The Rise of Political Parties

1. The Rise of Political Parties VS Thomas Jefferson-Democratic Republican Alexander Hamilton-Federalist

2. The Federalists Washington Adams Hamilton

3. The Anti-Federalists Madison Jefferson

4. Washington’s Precedent Setting Cabinet Thomas Jefferson- Secretary of State George Washington- President John Adams- Vice President Secretary of War-Henry Knox Secretary of the Treasury- Alexander Hamilton

5. Hamilton’s Economic Plan • 1790-Report on Public Credit: Should US fund the National Debt? • Hamilton believed that he could fund at par the $54 million debt through creditors purchase of government bonds and federal land. • Hamilton also proposed paying off the $25 million state debt as a proper national obligation. This was known as assumption. • In his second report Hamilton suggested an excise (internal) tax on whiskey-with lasting implications. • He also proposed not funding the national debt as a way to keep creditors tied to the US as well as not bankrupting the US. Investors would work hard to ensure the success of our country and it would “trickle down” to the mobocracy. (The only time trickle down has ever worked. ) • In order to ensure passage of this bill, Hamilton appealed to Jefferson by placing the new national capital on the Potomac, preserving VA as the most prominent state. (The VA Dynasty includes: Washington, Jefferson, Madison, and Monroe.

6. Hamilton’s Economic Plan Cont. • 1791-Report of Manufactures • Small group would manage many workers. • Provide employment opportunities, emigration, and expand the application of technology. • “Produce a more certain and steady demand for the surplus produce of the soil.” • Hamilton believed that capital, technology, and managerial discipline were the surest roads to national order and wealth. • Jefferson envisioned land as the key to prosperity and liberty for all. • Tariffs were put into place to increase federal revenue and encourage domestic manufacturing. Part of the cause of the schism between Feds and Anti-Feds was because southerners were forced to import so much as a result of a reliance on agriculture over industry.

7. National Bank • 1790-Report on a National Bank • Hamilton proposed a National Bank in order to diversify the national economy. • Private investors would pay ¾ on the dollar for a government bond. • The bank would then earn back most of the money used to fund the debt, make it available for loans, and earn interest on it from the Treasury. • It would cost taxpayers nothing and provide a safe place for government deposits, lending, and relieve the scarcity of hard cash (specie) by issuing paper money. • It would provide much needed credit for the economy and could regulate state banks. • Criticisms: • Dangerous scheme that would give power to small elite group. • Group would be able to influence and possibly undermine the federal government, much like in England. • “The country would be known as the U.S. of Bank.”

8. Strict v. Loose Construction • Constitutional • Congress can enact all measures “necessary and proper,” according to Hamilton. • Only unconstitutional activities were those expressly prohibited. • “Loose interpretation” • Washington had the opportunity to make the final decision and sided with Hamilton. • This leads to deepening political divide in the administration and ultimately to the Federalists v. Jeffersonian Republicans. • Unconstitutional • Could possibly oppress the states and trample on individual liberties. • Constitution should be interpreted “strictly” according to Madison and Jefferson. To step outside the Constitution’s boundaries is to “take possession of a boundless field of power no longer susceptible of any definition.” • Strict constructionists tended to be agrarian westerners and southerners. • Pro-state, weak central gov.

9. Whiskey Rebellion • 1st excise (internal tax) • Farmers used to trading in whiskey; easier to transport than corn and cheaper • Tax of 25% of the whiskey’s value wiped out and angered many Western Pennsylvanian farmers. • If not paid, they would face trial which would prove to be costly. • Only enforced in Pennsylvania • In July 1794 all “heck” broke loose when fed up Pennsylvanians rioted, including flying a flag of independence. • Hamilton denounced it as lawlessness that had to be squashed. • Washington, along with 13,000 troops, arrived to crush rebellion. • Resulted in severe limitation of opposition to federal policies. • Made it known that the federal government was the authority of the land, not the states government. (This would be challenged again during the Alien and Sedition Acts.)