Building a Nation: Washington's Government & Hamilton's Economy

1. Objectives • Describe the steps Washington’s administration took to build the federal government. • Analyze Hamilton’s plans for the economy and the opposition to them. • Explain how a two-party system emerged in the new nation.

2. Terms and People • administration – the officials in the executive branch of government • precedent – an act or statement that becomes a tradition to be followed • Cabinet – the officials who head the major executive departments and advise the President • tariff – a tax on imported goods • loose construction – a broad interpretation of the Constitution relying on the implied powers of Congress

3. Terms and People (continued) • strict construction – a narrow interpretation of the Constitution that limits Congress’s actions only to powers specifically granted by the Constitution • Whiskey Rebellion – a 1794 protest by farmers in western Pennsylvania against an excise tax on whiskey • political party – a group that seeks to win elections, hold public office and shape policy • Democratic Republicans – a political party that emerged in opposition Hamilton’s economic policies

4. How did debate over the role of government lead to the formation of political parties? In 1789, the leaders of the new government gathered in New York City. The newly ratified Constitutionwas entirelyuntested. The Framers and President Washington knew that a good startwas essential to the future of the republic.

5. The nation was $52 million in debt. • There was no navy and the army had only 400 men. • Spain closed the Mississippi River in New Orleans to American trade. • British troops occupied American land along the Great Lakes. When George Washington took office, he quickly established precedents for running the government. The new President faced many challenges:

6. Washington picked a Cabinet to head each of four executive departments in his administration. • Secretary of State Thomas Jefferson • Secretary of WarHenry Knox • Secretary of TreasuryAlexander Hamilton • Attorney GeneralEdmund Randolph

7. The first task was to set up a court system. • The Judiciary Act of 1789 created district and circuit courts and a six-member Supreme Court. • The office of Attorney General was created to prosecute legal cases for the government. • John Jay was appointed as first Chief Justice of the Supreme Court.

8. The huge debt was the biggest problem facing the administration. Treasury Secretary Hamilton suggested a controversial plan. Rather than just pay off the federal debt, state debts would also be assumed. Bonds for the total would be sold to wealthy investors. The investors would receive annual dividends and have a stake in helping the government succeed.

9. Hamilton also proposed chartering a Bank of the United States to regulate state banks and insure business support. • He hoped to replace the nation’s agriculturally based economy with commerce and manufacturing. • He proposed a high tariff or tax on imported goods to earn revenue and encourage domestic industry.

10. 1 The plan would establish the nation’s financial credibility. 2 The plan would gain political support from the wealthiest Americans. 3 The plan would enrich investors who would reinvest and thus create more wealth. Hamilton saw 3 advantages to his financial plan

11. 1 Wealth would be redistributed from farmers to merchants, and from the South to the North. Investors who purchased the bonds would make huge profits at everyone else’s expense. The costs would fall on farmers who would have to pay excise taxes and higher tariffs. Antifederalists objected to Hamilton’s plan. They had 3 main complaints: 2 3

12. Secretary of State Jeffersonopposed Hamilton’s plan. Most southern states had already paid off their war debts. He asked why they should bail out northern states that still had debts. Jefferson believed the plan gave more power to the government than the Constitution permits.

13. Jeffersonfavored a strict constructionof the Constitution. Congress should be limited to the powers specifically granted by the Constitution. The Constitution does not give Congress power to charter a national bank, so it could not establish one Hamiltonfavored a loose construction of the Constitution. Congress has implied powers, and can take any actions not specifically forbidden. The Constitution allows Congress to act for the “general welfare” so it could charter a bank.

14. In 1791, Congress accepted Hamilton’s plan. • The national debt was funded, outstanding state debts were assumed, excise taxes and tariffs were levied, and the bank was authorized. • In return, a new national capital was created. Washington D.C. would be placed in the South, on the banks of the Potomac River.

15. An excise tax on whiskey led to divisions between the Federalists and the Antifederalists. • To increase their profits, western Pennsylvania farmers made whiskey from their grain. • The whiskey tax reminded farmers of British taxes. • In 1794, some farmersresisted payment. Theyharassed and intimidatedtax collectors.

16. Twelve thousand militiamen were sent to deal with the rebellion, but they found no organized insurrection. • Then Jefferson criticized Hamilton for the use of federal force to repress legitimate criticism. Hamilton persuaded Washington to suppress the Whiskey Rebellion.

17. Despite Washington’s disapproval, two political parties emerged. Democratic Republicans Favored Jefferson and Madison.This party was strongest among Southerners and farmers. Federalists Favored Hamilton and was strongest among Northerners, merchants, and the wealthy.

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