In Thomas Jefferson's mind, the first order of business for him as President was the establishment of a "wise and frugal Government, which shall restrain men from injuring one another" but which would otherwise leave them alone to regulate their own affairs. He wanted a government that would respect the authority of individual states, operate with a smaller bureaucracy, and cut its debts. Jefferson also felt that the country should eliminate Hamilton's standing army by relying on a "disciplined militia" for national defense against invasion. Most importantly, he believed that good government would promote "the encouragement of agriculture." Commerce, in his mind, should be the "handmaiden" of agriculture rather than its driving force.

Accordingly, he reduced, though not substantially, the 316 employees subject to presidential appointment while leaving intact most of the nation's 700 clerks and 3,000 postal workers. The Army was cut to two regiments, one infantry and one artillery (3,500 total), with similar reductions in the Navy. He pressured Congress to abolish the direct tax of 1798 and to repeal the Alien and Sedition Acts, which were still in operation. To emphasize his opposition to the acts, Jefferson personally pardoned the ten victims of those laws who were still in prison. Even after paying $15 million in cash for the Louisiana Purchase (see Foreign Affairs section), the national debt fell from $80 million to $57 million during his two years of service.

War on the Judiciary: Federalists v. Republicans

Although Jefferson was no "blood-soaking" radical, as many of his Federalist opponents had charged, and no reign of terror occurred when he took office, a number of more radical Republicans pressured Jefferson and the Republican-dominated Congress to make war on the Federalist judiciary. Briefly told, the Federalist-controlled Congress under Washington and Adams had created a system of circuit courts that was presided over by the individual justices of the Supreme Court, all of whom were Federalists in 1800. Most of the lower judges on the circuit were also Federalists who had actively enforced the Alien and Sedition Acts, mainly against Jeffersonian-Republicans—by 1800, the terms "Democratic-Republican" and "Jeffersonian-Republican" had become interchangeable.

To make matters worse, just before Jefferson's inauguration, the lame-duck Federalist Congress passed the Judiciary Act of 1801. This piece of legislation reduced the number of Supreme Court justices from six to five, thus limiting Jefferson's ability to make Republican appointments. To further hinder the incoming Republican administration, the act created a new system of circuit courts with sixteen new judges and many more federal attorneys, clerks, federal marshals, and justices of the peace. On his last day in office, Adams worked until late in the night signing commissions for these judicial officers, all of whom were strong Federalists. However, the commissions remained in the government offices when Jefferson became President and Madison became secretary of state, and Madison refused to deliver the commissions, keeping some of the new Federalist judges off the bench.

Jefferson was powerless at first to dismiss the federal judges because they were appointed for life, but he did replace most of the marshals and other court officers with Republicans. Then, in 1802, the Republican-controlled Congress simply repealed the Judiciary Act of 1801, thus doing away with Adams's "midnight appointees." Still, the Federalist-dominated Supreme Court, with justices who were appointed for life and were led by the recently appointed Chief Justice John Marshall, greatly irritated most Jeffersonians.

Two impeachment proceedings were initiated to test the waters for removal of the Federalist justices by trial. According to the U.S. Constitution, a federal judge can be removed from office only for "high crimes and misdemeanors." In the first test, Justice John Pickering, a highly partisan Federalist who was also an alcoholic and undoubtedly insane, was tried by the Senate, based upon articles of impeachment drawn up by the House. Pickering was removed from office by a strict party vote. The other target for impeachment was Justice Samuel Chase, an able but nearly fanatic anti-Jeffersonian who frequently delivered streams of abuse from the bench. Fortunately for Chase, he had defenders among moderate Republicans in the Senate who feared overreaching their congressional authority. In the latter case, the Senate vote failed to carry the two-thirds majority in favor of conviction.

Chief Justice John Marshall was a loyal Federalist who demonstrated his commitment to a strong national government in the case of Marbury v. Madison in 1803. Jefferson's secretary of state, James Madison, had refused to deliver a last-minute justice of the peace commission to William Marbury, a wealthy land speculator in Washington, D.C., who was appointed in the final hours of the Adams administration. Marbury, claiming that his appointment could not be denied him, petitioned for a writ of mandamus, or a formal order of delivery, compelling delivery of the commission.

After hearing the case, the Supreme Court—without dissent—denied the writ although it agreed that the petitioners were entitled to their commissions. Chief Justice Marshall held that the Constitution did not give the Supreme Court the authority to issue writs of mandamus. In making this ruling, the Court declared unconstitutional that portion of the Judiciary Act of 1789 which gave the Court the power to issue such writs. This ruling established for the first time the principle that the Supreme Court can declare an act of Congress void if it is inconsistent with the Constitution. A landmark case, Marbury v. Madison established the basis for judicial review of congressional and executive actions on the grounds of their constitutionality. The Republican Congress repealed the Judiciary Act of 1801 rather than challenge Marshall head on. Jefferson, who admired Marshall's intelligence, agreed with those moderate Republicans who believed that Marshall's support of an independent judiciary posed no threat to republican liberties.