Hamilton’s Financial Plan

1. Hamilton’s Financial Plan Dealing with Debt & Building the Economy

2. Economic Problems • National Debt • Debt = total amount of money that a government owes to others • national and state government needed money so they borrowed from foreign countries and from ordinary citizens • government sold bonds –certificates that promised to repay the money loaned, plus interest, on a certain date- • Weak Economy

3. Economic Problems • Foreign Debt • $11,710,000 • Federal Domestic Debt • $42, 414,000 • States’ Debts • $21,500,000 U.S. must pay back debt to gain the respect of other nations

4. Hamilton’s Debt Plan • Pay off all war debt • Buy all the old state and national bonds issued before 1789 • Issue new bonds to pay off the old debts. • As the economy improved, the government could then pay off the new bonds. • Opposition • plan would reward speculators • Person who bought bonds at a low price from people who thought the government would not pay • many southern states had already paid their debts and felt others should do the same

5. Hamilton’s Debt Plan • Raise government revenue • Impose tariffs (tax) on imports • Puts money into government coffers • Encourages the growth of U.S. industry • Encourages people to buy American goods • Sell lands in the West • Institute an excise (domestic) tax on whiskey • Why might this be troublesome? • What is Whiskey made from?

6. Hamilton’s Debt Plan • Create a national bank • Safe for government investments • Bank makes loans to businesses • Bank issues money

7. Hamilton’s Debt Plan • Reflects Hamilton’s belief in: • Strong central government • Government encouraging business, industry • Paying debts to nations wealthy to gain their support for government

8. Opposition to the Plan • Led by James Madison & Thomas Jefferson • Many southern states had already paid off their debts • Did not want to have to pay for northern states’ debts • Thought northern speculators would get rich buying up bonds • Southern states had few factories = would pay higher prices for goods

9. Jefferson’s Opinion The political economists of Europe have established it as a principle that every state should endeavor to manufacture for itself: and this principle, like many others, we transfer to America…In Europe…Manufacture must…be resorted to of necessity…to support the surplus of their people. But we have an immensity of land…Those who labour in the earth are the chosen people of God…Dependancebegets subservience and venality, suffocates the germ of virtue, and prepares fit tools for the designs of ambition…While we have land to labour then, let us never wish to see our citizens occupied at a work-bench,.. for manufacture, let our work-shops remain in Europe. It is better to carry provisions and materials to workmen there…The loss by the transportation of commodities across the Atlantic will be made up in happiness and permanence of government… Why does Jefferson disagree with Hamilton?

10. Jefferson’s Opinion (cont.) [Hamilton’s] system flowed from principles adverse to liberty, & was calculated to undermine and demolish the republic, by creating an influence of his department over the members of the legislature…These were no longer the votes then of the representatives of the people, but of deserters from the rights & interests of the people…Thus the object of these plans taken together is to draw all the powers of government into the hands of the general legislature, to establish means for corrupting a sufficient corps in that legislature to divide the honest votes…& to have that corps under the command of the Secretary of the Treasury for the purpose of subverting…the principles of the constitution, which he has so often declared to be a thing of nothing which must be changed. What could this plan do to the new government?

11. Compromise • Hamilton offered to support the goal of making the nation’s capital in the South if southerners agreed to his plan to repay state debts • Capital is moved from NYC to an area between Maryland and Virginia along Potomac River = District of Columbia

12. Questions?