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Thomas Jefferson warns about the dangers of the national debt, Part II

February 27, 2012

  My last post was entitled “Thomas Jefferson warns about the dangers of the national debt in 1816” because in light of the $1.6 trillion debt the United States is about to incur I found his warning to be quite relevant today. While writing to Samuel Kercheval in 1816, Thomas Jefferson railed against the dangers of a perpetual national debt because  he felt it would lead to over taxation of the people, which in turn would lead to a tyranny over the people due to the fact people would have to work longer hours to feed the greed of the national government, while having less of their hard earned money to make ends meet without the government having to step in and provide sustenance for the people who would otherwise be able to provide for themselves.

  After reading a letter from Thomas Jefferson to Albert Gallatin in 1820 earlier today, I decided a follow up post would be in order.

  In this letter Thomas Jefferson wrote:

    At home things are not well. The flood of paper money, as you well know, had produced an exaggeration of nominal prices and at the same time a facility of obtaining money, which not only encouraged speculations on fictitious capital, but seduced those of real capital, even in private life, to contract debts too freely, with an all-time high rate of citizens in debt and in need of IVA help to extinguish their ever-rising debt.

  This flood of money led people to speculate on fictitious capital and enter into contracts freely. This sounds quite a bit like the mortgage crisis we are now facing where people entered into mortgage contracts they could not afford in the first place, leading to the housing crash and the downfall of the economy. And people speculated on these mortgages knowing they were insured by government backed loan institutions.

  Yet the government continues to spend money that it doesn’t have; borrowing money where it can, and printing money where it cannot. What did Thomas Jefferson think about this prospect?

  Something of the same character has taken place in our fiscal system. A little while back Congress seemed at a loss for objects whereon to squander the supposed fathomless funds of our treasury. This short frenzy has been arrested by a deficit of 5 millions in the last year, and of 7 millions this year. A loan was adopted for the former and is proposed by the latter, which threatens to saddle us with perpetual debt.

 I hope a tax will be prefered, because it will awaken the attention of the people, and make reformation and the economy the principles of the next election. The frequent recurrence of this chastening operation can alone restrain the propensity of government to enlarge expense beyond income.

  He worried about the Congress and its willingness to spend money under the assumption that there would always be money to spend. He knew this would lead to the federal government spending more money than it took in and he was absolutely right. Why should the government feel bound to the restrictions of income when it felt there would always be someone willing to loan money if need be?

  He wished that a tax would be imposed on the American people instead of having the government secure another loan, because while the people would not see the effects of a government indebted to another country vis-a-vis a loan, they certainly would feel the effects of over-taxation and would look to correct this mistake in the next election.

  This is precisely where we are today; the government has spent beyond its means and has borrowed billions of dollars from China. Barack Obama is also calling for taxes on the rich to help pay for the government’s insatiable appetite to spend money it simply does not have. We have reached the point where the government spending is simply not sustainable and if it is not corrected in the near future there will be no future.

  In 1820 Thomas Jefferson had enough faith in the people to believe they would make the necessary choices to bring down the nation’s debt and here we are nearly 200 years later and we are facing the same problems. I only wish I had as much faith in the people of the United States (and frankly in those politicians running for the presidency) as Thomas Jefferson did in 1820.

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10 Comments leave one →
  1. February 28, 2012 2:19 am

    Obama’s ideological bent prevents him from accepting any fact or opinion based on reality. As a committed left wing ideologue he is incapable of recognizing any truth that runs contrary to Marx or Alinsky’s make believe world of radical socialism.

    Jefferson’s foresight and warnings cannot penetrate or hold any weight in the socialist economic dialogue which is based on the failed model of Keynesian economics.

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    • February 28, 2012 6:53 am

      And I am afraid that there is no politician on the horizon who will be willing to tackle this issue with any real strategy until it is too late.

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  2. February 28, 2012 3:04 am

    I don’t know if Jefferson saw this kind of debt coming. A tax of the magnitude he was suggesting would cripple this economy-as if it needed another blow. We need to start cutting.

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    • February 28, 2012 6:54 am

      He would be stunned by the amount of debt, no doubt about it. He was worried about $5 million, while that was a large sum in his day it is nothing like we see today.

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  3. bunkerville permalink
    February 28, 2012 4:24 pm

    As I read more of the Founders documents, it is so clear that they understood what lay ahead for us and it worried them greatly. Too bad we lost track of our History and the reasoning behind why are Government was formed the way it was.

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    • February 28, 2012 9:09 pm

      And that really is the biggest problem in this country today; history is not taught, and so too many people do not understand what the role of government is supposed to be. Because of this many people feel as if the government must provide for them and this increases spending and leads to a larger national debt. I would also add that I believe history isn’t being taught in schools because this is exactly what they want; they do not want our children to know what the founders vision of America is so they can mold America into the model they want to see.

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  4. February 28, 2012 5:36 pm

    An excellent series, Steve. Jefferson clearly saw the pit falls of uncontrolled government spending. I doubt, however, he could have imagined we would be borrowing over 40 cents of every dollar we spend. Nor could he imagine that our current president wants to borrow even more. He would surely see that as insane.

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    • February 28, 2012 9:10 pm

      Thanks Jim. Not even in Jefferson’s wildest nightmares could he have predicted what we are seeing today.

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  5. February 29, 2012 2:44 pm

    You’ll enjoy this. Thomas Jefferson now BLOGS!
    Several times each week, he posts briefly on a variety of subjects, including debt. Today’s post was on avoiding alliances with Europe. Monday’s was on “laws of necessity.” Last week, he wrote about economic bubbles and George Washington. On February 14, in honor of Valentine’s Day, he posted about chocolate!
    Read his blog at http://ThomasJeffersonLeadership.com/blog/

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    • February 29, 2012 11:13 pm

      Sounds interesting, I will be checking it out!

      Like

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