I turn with great reluctance from the functions of a private citizen1 to matters of state. the swaggering on deck, as a passenger, is so much more pleasant than clambering the ropes as a seaman, & 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; & in compliance with the request of yours of to add some further thoughts on it. tho’ intended as only supplemental 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.2

The objects of finance in the US. have hitherto been very simple; merely to provide for the support of the government, on it’s peace establishment, and to pay the debt contracted in the revolutionary war; a war which will be sanctioned by the approbation of posterity thro’ all future ages. the means provided for these objects were ample; & 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 surplus3 portion of these taxes, destined for the paiment of that debt, should, when that object was accomplished, be continued, by annual or biennial4 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 surplus5 would have been sufficient for any war, administered with integrity & judgment.6 for authority to apply the surplus to objects of improvement, an amendment of the constitution would have been necessary.7 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 granting it, except when pledged for the reimbursement of a loan.8 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.9 this happy consummation would have been achieved by another eight years administration, conducted by mr Madison, and executed in it’s financial department, by mr Gallatin, could peace10 have been so long preserved. so enviable a11 state, in prospect for our country, induced me to temporise, 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 characters 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,12 throwing off all restraints of morality, all pride of13 national character, forgetting the mutability of fortune, and the inevitable doom which the laws of nature pronounce against departure from justice, individual or national,14 have dared to treat her reclamations with derision, and to15 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 ascendancy by desolating16 the world with blood & rapine. against such a banditti, war had become17 less ruinous than peace; for their 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,18 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 clouded19 our prospects of liberation from debt, and of being able to carry on a war without new loans or taxes. but altho’ deferred, these prospects are not desperate. we should keep for ever 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 & 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 it’s expences within our own time and unauthorised to burthen 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 independant right over the earth; this over their own persons.20 there have existed nations, & civilised & 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 & industry conjointly, and a fortiori his industry separately; and consume it’s fruits himself. a nation asserting this Saticide21 right might well suppose they could burthen with public as well as private debt, their ‘nati natorum, et qui nascentur ab illis.’ but we, in this age, and in this country especially, are advanced beyond these notions of natural law. we acknolege that our children are born free; that that freedom is the gift of nature, and not of him who begot them; that tho’ under our care during infancy, and therefore of necessity under a duly tempered authority, that care is confided to us to be exercised for the preservation & good of the child only; and his labours 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,22 to take the whole step. we believe, or we act as if we believed, that altho’ an individual father cannot alienate the labor of his son, the aggregate body of fathers may alienate the labors 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 it’s true point of view; and that we shall all consider ourselves unauthorised to saddle posterity with our debts, & morally bound to pay them ourselves, & consequently within what may be deemed the period of a generation, or the life of23 the Majority. in my former letter, I supposed this to be a little over24 20. 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 for ever the English practice of perpetual funding; the ruinous consequences of which, putting right out of 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 independant rights of posterity; because the annuities not expiring gradatim; 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, & 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 encoraging celibacy, and the disherison of heirs.25

Of the modes which are within the limits of right, that of raising, within the year, it’s whole expences, 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,26 that our habits of industry & of expence, may become adapted to them; and that they may be duly digested, & incorporated with our annual economy.

There remains then for us but the method27 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 expences of the year; in other words, to obtain a loan, equal to the expences of the year, laying a tax adequate to it’s interest, & 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, & of course a new tax is requisite every year, during the continuance of the war; & 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 paiment of instalments of principal, & perhaps of interest also, until the restoration of peace. this method of anticipating our taxes, or of borrowing on annuities for years, ensures repaiment to the lender, guards the rights of posterity, prevents a perpetual alienation of the public contributions, & consequent destitution of every resource, even for the ordinary support of government. the public expences of England, during the present reign, have amounted to the fee simple value of the whole island. if it’s whole soil could be sold, farm by farm, for it’s present market price, it would not defray the cost of governing it, during the reign of the present king, as managed by him.28 ought not then the right of each successive generation to be guarantied against the dissipations & 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 & generation, as between nation & 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 that our moral principles are not yet in that stage of degeneracy; and that in instituting29 the system of finance to be hereafter pursued, we shall adopt the only safe, the only lawful & honest one, of borrowing on such short terms of reimbursement of interest & principal, as will fall within the accomplishment of our own lives.30

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 & silver, which last, when crouded,31 will find an efflux into other countries, and thus keep the quantum of medium at it’s salutary level. let banks continue if they please; but let them discount for cash alone, or for treasury notes. they discount for cash alone32 in every other country on earth, except Great Britain, &, her too often unfortunate copyist, the US. if taken in time, they may be rectified by degrees, & without injustice; but if let alone till the alternative forces itself on us, of submission to the enemy for want of funds,33 or the suppression of bank paper, either by law, or by a convulsion, we cannot foresee how it will end.

The remaining questions are Mathematical only. how are the taxes & the time of their continuance, to be proportioned to the Sum borrowed, & the stipulated Interest?

The Rate of interest will depend on the state of the money market; & 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 20. years for reimbursement, which we call their maximum; & let the interest they last gave of 7½ p.c. 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 – 1.) & the duration of the annuity or tax, 20. years (= t.) what will be (a) the annuity or tax, which will reimburse principal & interest within the given term? this problem, laborious, & barely practicable to common arithmetic, is readily enough solved Algebraically, &34 with the aid of Logarithms.

a = 98,684.2 D; nearly 100,000.D. or ^¹⁄₁₀ of the Sum borrowed.

It may be satisfactory to see stated in figures the yearly progression of reimbursement of the million of Dollars, & their interest at 7½ p.c. effected by the regular paiment of CM D. annually. it will be as follows.35

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 Log. of a. subtract the Log. [r − 1].

and from the No of the remaining Logarithm, subtract s.

then subtract the Log. of this last remainder

from the difference between the Log. a. & Log. [r − 1]. as found before.

divide the remainder by Log. r. the Quotient will be t.

It will be found thus that CM D. will reimburse a million

by comparing the 1st & the last of these articles, we see that if the US. were in possession of the circulating medium, as they ought to be, they could redeem what they could borrow from that, dollar for dollar, & in 10. annual instalments; whereas, the usurpation of that fund by bank paper obliging them to borrow elsewhere at 7½ p.c. two dollars are required to reimburse one. so that it is literally true that the toleration of banks of paper-discount costs the US. one half their war-taxes; or in other words, doubles the expences of every war. now think, but for a moment, what a change of condition that would37 be which should save half our war-expences, require but half the taxes, and enthral us with debt but half the time.

Two loans having been authorised, of 16. and 7½ millions, they will require for their due reimbursement 2,350,000.D. of the 3. 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 & pledged for the reimbursement of these loans. the balance of 650,000.D. will be a provision for 6½ 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 ^¹⁄₁₀, and pledge it for the reimbursement.38

In the preceding calculations, no account is taken of the increasing population of the US. which we know to be in a compound ratio of more than 3. p.c. per annum; nor of the increase of wealth, proved to be in a higher ratio by the increasing productiveness of the imposts on consumption. we shall be safe therefore in considering every tax as growing at the rate of 3. p.c. compound ratio annually. I say, every tax; for as to those on consumption, the fact is known; & the same growth will be found in the value of real estate, if valued annually; or, which would be better, 3. p.c. might39 be assumed by the law as the average increase, and an addition of ^¹⁄₃₃ of the tax paid the preceding year, be annually called for. supposing then a tax laid which would40 bring in 100,000.D. at the time it is laid, & that it increases annually at the rate of 3. p.c. compound, it’s important effect may be seen in the following statement.

this estimate supposes a million borrowed at 7½ p.c. but, if obtained from the circulation without interest, it would be reimbursed within 8. years 8 months, instead of 14. years, or of 20. years, on our first estimate.41

But this view being in prospect only, should not affect the quantum of tax which the former calculation pronounces necessary. our creditors have a right to certainty, & to consider these political speculations as make-weights only to that, & at our risk, not theirs.42 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;43 and I will add that to us belongs also the regret that improvident legislators should have exposed us to a 20. years thraldom of debts & taxes, for the necessary defence of our country, where the same contributions would have liberated us in 8. or 9. 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, & my letter is too long already. I can refer you to no book as treating of this subject fully, & suitably to our circumstances. Smith gives the history of the public debt of England, & some views adapted to that, & Dr Price, in his book on annuities, has given a valuable chapter on the effect 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 impost, when freed44 from the revolutionary debt, will suffice to embellish & improve our country in peace, & defend it 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 bank circulating-paper is not unknown, nor have I since45 observed any effects either on the morals, or fortunes of our citizens, which are any counterbalance46 for the public evils produced. and a thoro’ conviction that, if this war continues, that circulation must be suppressed, or the government shaken to it’s foundation by the weight of taxes, & impracticability to raise funds on them,47 renders duty to that paramount to the love of ease & 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 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.—ever affectionately Yours

Th: Jefferson