The Indebted Mr. Jefferson

It is a wise rule, and should be fundamental in a government disposed to cherish its credit, and at the same time to restrain the use of it within the limits of its facilities, never to borrow a dollar without laying a tax in the same instant for paying the interest annually, and the principal within a given term; and to consider that tax as as a pledge to the creditors on the public faith. (Thomas Jefferson in a letter to John Eppes, June 24, 1813)

Then I say, the earth belongs to each of these generations during its course, fully and in its own right. The second generation receives it clear of the debts and incumbrances (sic) of the first, the third of second, and so on. For the first could charge with a debt, then the earth would belong to the dead and no the and not the living generation. Then, no generation can contract debts greater than may be paid the the course of its own existence. (Thomas Jefferson in a letter to James Madison, 1789)

It is amazing that Jefferson, a fiscal conservative in public office, as seen in the above quotes, could be so indebted in his personal life. Perhaps this was the reason for his governmental policies. Jefferson abhorred debt, but was indebted throughout most of his life. He railed against expensive government, yet overspent his own fortune while in various public offices and to maintain an extravagant lifestyle.

Jefferson could not live without the finer things in life. He was constantly purchasing: sculptures, paintings, furniture, musical instruments, fine clothing and books. He was able to do this by buying on credit, hoping to pay for it in the future with revenue from his law practice, government positions and his plantations. But, he sank deeper and deeper into debt.

Jefferson was very aware of his fiscal dilemma. Throughout his life, he was obsessive in maintaining his account books. Every penny earned and spent was fastidiously recorded. It was almost as if he felt that if he wrote down his financial transactions, that had them under control. But, Jefferson was so out of touch to the reality concerning his own finances that he once ran up a $10,000 wine bill for one year. The result of this delusion was that at his death, in today's money, the debt was between one and two million dollars.

There were factors other than Jefferson's extravagant lifestyle which contributed to his indebtedness. Many of these, such as governmental policies, financial panics, war, the Southern financial system of the day and inherited debt were beyond his control.

Jefferson's economy depended on agriculture. Like many Virginia gentry, he was rich in land and slaves, but lacked hard cash. He lived on credit; the land, slaves and future crops used as a guarantee for payment to English and Dutch lenders. A frugal individual could weather a bad crop or a financial panic under such a system, but not Jefferson. The result was that his personal property, land, slaves, and mansions became further and further encumbered. Under this system, when debt and the interest on it reached a certain point, creditors would foreclose. But, lending houses kept extending Jefferson credit, with compounding interest rates, due of his fame and reputation, allowing him to spend until his death. Because of the laws of the day, he could not declare bankruptcy and this debt was passed on to his heirs. . Jefferson was well aware of these policies in English Common Law, since he was a lawyer, and because of personal experience. His first large debt came as a result of his marriage, in 1772, to Martha Wayles Skelton. In 1774, his father-in-law, John Wayles died. Martha's share of the estate passed to Jefferson, as per the law of the day. This included 11,000 acres, 135 slaves, and an enormous debt. (Jefferson, who had publicly opposed slavery was now one of the largest slave holders in the Virginia Colony. The Hemmings family were among his new charges, which included Sally Hemmings, Martha's half-sister.)

Jefferson attempted to relieve himself of this debt by selling off the land for 4,200 pounds. He was paid in promissory notes for the purchase price. The notes were redeemed during the Revolutionary War with inflated, Virginia wartime currency. He stated: “I did not receive the money till it was not worth oak leaves”. Wayles' British creditors would not accept the Virginia script, since the Treaty of Paris allowed them to demand gold or sterling for payment. He would pay on this inherited burden for most of his life.

The Treaty did not deal with American losses during the War. He bemoaned that: “General Cornwallis's army took off thirty of my slaves, burnt one year's crop of tobacco in my barns and destroyed another in fields with other damages to the amount of 3,000 or 4,000 pounds”.

While Jefferson was attempting to deal with the Wayles' debt, he was also building his mansion, Monticello. This was a never ending, expensive process. Jefferson was constantly remodeling the building. He stated that: “Architecture is my delight, and putting up and tearing down is one of my favorite amusements”. The result of his “delight and amusement” was one of the most beautiful neoclassical structures in the United States, but, one that drove him further into debt.

Jefferson filled his twenty-room mansion with artwork, fossils, scientific equipment, 7,000 books, Indian relics and musical instruments. Much of the furnishings were from a buying spree while he was the American Minister to France. His purchases, which took 86 crates to ship back to Monticello, included: furniture, 63 paintings, seven busts sculpted by Houdon, glassware, silverware, china, wall paper, mirrors, wine and other sundry housewares.

Jefferson steadily lost money while serving in the various governmental posts that he held during his forty years of public service. Jefferson confided to a friend that he had not added one penny to his fortune for all his years of service, that his “hands as clean as they are empty.” He made up the shortfall, from expenses incurred serving his country from his own pocket. To impress the French, during his time in Paris, as the American Minister, he rented an mansion located on the Champs-Elysee. It had several salons, three private suites, stable, garden and a full staff of servants. Jefferson became an A-list member of Parisian society, hosting lavish dinner parties. The cost of this lifestyle far exceeded his annual salary of $9,000.

During Jefferson's two terms as president, his annual compensation was $25,000. At that time, there were no provisions for the president's residential expenses. Jefferson had to pay for the White House staff, his travel, food, his own secretary and official White House entertainment. Like his predecessors, Jefferson maintained the tradition of entertaining dignitaries in style. Only the finest foods, prepared by his personal French chef, and wines were served. His thrice-weekly small dinner parties, for Congressional leaders, became the most sought after invitation in Washington. The dinners were elegant with eight different kinds of French wine. But, stocking the kitchen and wine cellar came at a price of $50 a day that he paid from his salary. When he left office, White House expenses added to his debt by $10,000. (Some sources quote a figure of up to $30,000.)

At his retirement, in 1809, Jefferson faced the daunting tasks of maintaining his lifestyle, his estates and paying his debt. Since there was no government pensions, at that time, this had to be accomplished with assets he already owned: his plantations and his slaves. He possessed 10,000 acres and about two hundred slaves. Only a third of this population could be called field hands; over a third were under the age of ten or retired, the rest being tradesmen or house servants. Jefferson, in his account books, had overvalued the worth of his assets and his plans for the future were somewhat delusional. He expected to earn $2,500 a year from his estates, a goal he seldom met. Plus, land prices became depressed soon after his retirement. Jefferson had few options: make his holdings more productive, sell land, sell slaves, or alter his lifestyle.

He tried various ways to improve the production of his crops, with limited success, usually because of bad weather. He established a nailery and a cloth spinning operation at Monticello to gain extra income. These ventures were manned by slaves too young to work in the field. And, he attempted to make two mills on his property moneymakers. These last two ventures were disasters and added to his debt. He could not sell the majority of his land or slaves because they were the collateral for his debt. That left the option of changing his lifestyle.

In Jefferson's personal life, his debt seem to have no effect on his indulgent habits. He continued his eternal, expensive remodeling of Monticello. His adult children, his grandchildren, his sisters and their children live with him permanently or for extended periods of time. He was responsible monetarily for their welfare. Added to this, other family and friends visited for weeks. And, it was not unusual for strangers wanting to meet Jefferson, to arrive at Monticello unannounced. Jefferson, not turning a soul away, found himself entertaining as many as fifty family and guests at a time.

The War of 1812 disrupted agricultural commerce. This caused Jefferson's expenses to outstrip his income, more than usual. He had to take out further loans. One positive note for Jefferson came out of the War. The British, when they seized Washington D.C., burned the 3,000 volume Congressional Library. Jefferson was so in need of cash that he offered to sell his beloved books. This was from a man who once decried: “I can not live without my books.”

Jefferson probably had the largest library in the United States, numbering close to 7,000 volumes, on a wide range of subjects and languages (figures vary). He offered his collection in its entirety, at any valuation and payment determined by Congress. The terms of the sale far undervalued the library's worth. The 6,487 volumes sold for $23,950. It took ten wagons to deliver the new Congressional Library to the Capitol. Jefferson used $15,000 of his earnings to settle two old debts. Jefferson being Jefferson then immediately ordered several hundred books from Philadelphia.

After the war came a brief boom period with inflated crop and land prices. During this time, in 1818, he cosigned a $20,000 note for his friend and relative, Wilson Cary Nicholas, who was heavily involved in land speculation. The economic bubble burst and land prices fell. The Second Bank of the United States tightened credit which caused the Panic of 1819. Nicholas died in 1820, leaving a heavily mortgaged and depreciated estate. Jefferson had to assume the $20,000 debt that had an annual interest rate $1,200.

Even Jefferson realized, by this time, that he would never get out of debt. But, this did not stop him from entertaining and continued purchasing. Even knowing that he could lose a lifetime's work to his creditors, he insisted on buying his favorite granddaughter an expensive piano from Europe with a promissory note.

In 1826, sick and infirmed, the eighty-three-year-old Jefferson was haunted by the fact that Monticello would be lost and his family left homeless at his death. He was was so desperate that he attempted to sell most of his land to save the mansion. This failed due to the continuing depressed land prices in Virginia. Ironically, his acquisition of the Port of New Orleans as part of the Louisiana Purchase made the cheap, productive land of trans-Appalachia more attractive than the played-out soil of Virginia.

Lying awake one night, in January, 1826, thinking on how to save Monticello, Jefferson came up with the idea of a lottery to sell off his lands, excluding the mansion. This shows the of his desperation, since he had long opposed any form of gambling.

A lottery was against Virginia law, so a waiver from the legislature was required. Jefferson called in numerous favors as the bill was debated. The debate became public and a good portion of the nation was appalled that the author of the Declaration of Independence would be in such financial straits and had stoop to a lottery to save some part of his estate. Donations started pouring in from throughout the country. The lottery bill was finally passed, but never implemented. It was thought that public largess would pay the debt. But, with Jefferson's death on July 4, 1826, the donations dried up. The $16,500 raised, put just a small dent at the more than $100,000 owed.

After Jefferson's death, his grandson, Jefferson Randolph, sold off various properties, at well below value, in an attempt to save Monticello, but to no avail. In November of 1831; Monticello, 552 acres, furniture, farming tools, and livestock were sold at auction. The artwork and books would be sold later.

The slaves had been sold earlier. Jefferson, who in his writings, hated slavery, was not able to manumit them as Washington had on his death. His creditors would not allow it. (Only four individuals were freed, not including Sally Hemmings.) This is the most heart wrenching aspect of the indebted Mr. Jefferson's story. The second, is that his grandson, Jeff, would assume his debt and pay on it for most of his life.