Managing America- What Thomas Jefferson thinks of debt and the American history of the lottery. Is the lottery the way to solve the current U.S. National Debt problem along with cutting federal spending?

Managing America- What Thomas Jefferson thinks of debt and the American history of the lottery.

Is the lottery the way to solve the current U.S. National Debt problem along with cutting federal spending?

Thomas Jefferson was not sleeping well. Jefferson had lived with debt most of his adult life, but the amounts now owed and the interest due were growing beyond any pretense that his estate could cover them.

Then one night, late in January 1826, an idea came to him. The next morning he summoned his eldest grandson, Thomas Jefferson Randolph, and outlined a plan for a lottery to fund the liabilities. The former president, now almost eighty-three years old, was tormented by worries: his debts were increasing, he could lose all he had, including his home, Monticello, and his family could be left destitute.

 The depressed Virginia real estate prices of those days made the idea of a lottery attractive. Jefferson calculated that if he were allowed to conduct a lottery rather than attempt an outright sale, his mills on the Rivanna River would cover his debts and leave Monticello and the Monticello farm for him and his family. There was one significant hurdle. Lotteries were carefully regulated in Virginia and could be staged only with the state legislature’s approval.His document reviewed the history and use of lotteries in Virginia, and put forward his case. 

He listed lotteries that had been run in Virginia since the Revolution and included the financial objective of each, usually public works. He made no attempt to minimize this issue but built his case with a summary of his more than sixty years of state and national public service, concluding with his most recent endeavor, founding the University of Virginia.

The use of lotteries to satisfy private debts was familiar to Virginia planters of Jefferson’s generation. Before the Revolution, advertisements appeared frequently in the Virginia Gazette promoting “A Scheme for disposing of, by way of lottery, several valuable tracts of land,” and the like. Jefferson got firsthand experience when he helped manage a lottery for his cousin, George Jefferson, in 1768.

Debt had become a way of life in the colony because British merchants were willing to extend long-term credit for consignments of produce, usually tobacco. With this credit, the planters could indulge in the growing commercial market stemming from London. If a crop failed, sale of land or slaves was the fallback for revenue when no more credit could be had.

But as debt increased, and because there was little specie circulating in the colony, selling large tracts of land grew difficult. Smaller parcels offered through a drawing of lottery tickets purchased for as little as £5 to £10 each stood to attract wider participation.

Martha Wayles Jefferson was entitled to one-third of her father John Wayles’s estate, which was sizable but heavily encumbered with debts to British creditors. In such situations the debts could be avoided if the estate remained untouched until creditors were paid, but if the assets were distributed, the debts moved with them.

In 1774, as Jefferson and his brothers-in-law Francis Eppes and Henry Skipwith studied the estate, they were confident that sales of the less-desirable lands could liquidate the British debts. The plan was sound in 1774, but then came the Revolution.

Yet getting to this “work” of liquidating personal debts never seemed to fully capture his attention. He was far more intellectually and emotionally engaged in the challenges of shaping a new nation. In the years that he was minister to France, secretary of state, vice president, and president, he expected that the salaries he drew would cover his living expenses and so leave the profits from his farms to be applied toward his debts.

During Jefferson’s two terms as president, the office provided an attractive annual salary of $25,000. From this sum, however, he had to pay the staff for the President’s House and his own secretary, as well as cover travel, entertainment, and miscellaneous expenses. The fine food and wine served at the president’s small dinner parties became legend, but stocking larder and cellar was costly. As he prepared to leave office, Jefferson was shocked to learn that by trusting “rough estimates in my head,” he had exceeded his salary by three to four months, which meant he had a debt of about $10,000 that had to be covered.

A loan was arranged, and though he had written to his daughter Martha of the “gloomy prospect of retiring from office loaded with serious debts,” he maintained in his characteristic optimism: “I nourish the hope of getting along.”

His finances worsened in retirement.

The War of 1812 disrupted commerce.

With peace came a brief period of inflated agricultural prices, but that economic bubble burst.

As prices fell, the Second Bank of the United States began to tighten credit, creating the Panic of 1819.

But a recession can be hard to predict, and this one lasted for the rest of Jefferson’s life.

What Jefferson termed his coup de grace was delivered on a loan he cosigned for longtime friend Wilson Cary Nicholas. The amount was large, two notes at $10,000 each, but Jefferson felt obligated. As president of the United States bank in Richmond, Nicholas had arranged and endorsed notes for Jefferson, and he was connected to the family as the father-in-law of grandson Jefferson Randolph. Nichols died in October 1820, and his estate, valued at $350,000 when Jefferson had signed his notes in 1818, was now greatly depreciated as well as heavily mortgaged. Jefferson had to add the $20,000 note with $1,200 yearly interest to his own sizable debt.

A severe devaluation of Virginia land prices had troubled Jefferson even before Nicholas’s death, when he had tried his usual fallback of a sale of a small parcel of land to cover an interest payment. Jefferson’s financial situation became public with his lottery petition, presented to the Virginia legislature February 8, 1826.

The lottery bill said that only a fair evaluation at the current land prices could be attached to the properties that were to be offered.

On a second vote February 20, however, the lottery passed by a substantial majority in the Virginia legislature.

Once the bill passed and the property was appraised, Jefferson Randolph engaged lottery brokers Yates and McIntyre of New York. There were to be 11,477 tickets offered at $10 each, with the prizes the Monticello estate, the Shadwell mills, and one-third of Jefferson’s Albemarle County lands.

Jefferson’s situation spread, and concerned citizens of New York City, under the leadership of Mayor Philip Hone, persuaded Jefferson Randolph that the money could be raised by public subscription in a manner far more dignified than a lottery.

Committees were formed in New York, Philadelphia, and Baltimore, and meetings were conducted in Virginia as well. Approximately $16,500 was raised in a relatively short period. This was a small amount compared with a total debt calculated at more than $100,000 mad Jefferson think that the American populace had not forgotten him. With the idea of a public subscription, the lottery was put aside.

Thomas Jefferson Randolph determined to revive the lottery and asked Yates and McIntyre to advertise tickets in the Richmond Enquirer late in July and again in September and October. In early 1827, he traveled to Washington to petition Congress for an act that would make the lottery national, but without success. Why Jefferson Randolph let go of the idea is unclear, but on February 20, 1828, James Madison wrote to the Marquis de Lafayette that “the lottery owing to several causes has entirely failed.”

The sale of Monticello with an adjoining 552 acres was completed in November 1831, Jefferson’s art collection was sent to the Boston Athenaeum for sale there -with little interest.

The exact amount of the debt liquidated by these sales is not known, Jefferson Randolph assumed the remainder of his grandfather’s debt.

Thomas Jefferson hated debt.

He believed it compromised freedom of choice, whether attached to an individual or to a nation. As president, he was proud of reducing the national debt. In his personal finances, he was never so successful.

Is the lottery the way to solve the federal spending problem?

Mr. Martin Chekel, a noted international businessman and author of the thought provoking “Managing America” six book series and the retrospective eight book series “The Diary of American Foreign Policy 1938 – 1945” that laid the foundation for US foreign policy the past seventy-four years.