most notably, he made extensive use of the bank of the united states to conduct the government ’ s day - to - day fiscal operations. gallatin also kept hamilton ’ s system for keeping the public debt more or less intact. other parts of hamilton ’ s financial system were modified to serve republican causes. gallatin ’ s early see, for example, chernov ’ s description of hamilton ’ s achievements while secretary of the treasury ( chernov, op. cit., ch. 17 - 20 ). using the bank of the united states for the maintenance of financial stability was done both through lendingof - last - resort type operations and through the restriction and extension of credit in response to market conditions. robert e wright and david j. cowen, financial founding fathers : the men who made america rich ( univ. of chicago press, chicago il, 2006 ), ch. 1, provide a thorough exposition of hamilton ’ s ideology, achievements, and financial system, as well as his skilled use of the bank of the united states for the purposes of maintaining financial stability. at the end of 1793, gallatin won the election to the united states senate, but was removed shortly thereafter from the senate on the grounds that he did not have the minimum nine years of united states citizenship. alexander balinky, albert gallatin : fiscal theories and policies ( rudgers univ. press, new jersey nj, 1958 ) gives a very thorough introduction to the fiscal ideology of the republican party and how gallatin ’ s fiscal theories and policies were shaped by this. wright and cowen, op. cit., p. 103, point out how gallatin had more of a problem with the federalist domination of hamilton ’ s bank than with the bank itself. quoted in chernov, op. cit., p. 469. jefferson was elected president in 1800, but did not appoint gallatin until 1801 – even though it had been his intention from the start. see for example wright and cowen, op. cit., p. 93, for details. priorities included a change in hamilton ’ s tax structure in order to better reflect the republican party ’ s ideology and its constituencies. he also focused on the need to increase transparency in fiscal policy. he progressed rapidly on both fronts. internal taxes were soon abolished. the federal government came to rely almost exclusively on import tariffs, which gallatin saw as luxury taxes that did not burden his farming constituency. 16 gall

##atin also convinced congress to pass the law of 1801, which required an annual report by the secretary of the treasury to the president. he submitted the first of these reports later that year. moreover, the minting of dollars was somewhat scaled back under gallatin. to compensate, he allowed foreign coins to circulate along with the dollar. these measures were not taken because gallatin was opposed to the mint. rather, the mint proved to be very costly for the federal purse. therefore, gallatin saw the reduction of its operations as a way for the government to save money, in line with his primary objective of fiscal consolidation. 17 for gallatin, a reduction of the united states ’ federal debt burden “ was the end toward which all other fiscal policy was designed. ” 18 he argued forcefully that the federal government should spend tax revenues on new public services, goods or investment only when tax revenues were freed from having to service a large public debt stock. 19 gallatin ’ s cautious management and reduction of the public debt during his first years in office was crucial. it gave the united states treasury the necessary credibility to access financial markets and therefore finance extraordinary expenses. the most prominent example, of course, is gallatin ’ s arrangement to finance the louisiana purchase in 1803. he quickly managed to raise the necessary amount – nearly usd 15 million – through a bond issue arranged by the british merchant bank barings. 20 with hindsight, some scholars have questioned whether public debt reduction should be the main fiscal policy objective of an emerging country with high growth potential. 21 but, given gallatin ’ s debt reduction objective, his efforts were extraordinarily successful. by 1808, gallatin had managed to reduce the federal debt - to - gdp ratio by an estimated 50 percent or so, including the additional debt from the louisiana purchase. 22 this was a remarkable effort balinky, op. cit., provides a detailed description of the tax structure of the early united states and its changes under gallatin. see balinky op. cit., pp. 101 - 103, for an account of the united states mint under gallatin. quoted from balinky, op. cit., p. 39. this is not to suggest that gallatin was opposed to government - sponsored infrastructure projects. indeed, in 1808, he presented the gallatin report on roads and canals. as he put it at the time, the vision of roads and canals to link up the young nation “