Apart, however, from every question of the operation of the sinking fund, there were intrinsic difficulties in ascertaining the facts. The question was, as in such cases it is apt to be, in a great degree one of accounts. The immediate matter in dispute was a sum of $3,800,000 advanced by the bank in anticipation of revenue. Mr. Sedgwick and the Administration wished to fund it, and made considerable effort to prove that the debt would not only be unaffected thereby, but that, as a matter of fact, the debt had been diminished. Mr. Gallatin opposed the funding, and insisted that provision should be made for its payment, and he undertook to prove by a comparison of receipts and expenditures that the debt had been increased $2,800,000 down to the 1st January, 1796. It was felt to be a crucial point, and Mr. Gallatin was not allowed to go unanswered. On the last day of the session Mr. William Smith replied to him, elaborately proving that so far from there being a total increase of $5,000,000 in the debt, as he had undertaken to show, there was an actual excess of over $2,000,000 in favor of the government. To this Mr. Gallatin made an immediate reply, Mr. Smith rejoined, and the session ended.
Of course each party adhered to its own view, which was a matter of very little consequence so long as Mr. Gallatin gained his point of fixing public attention upon the subject; his aim was to educate his own party and to plant his own principles deep in popular convictions. After the adjournment he wrote a book for this purpose called “A Sketch of the Finances of the United States,” which was in fact a text-book, and answered its purpose admirably. In two hundred pages, with a few tabular statements appended, he discussed the revenues, expenditures, and debt of the United States with his usual clearness, and, while avoiding all apparent party feeling, he freely criticised the financial measures of the government. The duty of preventing increase of debt, of discharging the principal as soon as possible, was the foundation of the work; criticisms of the cases in which the burden had been unnecessarily increased were interwoven in the statement, which concluded with suggestions of additional sources of revenue.[35]
Thus already in the first year of his Congressional service Mr. Gallatin had sketched out and begun to infuse into his party those financial schemes and theories that were ultimately to be realized when they came into power. That these ideas, as forming a single complete body of finance, were essentially new, has already been remarked. In theory Mr. Hamilton also was in favor of discharging the debt, and originated the machinery for doing so; that is to say, he originated the sinking fund machinery, or rather borrowed it from Mr. Pitt, although this financial juggle has now become, both in England and America, a monument of folly rather than of wisdom; while a much more effectual step was taken in the last year of his service, when he recommended the conversion of the six per cents. into an eight per cent. annuity for twenty-three years, which was equivalent to an annual appropriation of about $800,000 a year for the payment of the principal. This, however, was not the real point of difference between the systems of Mr. Gallatin and Mr. Hamilton. Laying entirely aside the general proposition that the Hamiltonian Federalists considered a national debt as in itself a desirable institution, and conceding that the Federalists would themselves have ultimately reduced or discharged it, there still remains the fact that the Federalists made the debt a subordinate, Mr. Gallatin made it a paramount, consideration in politics. The one believed that if debt was not a positive good, it was a far smaller evil than the growth of French democracy; the other, that debt was the most potent source of all political evils and the most active centre of every social corruption. The Hamiltonian doctrine was that the United States should be a strong government, ready and able to maintain its dignity abroad and its authority at home by arms. Mr. Gallatin maintained that its dignity would protect itself if its resources were carefully used for self-development, while its domestic authority should rest only on consent.
Which of these views was correct is quite another matter. Certain it is that the system so long and ably maintained by Mr. Gallatin was rudely overthrown by the war of 1812, and overthrew Mr. Gallatin with it. Equally certain it is that the United States naturally and safely gravitated back to Mr. Gallatin’s system after the war of 1812, and has consistently followed it to the present time. The debt has been repeatedly discharged. Neither army nor navy has been increased over the proportions fixed by Mr. Gallatin and Mr. Jefferson. Commerce protects itself not by arms nor even by the fear of arms, but by the interests it creates. America has pursued in fact an American system,—the system of Mr. Gallatin.
True it also is that this result does not settle the question as between Mr. Hamilton and Mr. Gallatin, for there were special circumstances which then made the situation exceptional. As has been said, the war of 1812 was a practical demonstration of at least the momentary failure of Mr. Gallatin’s principle, and the failure occurred in dealing with precisely those difficulties which the Federalists had foreseen and tried to provide for. The question therefore recurs, whether the Federalist policy would have resulted better, and this is one of those inquiries which lose themselves in speculation. There is no answer to so large a problem.
Congress rose on the 1st June, 1796, and Mr. and Mrs. Gallatin passed the summer in New York. Meanwhile, the co-partnership in which he had engaged had resulted in establishing on George’s Creek a little settlement named New Geneva, and here were carried on various kinds of business, the most important and profitable of which was that of glass-making, begun during Mr. Gallatin’s absence in the spring of 1797.
Leaving his wife in New York, Mr. Gallatin went to New Geneva for a few weeks in the autumn of 1796.
GALLATIN TO HIS WIFE.
Philadelphia, 26th September, 1796.
... I arrived here last Saturday.... I have received pretty positive and certain information that Findley will be re-elected unanimously in our district, my name not being mentioned there, and that I will be superseded in Washington and Alleghany by Thomas Stokeley. This I have from Woods’s friends, who seem to be equally sure that neither he nor myself are to be elected. The Republicans despair to be able to carry me, not, by the by, so much on account of the treaty question as because I do not reside in the district and have not been this summer in the western country, and they hesitate whether they will support Edgar or Brackenridge. At all events, I think I will be gently dropped without the parade of a resignation. The other party will call it a victory, but it will do neither me nor our friends any harm. I think, indeed, it will not be any disadvantage to the Republican interest that my name should be out of the way, at least for a while....