“If our armies are not so numerous as those of other nations, they have qualities which render them more valuable. Those raised by voluntary enlistment are more effective than those raised by conscription; and I should think a general would feel much more confidence in an army raised as our armies are raised, than he could possibly have while leading to battle a band of slaves torn from their homes by force.”

What is Patriotism? (1908)
Context: Our writer claims that militarism can never become such a power in America as abroad, since it is voluntary with us, while compulsory in the Old World. Two very important facts, however, the gentleman forgets to consider. First, that conscription has created in Europe a deep-seated hatred of militarism among all classes of society. Thousands of young recruits enlist under protest and, once in the army, they will use every possible means to desert. Second, that it is the compulsory feature of militarism which has created a tremendous anti-militarist movement, feared by European Powers far more than anything else. After all, the greatest bulwark of capitalism is militarism. The very moment the latter is undermined, capitalism will totter. True, we have no conscription; that is, men are not usually forced to enlist in the army, but we have developed a far more exacting and rigid force--necessity. Is it not a fact that during industrial depressions there is a tremendous increase in the number of enlistments? The trade of militarism may not be either lucrative or honorable, but it is better than tramping the country in search of work, standing in the bread line, or sleeping in municipal lodging houses. After all, it means thirteen dollars per month, three meals a day, and a place to sleep. Yet even necessity is not sufficiently strong a factor to bring into the army an element of character and manhood. No wonder our military authorities complain of the "poor material" enlisting in the army and navy. This admission is a very encouraging sign. It proves that there is still enough of the spirit of independence and love of liberty left in the average American to risk starvation rather than don the uniform.

The earliest known appearance of this statement is from 1895 (Joshua Douglass, "Bimetallism and Currency", American Magazine of Civics, 7:256). It is apparently a combination of paraphrases or approximate quotations from three separate letters of Jefferson (longer excerpts in sourced section):
I sincerely believe, with you, that banking institutions are more dangerous than standing armies...
Letter to John Taylor (1816)
The bank mania...is raising up a moneyed aristocracy in our country which has already set the government at defiance...
Letter to Josephus B. Stuart (1817)
Bank paper must be suppressed, and the circulating medium must be restored to the nation to whom it belongs.
Letter to John W. Eppes (1813)
Misattributed

Brooks D. Simpson. "The Soldiers' Flag?" https://cwcrossroads.wordpress.com/2015/07/05/the-soldiers-flag/ (5 July 2015), Crossroads, WordPress
2010s

Bill, Christofferson, http://www.wisopinion.com/blogs/2006/09/ann-richards-rip_115820616780417606.html, Bill Christofferson, "Ann Richards, R.I.P., The Xoff Files, September 13, 2006, 2006-09-16
2006

Source: The Art of War, Chapter XIII · Intelligence and Espionage

National Monuments, st. 1 (February 1905).

Source: Defending increased naval expenditure; speech in Bristol (22 April 1889), quoted in The Times (24 April 1889), p. 6

Source: The Principles of Political Economy and Taxation (1821) (Third Edition), Chapter XXXII, Malthus on Rent, p. 281