Alexander Hamilton, as Secretary of Treasury, proposed a three-part financial plan to establish the national government's credit and enhance its authority. The plan involved the federal government assuming states' Revolutionary War debts, creating the national Bank of the United States, and implementing tariffs and taxes. While successful, the plan divided those in support of Hamilton's vision of a strong central government and wealthy merchants from Jeffersonian Republicans who favored a decentralized agrarian society. This division led to the emergence of the Federalist and Democratic-Republican political parties.

1. Federalists and
Republicans
p. 170-175

2. Alexander Hamilton
• Hamilton: GW’s Secretary of Treasury
• His goal: to enhance the authority of the national
government and favor wealthy financiers and
seaport merchants
• He exerted more influence on domestic and
foreign policy than anyone else during his time in
office and after (during this time period)

3. Hamilton

4. Hamilton’s Financial Plan
1. Public Credit-January 1790
• New gov’t would take responsibility of existing
debt
• Had been in the hands of wealthy speculators
• These private certificates of debt would be traded
for interest-bearing bonds
• “funding the debt”

5. Hamilton’s Financial Plan
• Hamilton also proposed a permanent national
debt
• This would allow for the gov’t to pay the
speculators
• The debt would be paid off by gold and silver
coins at a 6% interest rate
• Chance for wealthy to make $$$ & have a stake in
the gov’t

6. Hamilton’s Financial Plan
• Hamilton wanted the federal gov’t to assume the war debts
of the states
• Those on the inside found out and started buying the war
bonds of southern states, thus gaining a huge profit
• Some states wanted to control the power of the federal gov’t
• To get the states (MD and VA) to agree, Hamilton agreed to
move the capital to Washington, D.C.
• “Dinner Table Bargain”
• This gave Hamilton the support he needed to move the plan
forward

7. Hamilton’s Financial Plan
2. National Bank-December 1790
 Safe place for gov’t to deposit funds
 Provide loans & currency to businesses
 Chartered by federal gov’t
 Provide stable currency

8. Hamilton’s Financial Plan
• Jefferson and Madison stated that a national bank
was unconstitutional— “strict construction”
• Incorporating a bank was not a delegated power
• Hamilton used Article 1, Section 8, saying that
Congress make “all laws which shall be necessary
and proper” to carry out the Constitution’s
provisions—implied powers
• Washington agreed and signed it into law

9. Hamilton’s Financial Plan
3. Revenue and Tariffs-December 1791
 Hamilton wanted a national revenue that would
be used to pay the annual interest on the
permanent debt
• 1792: Congress imposed several domestic taxes,
such as on whiskey
• The tax was too small to help much: $1 million
annually

10. Hamilton’s Financial Plan
• To raise more $, Hamilton called for tariffs on
foreign imports
• “Report on Manufactures” (1791): a report calling
for self-sufficiency in manufactured goods

11. Report on Manufactures

12. Did Hamilton’s Plan
Work?

13. Did Hamilton’s Plan
Work?
• Yes! Customs revenue provided about 90% of the
U.S. gov’t income between 1790-1820
• Bonds sold well in America & abrorad
• Manufacturing increased
• **Outcome: provided the federal government with
financial stability.

14. Jefferson’s Agrarian
Vision
• Hamilton was not totally supported
• Federalists were broken up into two factions
• Northern Federalists agreed with Hamilton
• Southerners agreed with Madison and Jefferson
• Hamilton’s supporters were named
FEDERALISTS
• Jefferson’s supporters were named
DEMOCRATIC-REPUBLICANS

15. Agrarian Vision

16. Jefferson’s Agrarian
Vision
• Southern planters and western farmers moved
towards Jefferson’s ideas
• He thought that workers who depended on wages
lacked the economic independence required to
sustain a republic
• his plan: a West settled by productive yeomen
farm families

17. Jefferson Quotes
• "Cultivators of the earth are the most valuable
citizens. They are the most vigorous, the most
independent, the most virtuous and they are tied
to their country and wedded to its liberty and
interests by the most lasting bands.”—Letter to
John Jay (1785)
• "Agriculture is our wisest pursuit, because it will in
the end contribute most to real wealth, good
morals, and happiness." –Letter to George
Washington (1787)

18. Jefferson’s Agrarian
Vision
• He believed that having a massive agricultural
society, Americans would be able to feed the US
and Europe, and they would give us goods in
return
• French Revolution gave it a chance, and wheat
and cotton prices soared, raising profits in
southern region
• Americans were divided over sides in the French
Revolution, especially after the execution of Louis
XVI (1793)

19. Jay’s Treaty (1794)
• Britain’s navy was bullying American ships going to France
 To avoid war, GW sent John Jay (Chief Justice) to Britain
• Deal required the US gov’t to make “full and complete compensation”
to British merchants for all pre-Revolutionary War debt owed by
American citizens
• Gave British right to remove French property from neutral ships
• Americans submitted claims of illegal seizure to arbitration and
required British to remove military garrisons from NW Territory and to
end their aid to Indians there, but demands were not met
• Many thought it asked America to give up too much, and it barely
passed Senate; opposed by Republicans
• But prevented war w/ Britain

20. Jay’s Treaty (1794)

21. Pinckney’s Treaty (1795)
• Spain feared a British/American alliance would
interfere w/ their N. American possessions
• Spain recognized the right of Americans to
navigate MS River to deposit goods at New
Orleans
• Agreed to fix northern boundary of FL at 31st
parallel
• Required Spanish authorities to prevent Indians in
FL from launching raids across border

22. Whiskey Rebellion
• Whiskey Rebellion in 1794: a protest on the
whiskey tax of Hamilton: challenging federal
authority, much like Shay’s Rebellion
• Farmers in western PA refused to pay the tax &
began terrorizing tax collectors
• GW raised an army of almost 15,000 to stop
rebellion, which collapsed

23. Whiskey Rebellion

24. New States
• 14th—VT=1791
• 15th—KY=1792
• 16th—TN=1796
• Original 13 states gave up western land claims

26. Questions to Consider:
• What was Hamilton's plan
for paying the nation's
debts and restoring credit
on a sound basis? To
which social, economic,
and political groups would
this have appealed?
• How did political parties
rise as a result of
Hamilton's programs?
• How did political parties
rise as a result of
Hamilton's programs?
• What diplomatic problem
did the French Revolution
and the war that followed
pose for the United
States? How did
Washington and Congress
deal with this problem?
• How did Washington's
reaction to the Whiskey
Rebellion underscore the
difference between the
Constitution and the
Articles of Confederation?