After having peaked at $127 million after the War of 1812, the national debt stood at $58.4 million when Andrew Jackson became president in 1829. Jackson was determined to pay off the debt in full. With a combination of personal motivation, political desire, and financial discipline, the debt became a temporary victim of Old Hickorys resolve to protect the American people.
Why was Jackson so intent on eliminating the national debt? Personal experience may have been involved. Jackson grew to fear and hate debt, according to author Jon Meacham, from his dealings with a speculator in Philadelphia in 1795. The 28-year-old Jackson was nearly ruined and from then on distrusted financial speculation and manuevering. Historian H.W. Brands points out that Jackson believed debt was a “moral failing.”
Additionally, Jackson and his fellow Democrats were greatly influenced by the tenets of Thomas Jefferson and the Democratic-Republicans of a generation earlier. Jeffersonians and Jacksonians alike decried the formation of a speculating class, “paper men” as Jefferson called them, investing in the national debt and therefore assuming a position of influence to corrupt the federal government. The peoples liberties were threatened by the debt.
So, in his first annual message in December 1829, President Jackson promoted the benefits of paying off the debt. The people would be “relieved from a considerable portion of its present burdens” and be able to “display individual enterprise.” He also mentioned that the states financial power would improve which would allow them to fund education and public projects. With its debt paid, the federal government would still be able to “promote the general weal in all modes permitted to its authority.”
Maysville Road Bill Veto
The next year, Jackson grew alarmed with the increasing number of bills proposed in Congress that would, in Jacksons words, “far exceed by many millions the amount available in the Treasury for the year 1830.” Although he had constitutional concerns when he vetoed the Maysville (Kentucky) Road bill and other similar internal improvement measures that were entirely aimed at one state, Jackson was committed to paying down the debt. “This pledge I am determined to redeem,” he said to Kentucky congressman and Maysville supporter Richard Johnson.
Along with controlling expenditures, the Jackson administration channeled increasing revenues toward the debt. The government benefitted from booming federal land sales, thanks in part to Jacksons removal of federal deposits from the Bank of the United States to state banks. This resulted in more loans to farmers and speculators to buy western lands. Government land sales rose from $6 million in 1834 to $25 million in 1836. However, Jackson abhorred the unintended consequence of a rising speculative land market.
Also, growing revenues from the tariff were applied to the debt. The Tariff of 1828 (the “Tariff of Abominations” to southerners), which increased rates for protection and revenue purposes, had money pouring into federal coffers thanks to a robust economy. According to historian Daniel Walker Howe, there was pressure to lower the tariff, in part, due to the federal windfall. The government expected to quickly pay off the debt in 1833.
Panic of 1837
It took a little longer than that. The Treasury department eventually announced that the debt would be paid off on January 1, 1835. In conjunction with the 20th anniversary of the Battle of New Orleans, Jacksons supporters held a dazzling celebration in Washington to honor Jacksons defeat of the debt and the British. Jacksons former Attorney General, Roger Taney, believed it was the only time a major nation succeeded in paying off its debt. It is still true today.
However, the surplus would only last two years. The panic of 1837 unleashed a severe depression that depleted federal revenues. The debt reemerged and has not been extinguished since. Ironically, Jacksons other economic policies, such as the Specie Circular, which required public land to be purchased with hard money only (gold and silver) in order to curb speculation, contributed to a credit crunch that caused the panic.
It was an inglorious end to Jacksons campaign to eliminate the debt, but he was successful. His personal and political hatred for debt gave him the will to control spending and apply expanding revenues from the booming economy to the debt. But booming economies go bust eventually and so did Jacksons surplus.