Hamilton’s Economic Plan

Background National and State government had very large amount of debt after years of war Dealing with the nations economy became a dividing point between southern planters and northern businessmen Hamilton as Secretary of Treasury under the President Washington, with his support, created a three part plan Deal with National Debt Gain Revenue US banking System (National Bank)

Expectations of New Nation Improved trade, free from restrictions Government protection Stable Economy One united nation Fair tax laws (specifically wanted by farmers) Right to settle in western lands No government interference in daily life Simpler trade laws Protection from foreign competition

1. Deal with National Debt Hamilton’s plan Pay foreign debt first Gradually repay citizens who bought bonds Federal Government absorb states’ debt South didn't’t want this, but agreed as long as the capital would be moved to neutral location closer to the south United States owed $11.7 million to other countries Owed $40.4 million to citizens Bondholders who needed money sold their bonds to speculators for less then they bought them for

2. Gaining Revenue Hamilton wanted higher tariffs  would make the price of foreign goods rise Would bring in money (revenue) Would promote buying American, in hopes of protecting from foreign competition promote new business Jefferson opposed because he feared it depended too much on business and manufacturing Didn’t like the idea of depending on other people’s work to make a living, unlike farmers Lower tariffs would keep products farmers bought at a lower price

3. US Banking System Hamilton  Create a National Bank for the Federal government to safely deposit money into Create national mint to issue own money Each state creates their own bank 20 year trial- suggestions in hopes of lessening strong negative reaction from states rights activists Jefferson  opposed idea Too much power to federal government Constitution does not give congress power to create a bank

US Banking System (cont.) Hamilton  Loose constructionist Necessary and Proper Clause allowed government to create a national bank Thought the government had the right to “take reasonable actions that the Constitution does not specifically forbid” Jefferson  Strict constructionist Necessary and Proper Clause is to be used in very special situations Constitution does not give government right to create a national bank Felt the federal government should only do what is specifically stated in the constitution