to the supper conversation but overlapping the trauma unleashed by the Bank approval process. On February 4th, Secretary of State Jefferson wrote to Livingston that “a vast mass of discontent gathered in the South [generated by the charter of the National Bank], and the only way to reverse [that] trend in government [was] by increasing the ‘republican scale’ in Congress”. On the same day, he sent another letter to Virginia’s George Mason making the same point, and asserting the ‘only corrective of what is corrupt in our present form of government will be the augmentation of the numbers in the lower house, so as to get a more agricultural representation, which may put that interest above that of stock-jobbers‘. [77] Stuart Bruchey, the Roots of American Economic Growth, 1607-1861, pp. 115-16

When completed  Madison and Jefferson returned to New York City,  spending nearly a week meeting with Madison’s college roommate, Philip Freneau, also of like mind. They urged Freneau to launch a newspaper in Philadelphia “that would express their mutual fear and detestation of the Treasury Secretary’s attempt to shape the federal government along British lines“. Freneau apparently agreed, but, poor and poverty-stricken, he soon backed out.  Jefferson returned from Philadelphia to New York City to spend a day to talk him back into the newspaper, followed up by a separate visit from Madison. To make the proposition affordable, Jefferson hired Freneau as a translator in the office of the Secretary of State, with a salary sufficient to Freneau’s needs. The rest, as some would say, was history. Thus began Jefferson and Madison’s concerted half-decade long organizational and mass media campaign that resulted in the formation of the Democratic-Republican Party and its victory in the Presidential elections of 1800 [99] Thomas Fleming, the Great Divide, pp. 109-111.

That this campaign commenced literally within weeks, and went into high gear less than a month after passage of the National Bank legislation is testimony the Bank, more than any single issue, fractured the mile-wide, inch-deep Federalist Tribe consensus–a fracture that started months earlier with the Public Credit Report/Approval. The Jefferson/Madison break with the Federalist Tribe, and the Washington administration persisted until the eve of the 1796 elections–through all of Washington’s second term. At first, Washington was either unwilling to believe what was going on around him, or more likely was unwilling to take action directly against members of his own administration. The public attacks, made principally by Freneau newspaper blogs were leveled a Hamilton–who responded by surreptitiously organizing his own followers to respond. Publicly, Jefferson was silent but his attacks on Washington,  however,  were privately conveyed through letters  (“tired”, too old, dupe of Hamilton the principal charges). By August 1792, Washington wrote to Hamilton urging moderation (despite “wounding suspicions,” “irritating charges”) in his relations with Jefferson, and vowed to restrain Jefferson. As his first term drew to an end, Washington seriously flirted with not running for a second. This is strong evidence that the internal tension within his administration was evident to him, that he was dealing with it in his his own somewhat aloof management style, and was seriously contemplating calling it quits–he was not a professional politician and nothing disturbed him more than dysfunctional internal polarization and creeping partisanship.

In September 1792, Washington had his first Mount Vernon breakfast with Jefferson in an attempt to resolve the matter. As described by Fleming [99] Thomas Fleming, the Great Divide, pp. 131-6, the breakfast was brutal, as both lost their temper. Charges of Congressional corruption on sale of bank shares were broached by Jefferson (he charged that Hamilton was buying votes in Congress through sale of Bank notes), and apparently Washington countered with an assertion “that the only worthwhile test of Hamilton’s [economic] system was its effectiveness”–he was still supportive of Hamilton. Jefferson’s concerns regarding speculative schemes revolving around Hamilton’s Deputy Secretary Duer were in the papers daily and Hamilton’s extra-martial affair/blackmail allegations had surfaced also. Jefferson accused Hamilton of “monarchical tenancies” which Washington refused to accept. Hamilton was a hard guy to defend at this point, but Washington stood his ground. Washington and Jefferson’s long-standing  personal relationship was fatally disrupted at the breakfast. The two settled down, with Washington suggesting he would not run in the coming election, and Jefferson urging him strongly that he ought. Eventually Washington committed to a second term, was duly elected and approved by the electoral college on December 15, 1792.

But by that time, the 17922 elections, Jefferson crossed his Rubicon, probably personally with Washington but more importantly his struggle with Hamilton permeated into Congressional elections, and in certain gubernatorial elections (New York). The 1792 Congressional results, according to the Historical Atlas of Political Parties in Congress [99], were dramatic with clearly identified Federalists estimated to hold a one to two vote edge over opposing “Republican” adherents in both Senate and House. Democrat-Republicans took over the House in 1794, but dipped to one-third of the Senate. During the Adam’s administration, Democrat-Republicans continued to hold about a third of the Senate,  and hovered around the mid-forties of the House. That all changed dramatically in 1888–but we will deal with that in a later module. Kenneth Martis, Historical Atlas of Political Parties in Congress (1989). events in the French Revolution (decapitation of Louis XVI and his wife), Jefferson’s agenda was drawn into issues associated with his core responsibility: foreign affairs. That he was out of step in this area as well as he was in the domestic agenda, is evident by Jefferson’s decision to resign from the Secretary of State in December of that year (1793). Partisan and political stalemate had developed by 1793 although polarization along issues and ideology was just beginning to intensify. From this point on, I would offer that the next seven years offers serious insight into the politics associated with the Trump Presidency–in many ways, including the role of the “mainstream media”, this transition period closely exhibits dynamics and events associated with post-2016 American politics.

From 1793 through 1800 (Washington’s second administration and the Adams administration) the Federalist Tribe consensus had shattered. While outside our ED-relevant interest, Jefferson and Madison organized a coherent. semi-organized “Democrat-Republican” Tribe–which over the next half century evolved into a formal two party mass-based political system.