Republican reform was grounded on fiscal policy. In the Jeffersonian scripture, public debt and taxes were evils of the first magnitude. The debt drained money from the mass of citizens, diverted it from the productive enterprise of individuals, and led to a system of privilege, coercion, and corruption that was the bane of every government and fatal to a free one. The alternatives were clear: "Economy and liberty, profusion and servitude." The debt, which had actually increased under the Federalists, stood at $83 million and consumed in annual interest almost half the federal revenue. Gallatin developed a plan to extinguish the debt in sixteen years by large annual appropriations but, amazingly, to reduce taxes at the same time. All the internal taxes—Hamilton's whiskey excise, the land tax of the Adams administration—would be repealed. The government would depend entirely on the revenue of the customhouses. The plan required deep retrenchment: reductions in the army and navy, in foreign embassies, and in civil offices, beginning with the tax collectors.
The plan, which Jefferson outlined in his first annual message to Congress, was liable to two main objections. It assumed peace, and although the principles of the Peace of Amiens had been agreed upon, this was a risky assumption in the world of William Pitt and Napoleon Bonaparte and seemed to jeopardize the nation's defense in favor of niggardly economy. Moreover, the plan rested on a doubtful theory of political economy for a developing nation. The theory looked to economic growth through release of the energies, talents, and resources of free individuals without the direct aid or favor of the government. The opposite theory, of which Hamilton was an early practitioner, assigned to the government a positive role in economic development. It supposed that a nation might grow out of debt by going deeper into debt to promote development. The logic of this escaped Jefferson, but he knew that Hamilton's system of debt and taxes involved powers and privileges that were incompatible with republican government under the Constitution.
Jefferson's fiscal program placed the administration on unassailable ground with Republicans in Congress. Men rubbed their eyes in disbelief at the spectacle of the chief magistrate renouncing taxes, patronage, and power. It promised, said an English observer, "a sort of Millennium in government." The program was rapidly put in place. During the next seven years the nation was liberated of $33 million of debt. In the end, of course, the program was derailed by foreign crisis and war. Thirty-four years would pass before retirement of the national debt.
Pitched on the horns of his dilemma, reformation or reconciliation, the president agonized a good deal about the Hamiltonian fiscal system. He reflected in 1802,
When the government was first established, it was possible to have kept it going on true principles, but the contracted, English, half-lettered ideas of Hamilton destroyed that hope in the bud. We can pay off his debt in 15 years, but we can never get rid of his financial system. It mortifies me to be strengthening principles which I deem radically vicious, but the vice is entailed on us by the first error.. . . What is practicable must often control pure theory.
A clear case in point was Hamilton's Bank of the United States. Jefferson thought it an institution of "the most deadly hostility" to republican government, yet the bank's national charter ran to 1811. Gallatin, meanwhile, found the bank a highly serviceable institution and actually expanded its operations. The demand for credit in a thriving economy was insatiable. State-chartered banks multiplied, and a banking interest grew up in the Republican party. Although it played havoc with his ideal of a plain and dignified republican order, Jefferson could neither injure nor ignore it. "What is practicable must often control pure theory."
The federal judiciary furnished the principal political battleground of Jefferson's first term. There were three battles and many skirmishes in the so-called war on the judiciary. The first was fought over the Federalist Judiciary Act of 1801. This eleventh-hour act of a dying administration created a whole new tier of courts and judgeships; extended the power of the federal judiciary vis-à-vis the state courts; and reduced the number of Supreme Court justices beginning with the next vacancy, thereby depriving Jefferson of an early opportunity to reshape the court.
Republicans were enraged by the act because of its manifest partisanship and its wanton increase of judicial power. Jefferson promptly targeted the act for repeal. The Federalists had retired to the judiciary as a stronghold, he said. "There the remains of Federalism are to be preserved and fed from the treasury and from that battery all the works of Republicanism are to be beaten down and erased." The experience of the Sedition Act had demonstrated, in his opinion, the prostration of the judiciary before partisan purposes.
Soon after assuming office, Jefferson took executive action to pardon victims of the Sedition Act, which he condemned as null and void, and to drop pending prosecutions. He wished to make judges more responsible to the people, perhaps by periodic review of their "good behavior" tenure; and while conceding the power of judicial review, he did not think it binding on the executive or the legislature. It was his theory—a corollary of the separation of powers—that each of the coordinate branches of government is supreme in its sphere and may decide for itself on the constitutionality of actions by the others. Congress, after heated debate, repealed the offensive act and, with minor exceptions, returned the judiciary to the footing it had occupied in 1800.
The second battle centered on the case of Mar-bury v. Madison . William Marbury and three others alleged that they had been appointed justices of the peace for the District of Columbia on 3 March 1801 but that their commissions, complete in every respect, had been withheld by the incoming administration. They sued Madison, in whose department the matter belonged, and the Supreme Court granted a "show cause" order on delivery of the commissions. Finally, in 1803, Chief Justice Marshall ruled that the plaintiffs had a legal right to the commissions and, moreover, that the requested writ of mandamus to the secretary of state was the appropriate remedy. He went on to read the executive a lecture on the duty of performing valid contracts but chose to avoid a showdown with Jefferson by declaring that the power of the court to issue writs of mandamus, contained in the Judiciary Act of 1789, was unconstitutional.
In later years the decision would be seen as the cornerstone of the whole edifice of judicial review, but in 1803 it was understood essentially as a duel between the executive and the judiciary. The Republicans criticized Marshall not because of theoretical claims of judicial power but because he traveled outside the case, pretending to a jurisdiction he then disclaimed, in order to take a gratuitous stab at the president. Politics alone could explain such behavior. Obviously, although they were constantly at swords' points, neither Jefferson nor Marshall wanted to press the issue to conclusion.
The Jeffersonian campaign, halting though it was, also contemplated the impeachment of federal judges who violated the public trust. In 1803–1804, Congress impeached, tried, and convicted Judge John Pickering of the federal district court in New Hampshire. The case was a hard one because Pickering's bizarre conduct on the bench proceeded less from his politics than from intoxication and possibly insanity, but in the absence of any other provision for removal, the Republicans took the constitutional route of impeachment and convicted him of "high crimes and misdemeanors." In 1804–1805 the House impeached, and the Senate tried, Supreme Court Justice Samuel Chase. A high-toned Federalist, he had earned Republican enmity as the presiding judge in several sedition trials and in harangues to grand juries assailing democracy and all its works. Inevitably, Chase's impeachment was a political act.
The fact that Chase was indicted the same day the Senate convicted Pickering seemed to substantiate Federalist fears of wholesale prosecution. Actually, this was never the president's intention. He sought only to make an example of a particularly obnoxious Federalist justice. And when the Senate finally voted to acquit Chase, Jefferson turned away from impeachment in disgust. He remained anxious about the unchecked power of the judiciary. He faced still other encounters with John Marshall. But the Jeffersonian war on the judiciary, if such it was, ended without serious disturbance to the foundations of judicial power. Jefferson could rule the cabinet; he could charm, persuade, and cajole Congress; he could provide inspirational leadership for the American people; but in dealing with the judiciary he found little scope for these talents and, of course, felt awkward in a confrontational role.