3.2 – Hamilton’s Economic Plan

American History I

Unit 3 – The New Nation

Day 2 – Alexander Hamilton’s Economic Plan

Five parts of Hamilton’s Economic Plan

1. Funding

2. State Debt Assumption

3. National Bank

4. Protective tariff

5. Excise tax

(1) Funding

• The first thing the US needed to do was pay its debts (over 80 million dollars)

• Funding Plan: issuing new bonds for old bonds; borrowing the money and paying back later • The government would issue new bonds

and replace the old ones (sold during the war) for more than their original value

• Some found out about the plan early and tried to buy up the seemingly worthless bonds before the plan came out

• Hamilton believed the wealthy would participate in buying and the US needed their help

(2) State Debt Assumption

• The US govt. would assume state debts to make them debt free

• The south was upset because they had little debt; the north had higher debt • Why would this upset the

south?

• The capital would be in a more southern location (i.e. Washington DC!!!!!)

(3) National Bank

• Set up to have one currency in the US and build confidence in the US

• Necessary & Proper Clause of the Const. allowed for this • Hamilton’s belief regarding the

Constitution allowed him to create the National Bank.

• Easier to do business

• Before this, each state make their own currency and it wasn’t always equal

• It would give more confidence in the Federal Government

• Anti-Federalists against it

A New Capital:

Washington, DC

• Congress decides to build

the capital on swamp land called “Foggy Bottom”

• Border of Virginia, and Maryland (Potomac River) • Located in the middle of the

country

• Created a compromise in Congress (North vs. South) • Most financial people lived

in the North East • Satisfied southerners in

Congress (Anti-Federalists)

(4) Tariffs

Protective tariffs

• Tax on imports (foreign goods) to protect American goods

(5) Taxes

Excise tax:

• Type of Sales Tax (specific items)

• The excise tax was placed on many items including whiskey, which was profitable

• Whiskey production was the main source of income for many western settlers and the tax was not well liked

Whisky Rebellion (1794)

• Rebellion against taxes in Hamilton’s plan on the frontier of Pennsylvania • Washington sent out 13,000 militia and

stopped the rebellion.

• Showed the power of the federal gov’t & that they wouldn’t accept rebellion (Ability to enforce laws) • Opposite of Shays’ Rebellion

• Leads to more support for the Democratic-Republican Party among the common people

• The Federalists were seen as a party against the common people

Video – G.W. & Whiskey Rebellion

Political Parties Authors of the Constitution wanted to avoid political parties

Why do you think this was the case? They felt these groups were “factions” that threatened the unity of a republic

However, two political parties form… Federalists & Democratic-Republicans (Anti-Federalists)

Alexander Hamilton vs. Thomas Jefferson

• Hamilton wants a STRONG government (Federalist) • Believes there should be a bank to

cover it!

• Against Jefferson

• Jefferson is a Democratic-Republican (formerly an Anti-Federalist) and wants STRONGER STATE gov’ts • Against Hamilton

• Thought the states should have more power and that a national bank would give WAY TOO MUCH power too the gov’t

http://www.youtube.com/

watch?v=Vy7FJJ_ud84

National Debt Pay national and state

debt (taxes)

Payment of only

national debt

Want national bank

(loose interpretation)

Loose interpretation

(loose translation)

Strong Federal

Government

Hamilton

Federalists

Based on farming

No national bank

(strict interpretation)

Strict interpretation

(strict translation)

Weak Fed. and Strong

State Government

Jefferson

Democratic-Republican

Based on shipping and

manufacturing

Political Party

Issue

Government Power

Constitution

National Bank

Economy

Formation of Political Parties

Foreign Policy Support France Support Britain

Problem: What happens when people disagree about the government?

Solution: Political parties

Script Writing

• When Washington became the first President, the country was a mess. To help fix this problem, he created a position called the Secretary of Treasury to take care of financial issues. Washington appointed Alexander Hamilton. Another member of Washington’s cabinet, Jefferson, disagreed with Hamilton.

• Your task: Create and film a skit in which Hamilton & Jefferson sit down with a mediator to work out their differences.

Skit must include:

• Introduction of all parties involved

• Background on the 3 parts of Hamilton’s plan

• Hamilton’s point of view on why the plan is good (North)

• Jefferson’s point of view on why the plan is bad (South)

• A conclusion to the mediation – either a compromise (which was what happened historically), or a disagreement (mediation didn’t work)

• Use info from your notes and the textbook (p. 285-286)

• Skit is worth 10 points

Questions

• What are the five parts of Hamilton's economic plan?

• Why was the U.S. capital moved to Washington D.C.?

• What does the Whiskey Rebellion in 1794 show about the United States government?

Vocabulary

• Tariff

• National Bank

• Whiskey Rebellion (1794)