Hamilton and National Finances Chapter 10 Section 2

Alexander Hamilton Grew up running a shipping company in the West Indies Businessman and Lawyer Supported the Federalists Secretary of the Treasury under George Washington Had to figure out how to pay the national debt

The National Debt Issue National Debt – money that a country owes either foreign lenders or its own citizens U.S. debt post-Revolution ◦Foreign Nations = $11.7 million ◦U.S. citizens = $40.4 million  Mostly in the form of bonds Hamilton – needed to stabilize finances. Wanted to: ◦Keep American trust ◦Pay debt immediately ◦Pay bonds over time

Government Bonds – a certificate that represents money owed by the government to a citizen; used primarily as a way for a government to raise money This is an example of a bond sold by the state of Massachusetts in When a bond is “cashed in,” it earns a certain percentage of interest over time. In this case, it will earn 6% each year.

Bond Issues Many people sold their bonds to speculators – people who would buy items at low prices in the hopes that the value would eventually rise Initial buyers sold them thinking that the government would never repay their debts Hamilton’s plan would pay the bond value in full = speculators make a big profit

Jefferson Speaks Up Statesman from Virginia Drafted the Declaration of Independence Supported Anti-federalists Against Hamilton’s plan for bond repayment ◦Not fair to the original bond owner ◦“Immense sums were thus filched (stolen) from the poor and ignorant” Did not gain much support on this issue

State Debts States collectively owed $25 mil for war expenses Hamilton wanted federal government to pay $21.5 mil of this total ◦Increase support for federal government ◦Help national economy States with few war debts (NC, VA) didn’t want to pay taxes to help pay the debts of other states Hamilton needed help to get this passed…

The Washington D.C. Compromise Washingto n D.C.’s location is the result of a compromise between the North and South. The sketch shows the city in iann1800.

The Washington D.C. Compromise Hamilton worked out an agreement with southerners like Jefferson and Patrick Henry ◦If the southern states would support the national debt relief, Hamilton would get northern support to move the national capitol from New York to an area on the Potomac River ◦Became Washington D.C.  Philadelphia served as a temporary capitol while D.C. was under construction

Ideas of Hamilton and Jefferson HamiltonJefferson Strong central gov’t Little faith in common person ◦Didn’t have sense to do what is “right” Promote manufacturing and business Higher taxes on imported goods ◦“protective tariff” Protect powers of states Most people are capable people ◦Have the right to govern themselves Did not want to depend on manufacturing – farmers make best voters Lower tariffs ◦Helps farmers by keeping import prices low

Debate over the Bank Hamilton wanted to create a national bank to keep the funds of the national government safe Also wanted it to be a mint = place where money is printed or coined Jefferson and others did not think that the government had the power to create a national bank ◦Was not listed in the Constitution

The Bank of the United States Then Now

Conflicting Constitutional Views Loose ConstructionStrict Construction Hamilton The “Necessary and Proper” clause of the Constitution gives Congress the authority to create a Bank of the United States ◦Congress can do anything “necessary and proper” to meet the goals of the Constitution Jefferson The Constitution does not give Congress the authority to create a Bank of the United States Government should only do EXACTLY what is listed in the Constitution ◦Didn’t think Bank was “necessary”