Zero U.S. debt wasn’t so great the first time around

By Chadwick Matlin
July 29, 2011
By Chadwick Matlin
The opinions expressed are his own. 

At this rate, we’re going to have more debt-reduction proposals than we have trillions in debt. There was Simpson-Bowles, the Gang of Six (Pt. 1), Obama’s $4 trillion gambit, Coburn’s $9 trillion slash, Cut-Cap-and-Balance, and the Gang of Six (Pt. 2), Obama and Boehner’s near-deal, and as of this week Reid and Boehner’s dueling plans. But even the most austere of these proposals would have left us more than $5 trillion in debt, and the one likely to pass—if one passes, that is—will likely still leave us with more than $10 trillion of obligations. Somewhere, Andrew Jackson is shaking his skeletal head, pissed that a bunch of profligate Americans have soiled his legacy.

As president, Jackson was responsible for the first and only time the country stood at a true Debt Zero. The debt was $58.4 million when he first took office in 1829; six years later, as he would announce in his 1835 State of the Union, the country was finally in the black, with $440,000 in the bank. All it took to get there was a maniacal devotion to small government, the forced removal of tens of thousands of Native Americans, and tariffs so high the union nearly broke apart. The kind of thing that’s easily replicable in 2011.

So while we’re counting down the days until the U.S. bursts through the ceiling like a Roald Dahl character, let’s dwell on a different timeline: Andrew Jackson’s. It’ll remind you that Debt Zero doesn’t happen overnight.

1795: For Jackson, debt became his white whale from an early age. Before he went to battle and burnished his Old Hickory* legacy, he was a lawyer and real-estate man, and a rich one at that. When Jackson was 32, he sold 68,000 acres of land to a guy named David Allison. But Allison didn’t have the most stable of financial lives, and soon ended up declaring bankruptcy and rotting in a debtors prison, where he’d die in 1798. Jackson, meanwhile, was left in a lurch, having used the promise of Allison’s money to start buying supplies for a trading post he was starting. According to John Steele Gordon’s surprisingly readable history of U.S. debt, Hamilton’s Blessing, Jackson would spend the next 15 years sorting it all out.

1824: When Jackson first unsuccessfully campaigned for president he did it on a platform that would make Tea Partiers blush. He framed the federal debt as an almost-spiritual affliction, calling it “a national curse.” As Jon Meacham writes in, American Lion, his Pulitzer-winning biography of Jackson: “To him debt was dangerous, for debt put power in the hands of creditors—and if power was in the hands of creditors, it could not be in the hands of the people, where Jackson believed it belonged.”

1828: Likewise, he was adamant power not be in the hands of the Brits. The country’s protectionist streak meant a series of tariffs were passed to help build the economy. Starting in 1824, when Jackson was still a Senator, he voted in favor of tariffs in an attempt to raise revenue on imports and help the country’s fledgling manufacturing industry compete with Britain’s. 1828′s Tariff Act, menacingly nicknamed the “Tariff of Abominations,” was especially restrictive, and South Carolina, whose economy was already suffering, was furious (again—some things never change) that the legislation would raise duties from 33 to 50 percent, reinforce Britain’s unwillingness to import its cotton, and keep prices on manufactured goods from the north high. The Union was threatening to fracture, but the Treasury was getting rich. Tradeoffs.

1829: Once he took office, Jackson finally had enough power to spear the debt, pursuing it single-mindedly, no matter the costs. He refused to finance state projects with federal funds, partly because he believed in a small federal government, and partly because it would cost too much. Predictably, congressmen who were trying to get funding for local projects (proto-pork!) were angry, but Jackson wouldn’t budge. In 1830, he threatened to veto any funding for state infrastructure. “I stand committed before the country to pay off the national debt at the earliest practicable moment,” he told a Kentucky congressman seeking funding. “Are you willing–are my friends willing to lay taxes to pay for internal improvements?–for be assured I will not borrow a cent except in cases of absolute necessity!” The Congressman replied, “No, that would be worse than a veto.” (Some things never change.)

1830: Congress passes the Indian Removal Act of 1830, offering 25 million acres of new land in exchange for the forced eviction of tens of thousands of Native Americans. That land was later sold, and between 1832 and 1836 federal land sales increased 1,000 percent, brining more than $25 million into federal coffers in 1836 alone. The U.S. was committing human-rights atrocities, but the Treasury was getting rich. More tradeoffs.

1832: Jackson was now President, and South Carolina’s anger finally boiled over. It threatened to circumvent federal law and lift the tariffs on British imports, both lowering plantation owners’ costs and reopening a market. Jackson, with the end of the federal debt in sight, agreed to relax the tariffs and coaxed South Carolina off the ledge. Twenty-nine years later, they would push back over by taking first shots of the Civil War.

1835: It only took 40 years, but Jackson had finally done it—exorcised both him and the country of its debt curse. “Free from public debt, at peace with all the world,” he wrote to Congress. The U.S. was finally debt-free. The Democrats held a banquet to celebrate, but Jackson was too modest to attend. No reason to celebrate what was sure to be the new normal.

2011: The US hasn’t reached Debt Zero since.

*Editor’s Note: This article originally referred to Jackson as “Stonewall,” however Stonewall Jackson was a confederate Civil War general. The sentence has been corrected to use President Jackson’s nickname of “Old Hickory.”

Graphic: A portrait of U.S. President Andrew Jackson. White House / Reuters
451 comments

We welcome comments that advance the story through relevant opinion, anecdotes, links and data. If you see a comment that you believe is irrelevant or inappropriate, you can flag it to our editors by using the report abuse links. Views expressed in the comments do not represent those of Reuters. For more information on our comment policy, see http://blogs.reuters.com/fulldisclosure/2010/09/27/toward-a-more-thoughtful-conversation-on-stories/

Chadwick, thank you for portraying an accurate picture of events and the cruelty inflicted upon the Native Americans to achieve the Federal government’s ends. Who will be the next group to suffer? (Does the end justify the means?)

It should also be noted that Andrew Jackson ended the Bank of America Charter, our central bank. This action caused a complete collapse of U.S. manufacturing and a horrific depression. Ninety percent of manufacturing closed because of the lack of credit previously provided by the Federal Bank. Maybe his own financial losses were cause for his dislike of banks in general? Clearly he had no grasp of how an economy works. Some historians have suggested Jackson was vindictive.

The larger question remains. Should we follow the path that Jackson set forth, will we be sowing the seeds of armed civil conflict again? It is doubtful any of our leaders are brighter than President Jackson. We as a Nation must learn to solve our problems without visiting violence upon our citizens or the citizens of other nations.

Posted by coyotle | Report as abusive

what no one talks about is the ridiculous military empire we have, the bases, the troops in almost every country on the globe serving the corporate/globalist agenda. in the end what is bankrupting us are the same forces which have destroyed the economy, the banks and giant corporations, that want our bailouts and profit from our needless wars….they will suck the usa until it is lifeless. this hasnt changed.

Posted by barkinbob | Report as abusive

@ coyotle

Regarding your query “Who will be the next group to suffer?”, I’d like to suggest a couple of candidates for consideration.

Religious organizations would be a good place to start. Most religious organizations in America are Christian, but to be fair, we should tax all religions on their income. If certain organizations are in good standing with their local governments because of their philanthropy and good works, then local governments would be free to grant favorable property tax status.

Of course, I realize that members of these organizations will object to my suggestion, so I offer two more less controversial suggestions: the international financial community and American corporations.

Posted by breezinthru | Report as abusive

Is the author mixing up Thomas J. Jackson (aka Stonewall Jackson) with Andrew Jackson when he refers to the latter as burnishing his “Stonewall legacy”?

Posted by WBBMD | Report as abusive

Disagree strongly on taxation of religions. Churches do pay taxes on things considered transactional income. Sadly, I would think that it is obvious that taxation of churches would amount to very little revenues … those who suggest otherwise should make suggestions with numerical backing.

Military is a necessary thing. Whether we distribute them globally is a more complicated matter than simply taking a financial view of same. I take your point that we should review, however, and stop doing for other nations things that they should do for themselves, or imposing our will on others. We could start by dropping funding to all nations who did not support our work in Iran and Afghanistan. And we could drop funding to India’s neighbor which seemed to both help and hinder those efforts.

Being debt free and stimulating the economy should not conflict. We should be able to figure this out. Did readers of this article see the Reuters article about the federal government closing or consolidating 800 data centers? I would suggest there is considerable low hanging fruit to be harvested like these data centers, which amounted to a minimum US $3B in savings, before we worry about California or South Carolina seceding from the Union.

Posted by tomwinans | Report as abusive

Real cause of USA debt is not internal problems but external problems which are causing slow erosion of USA economy. Fundamentally still most powerful country and if just some expenses control can bring USA economy back to boom.

Posted by jagishar | Report as abusive

Big blunder in this article. Andrew Jackson was NOT Stonewall Jackson. Thomas Jackson was.

Posted by gangof4 | Report as abusive

@dv3 – and you could start by seeing past typos to understand the point. But thank you for reading my post.

Agree strongly that our past presidents have not stood up to a high bar. This is quite sad for us Americans who would like to see us perform better, and who would like to see us make hard decisions rather than capitulate to weak arguments and unsupported claims.

Posted by tomwinans | Report as abusive

Comparing today’s exploding debt to Jackson’s no debt condition is absurd. Our current situation is not sustainable, consuming ever increasing amounts of our GDP and being borne on the backs of middle class Americans. Of all segments of our society, be it family, business, state government, or local government, only the federal government has been able to sustain itself on vast amounts of borrowed money. The rest have to live within their means. I’m sick of paying for Washington’s profligate spending and borrowing.

Posted by John-B | Report as abusive

Who are the editors of this site? I was misled into reading this article because I thought it was about debt. It turns out it was just a nonsensical rant. If the point of your article was to talk about the plight of the Native Americans during that period of American history, you should have titled your article as such and put it on a different website. In addition, slavery was still legal during the same year are you suggesting that if the US becomes debt free that slavery will be legal again too?

Posted by M.C.McBride | Report as abusive

If you don’t know Andrew Jackson from Thomas Jackson, or the Revolutionary War from the Civil War, how do we know anything else in this article has any basis in fact?

Posted by gmroder | Report as abusive

If this author is not patient enough to learn the difference between Stonewall Jackson and Andrew Jackson, then how can we trust anything he says? Reuters is supposed to bring us informed commentators, instead they bring us green, arrogant kids who think that turning a clever phrase makes them wise. Thumbs down, Reuters.

Posted by MattJD | Report as abusive

It’s a shame that the author didn’t include Jackson’s 1832 Veto of the Second Bank of the United States which outlined Jackson’s view of the danger of Big Banks, especially when giving money to legislators and having said legislators in their pockets. This was important to keep the legislature from being co-opted by the Big Bank. Lessons for the 21st Century.

Posted by neahkahnie | Report as abusive

So tariffs angered a few special interest groups (like Southern cotton farmers), but they played a key role in eliminating the debt. Maybe we should give tariffs a try again. It’s time to withdraw from the World Trade Organization and manage U.S. trade policy in the best interest of the U.S., and not for the benefit of the parasitic economies that feed on our market.

Posted by Pete_Murphy | Report as abusive

for a very well written historical article you have one glaring error. He was NOT “Stonewall Jackson> That was a Confederate general in the Civil War.

Posted by kehenalife | Report as abusive

This is probably the worst “article” I’ve ever read on Reuters.
Andrew (definitely not “Stonewall”) Jackson dedicated his life to destroying the privately owned and controlled central bank of the time which was the equivalent of today’s Federal Reserve system.
He had a crazy notion that the government of a nation should control it’s own money supply, not international bankers.
The problem with taking on global bankers, is even if you do manage to oust them after decades of fighting and assassination attempts, they’ll gladly manufacture an economic crisis or two and buy their way into power again, even if they have to hand select and groom a presidential candidate to do it.
On a totally unrelated note, I can’t wait for the government to raise the debt ceiling by another 2.8 trillion, so the Federal Reserve can announce QE3 and buy up trillions of dollars worth of government bills, notes and bonds through it’s “primary dealers” who make a commission on the sale.
These primary dealers just happen to be the same member banks who will get access to all that new cash at 0% interest rates.
Who are these member banks you’re wondering? Who else but Goldman Sachs, JP Morgan Chase, Morgan Stanley etc. etc.
Same old pit of vipers.

Posted by RandomName2nd | Report as abusive

I stopped reading when I got to the “Stonewall” mention. It gave me the impression that the author was not well-versed enough in American history to make the remainder of the article worth my time. This kind of thing not only sadly illustrates our declining education system, but raises doubts over the abilities of the editors that allow such glaring errors to be published under the Reuters masthead.

Posted by Chinchar | Report as abusive

So how would president Jackson have fared in today’s world with the internet, global markets, video on demand, public officials’ lives open for scrutiny and all documents available for review on the internet.

Nevertheless, thank you for a historical perspective. It is true that borrowing money from someone does give them power. That is something that we have forgotten about.

Posted by varun.mitroo | Report as abusive

[...] Matlin, jurnalist independent, notează într-o opinie pentru agenţia Reuters că, în ritmul actual al discuţiilor, SUA riscă să aibă mai mult de un [...]

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