December 12th is John Jay’s birthday. As one of the seven most influential founders of our country, Jay’s contributions are not as well known as, say, those of John Adams, Alexander Hamilton, Thomas Jefferson or George Washington. What follows is a short account of one of Jay’s most important and least understood contributions to American history.
John Jay was tall, reserved, severe. The same could be said of George Washington, only Jay lacked the General’s magnetism. Jay’s rare attempts at humor generally fell flat. Among the nation's founders he was the most openly religious. He quoted and paraphrased the Bible in his speeches and in his political papers. With Hamilton, he founded the New York Manumission Society—the first of its kind in America—with the expressed purpose of freeing African Americans from bondage in the state of New York. In France, with John Adams and Benjamin Franklin, Jay negotiated the Paris Peace Treaty that ended war with Britain and secured American independence.
When Jay returned from France in 1784, he learned he had been appointed Superintendent of Foreign Affairs (forerunner of Secretary of State). Jay did not want the job. His desire was to spend time with his family and to resume his law practice. Being a good patriot, he accepted the appointment with one condition, that the Confederation Congress move the capital from Annapolis, Maryland to New York City—Jay’s home. Discretion being the better part of valor, Jay probably hoped that Congress would rescind the appointment. What he didn’t know was that Congress was desperately in need of a strong leader. Jay had the necessary credentials. He was a member of one of the most powerful families in New York, had served a term as president of the Continental Congress during the Revolutionary War, and in public meetings had a reputation for taking command and getting things done.
Congress wasted little time in agreeing to Jay’s terms and within a fortnight moved the capital to New York City.
Jay had a vision. As Superintendent of Foreign Affairs, he would be de facto head of state. His biggest obstacle, however, was competing for leadership with thirteen sovereign states. Under the Articles of Confederation, the states shared power equally with the national government. Jay’s plan was to strengthen the power of the unicameral Congress—make it an American version of Parliament—and make his position that of prime minister. It all hinged on having a federal revenue stream. As Jay’s friend Alexander Hamilton pointed out, “Power without revenue is a bubble.”
PROXIMITY TO A KING
At some point during his four-year tenure as Superintendent of Foreign Affairs, when things weren’t going well at all, Jay surely looked out across the waters of Upper New York Bay and imagined Mount Vernon somewhere far off on the horizon. That’s where he should have insisted on moving the capital. It would have made his job so much easier. In England, the prime minister represented not just the will of Parliament but the will of the king. The prime minister administered the affairs of state, while the king served more as the nation’s father-figure. The prime minister’s role was political. The king’s role was largely symbolic. Above all, the king was the traditional source of executive power. To be effective, the prime minister needed the support of the king. In the United States, for all intents and purposes, the king presided at Mount Vernon.
George Washington was not king, but he could have been. The support was there. The people thought of him as their king. During the Revolution, a number of his generals and most of his soldiers wanted him to be king, but Washington wouldn’t hear of it. After the Revolution he retired to Mount Vernon content to manage his plantation and enjoy life as a member of the tidewater elite. Still, the perception remained strong that a king-in-waiting presided at Mount Vernon.
Had the capital moved to the Potomac, Jay’s nearness to Mount Vernon might have worked miracles for him and the national government. Jay could have met with Washington regularly, as English prime ministers do with their king, to seek advice and share knowledge, or merely to play cards, it didn’t matter which. Perception was everything. Close proximity to Mount Vernon would have given Jay the very clout he needed to get a revenue bill passed. Tax and spend—that was the real power of governing. As it was, only the states had such power and weren’t about to share it with the national government. Opposition from powerful state leaders like Patrick Henry and George Clinton would have gone unheeded had George Washington’s presence loomed over a Potomac capital. Jay needed a king to achieve his goals, King George.
In 18th-century America, people took comfort in having a king. Prior to the Revolution, Americans clung steadfastly to the illusion that the British king would intervene on their behalf whenever Parliament acted out of hand with some new tax. Indeed, the people believed the king had their best interest at heart. When the dreaded Stamp Act was repealed in 1766, the widespread belief was that the king had responded to their petitions and taken action, had sacked the prime minister and ordered the repeal.
When the Townsend Duties were enacted in 1767, there was some confusion as to why the king was slow in undoing Parliament’s obvious usurpation of power. When the Duties (except for tea) were finally repealed in 1770, the king was praised for having set things right. In Massachusetts in 1774, when military rule replaced popular government as punishment for the Boston Tea Party, Parliament rather than the good king was blamed. Even as late as the Fall of 1775 when the Continental Congress petitioned the king for redress of grievances, it was still hoped that he would intervene on their behalf. Thus when news arrived from London that the king had denounced the colonists as “rebels” and personally ordered the military to use force in putting down the insurrection, Americans felt betrayed and began considering independence as a very real option.
SHOW ME THE MONEY
The men who signed the Declaration of Independence were justifiably distrustful of kings. They equated monarchies with abuses of power, with corruption, and excessive taxation. Since many of them had served in state legislatures and trusted that form of governing, they refrained from making executive appointments, and so prosecuted the Revolution by committee. And they did so with an all-volunteer army, and without a consistent revenue stream. They chose George Washington as commander-in-chief, kept a close eye on him, and looked for ways to finance the war without taxing the public.
Almost immediately, Washington began writing from the field asking for more money: money to pay soldiers, buy food and clothing, blankets and tents, medical supplies, more ammunition and more guns. Congress responded by borrowing money from wealthy Americans committed to the cause and by issuing IOUs in place of cash, but mostly by printing money. Between 1775 and 1780, Congress issued paper money no fewer than thirty-seven times, backed by nothing more than its solemn declaration that it was legal tender. In the end, these paper issues amounted to more than $200 million. With nothing behind it (there were no gold or silver reserves), it was mere fiat money that quickly depreciated as fiat money always does. Before the war ended, Congress was forced to revalue earlier issues to a paltry 2.5 percent of face value; virtually nothing. The government also issued interest-bearing securities as a means of payment, but being unable to pay regular dividends these too depreciated rapidly. Meanwhile, state governments requisitioned food and supplies from citizens--sometimes against their will--and paid with state securities that likewise declined in value.
By 1781, with the war ongoing and public credit in a near state of collapse, Congress appointed its first executive officer in the hope he could work a miracle. They picked a wealthy Philadelphia merchant named Robert Morris as Superintendent of the Treasury. Prior to the appointment, Morris had proven quite resourceful in raising money for Washington’s army. He knew all the right people and when and how to ask for money. Born in Scotland, Morris migrated to the United States with only the clothes on his back, entered business and had become rich merchant. He owned a fleet of ships that were forever arriving and departing from the port of Philadelphia.
The Morris appointment could not have come at a better time. The British Army was encamped at Yorktown where General Washington saw his chance to trap and defeat them in one fell swoop, IF he could get his army there in time to deliver the knockout punch. But he needed money—fast. His army wouldn’t depart for Yorktown until it was paid with something more substantial than yet another paper issue. This time, soldiers wanted payment in hard currency, in metal coins, otherwise they wouldn’t budge. So it was on the pledge of his personal credit that Morris found the needed metal money, borrowed from friends and from the French government. At the last possible moment, a shipment of barrels arrived in Philadelphia filled with silver half-crowns. Paid a month’s salary in advance, the Continental Army marched to Yorktown and, with the help of the French Army and Navy, defeated the British in a stunning upset.
With the war all but over, Morris now undertook a number of measures to restore financial stability to the fledgling republic, including the creation of the nation’s very first bank, the Bank of North American. Capitalization was made possible through loans from France and Holland. The thrust of Morris’s financial program, however, depended on the passage of a tariff bill. Without a revenue stream, Morris could work his magic only for so long. Passage of a tariff bill required amending the Articles of Confederation, which required a unanimous vote. Once debate got underway, all the old fears surfaced: what was Morris doing but making a grab for power? Where revenue flowed corruption followed, not to mention monarchy and tyranny, the very evils they had fought a war to be free of. Twice the measure was put to a vote, and twice the measure was defeated. After the second defeat Morris threw up his hands in frustration and resigned. A month later Congress turned to John Jay.
CAPTAIN OF THE DEBATE CLUB
By the time Jay took office, all the major players who struggled for independence had departed the national stage. Some were serving in governor’s mansions and others in state houses up and down the American coast. Meanwhile, John Adams, Thomas Jefferson, and Benjamin Franklin were away in Europe serving as foreign ministers. James Madison, after four trying years in Congress, was back in Virginia giving himself a crash course on the history of republics and why they always failed. Equally frustrated with the national government, Alexander Hamilton was back in New York practicing law. Where once the most-educated and best-informed delegates had served their country with courage and distinction, Congress was now little more than a revolving door of political lightweights.
And the states? Disputes were commonplace, over boundary lines, fishing rights, logging rights, interstate commerce, and paper money (most states were by now printing their own paper money). States were either threatening to send their militia to resolve the latest dispute with a neighboring state, or, if things didn’t go their way, threatening to secede. It seemed only a matter of time before the fragile union would dissolve and America would end up like Europe—quarreling sovereign states forever at war with each other. Patrick Henry of Virginia, George Clinton of New York, John Hancock of Massachusetts, and Samuel Chase of Maryland--all governors of influence and power--spoke more like demagogues than as the enlightened leaders of 1776 they once had been. Whenever there was talk of granting Congress the power to tax, state leaders responded with the usual litany of fears: “corruption in high places,” “monarchy,” “standing armies” and “tyranny.” Meanwhile, nothing was being done about a host of national problems: the Spanish blockade of the Mississippi River, British occupation of the Northwest Territory (in violation of the Paris Peace Treaty), Barbary pirates in the Mediterranean raiding American ships and making slaves of American sailors, the unpaid war debt, and the collapse of public credit.
Under the Articles of Confederation, the only way Congress could generate income was by apportioning costs among the thirteen states according to the value of each state’s surveyed land. It was an idea that looked good on paper but in reality didn’t work. Despite repeated requests, the states never paid a cent. What they did do—and exceedingly well—was pay lip service. They sent delegates to New York who spoke well and made the right impressions, but who had to check back with their respective states before voting on anything of substance. Without revenue, Congress was little more than a debate club, with John Jay as the frustrated captain.
The answer to the deadlock came in the summer of 1787, when the Constitutional Convention was held in Philadelphia. The real purpose of the Convention was simple—to free Congress from the constraint of the states in order to enact a revenue bill. That fall, the new Constitution went to the states for ratification.
JAY’S NINE POINTS
In an address given at the New York Ratifying Convention in Poughkeepsie in 1788, Jay made the case for all that was wrong with the national government under the Articles of Confederation. We’ll call them Jay’s Nine Points on How Not to Run a Nation.
1 - “Congress may make war, but are not empowered to raise men or money to carry it on;
2 - “Congress may make peace, but without power to see the terms of it observed;
3 - “Congress may form alliances, but without ability to comply with the stipulation on their part;
4 - “Congress may enter into treaties of commerce, but without power to enforce them at home or abroad;
5 - “Congress may borrow money, but without having the means of payment;
6 - “Congress may partly regulate commerce, but without authority to execute their ordinances;
7 - “Congress may appoint ministers and other officers of trust, but without power to try or punish them for misdemeanors;
8 - “Congress may resolve, but cannot execute either with dispatch or with secrecy;
9 - “In short, Congress may consult, and deliberate and recommend, and make requisitions, and they who please may regard them.”
Jay had one last parting shot: “From this new and wonderful system of government (Jay’s rare attempt at sarcasm), it has come to pass, that almost every national object of every kind, is at this day unprovided for. . . .” The only viable solution was to ratify the new Constitution, which New York state did in July 1788, thereby assuring the necessary two-thirds majority of states required for passage.
The new federal government, under the leadership of the newly-elected president, George Washington, took effect April 1, 1789. The rest, as they say, is history.
In spite of a multitude of frustrations, Jay gets little credit for the remarkable job he did do under impossible circumstances. He prepared more than one-hundred reports for Congress and wrote more than five-hundred official letters. He helped open up trade with China; he established a system of consuls in foreign ports; he negotiated with foreign representatives living in the United States; he advised Congress on admiralty cases; he drafted a law on piracy for Congress; he corresponded with diplomats abroad, with governors at home, and with ordinary citizens. On his watch, John Adams negotiated a series of loans with a consortium of Dutch financiers that kept the nation financially afloat until the new government assumed power.
Jay’s greatest contribution, however, was keeping the peace among the thirteen states, and keeping the nation out of foreign war.