The Federalist Era

The Federalist Era 1789-1800

“ Our prevailing passions are ambition and interest; and it will be the duty of a wise government to avail itself of those passions, in order to make them subservient to the public good.”Alexander Hamilton, 1787 How was this viewpoint manifested in Hamilton’s financial program as Secretary of the Treasury?

Washington’s Presidency • Members of the first Congress under the Constitution were elected in 1788 and began their first session in March of 1789 in New York City, then the nation’s temporary capital. • George Washington was unanimously elected by the electoral college as the nation’s first president and took the oath of office on April 30th, 1789. • “The inauguration was a…republican affair. Washington wore a simple suit of black velvet; and the ceremony itself had to be delayed for almost two weeks until a sufficient number of congressmen arrived. They were all, Washington included, making it up as they went along.”

Washington’s Presidency

Organizing the Federal GovernmentExecutive Departments • As chief executive, one of Washington’s principal task upon entering office was to organize new departments of the executive branch. • The Constitution specifically authorizes the president to “nominate, and by and with the Advice and Consent of the Senate…appoint…public Ministers and Consuls…and all other Officers of the United States, whose Appointments are not herein otherwise provided for, and which shall be established by Law…” • Washington installed a Cabinet system, bringing on Thomas Jefferson as Secretary of State, Alexander Hamilton as Secretary of the Treasury, Gen. Henry Knox as Secretary of War, and Edmund Randolph as the Attorney General. • These four men formed a cabinet of advisors with whom Washington met to discuss policy issues. Thus began the custom, continued to this day, of a president calling cabinet meetings as a basis for obtaining advice and information from key leaders in the administration.

Organizing the Federal GovernmentFederal Court System • The first battle Washington evaded focused on the shape and powers of the federal courts. The Constitution offered even less guidance on the judiciary than it did on the Executive branch. The studied ambiguity reflected apprehension about any projection of federal power that upset the compromise between state and federal sovereignty. Washington personally preferred a unified body of national law, regarding it as a crucial step in creating what the Constitution called “a more perfect union.” In nominating John Jay to head the Supreme Court, he argued that the federal judiciary “must be considered as the Key-Stone of our political fabric” since a coherent court system that tied the states and regions together with the ligaments of law would achieve more in the way of national unity than any other possible reform. • But that, of course, was also the reason it proved so controversial. The debate over the Judiciary Act of 1789 exposed the latent hostility toward any consolidated court system. The act created a six-member Supreme Court, 3 circuit courts, and 13 district courts but left questions of original or appellate jurisdiction intentionally blurred so as to conciliate the advocates of state sovereignty. Despite his private preferences, Washington deferred to the tradeoffs worked out in congressional committees, chiefly a committee chaired by Oliver Ellsworth of Connecticut, which designed a framework of overlapping authorities that was neither rational nor wholly national in scope. In subsequent decades John Marshall, Washington’s most loyal and influential disciple, would move this ambiguous arrangement toward a more coherent version of national law. But throughout Washington’s Presidency the one thing the Supreme Court could not be, or appear to be, was supreme, a political reality that Washington chose not to contest.

Hamilton’s Financial Program • One of the most pressing problems faced by the United States under of the Articles of Confederation had been the government’s financial difficulties. Washington gave total responsibility for rescuing the debt-burdened American economy to his Secretary of the Treasury, Alexander Hamilton.

Hamilton’s Financial Program • Hamilton buried himself in the numbers for three months and emerged with a 40,000-word document titled Report on Public Credit . His calculations revealed that the total debt of the United States had reached the daunting (for then) size of $77.1 million, which he divided into three separate ledgers: foreign debt ($11.7 million), federal debt ($40.4 million), and state debt ($25 million). • Hamilton’s proposed a simple strategy to strengthen the nation’s finances.

Hamilton’s Financial Program Goal • To strengthen the nation’s finances and promote economic growth • To give the propertied and financial classes a stake in the new government • To move the country away from its reliance on agriculture and toward an economy based on commerce and manufacturing

Hamilton’s Financial Program Components • Funding the national debt at face value (par) with current holders of government bonds • Federal assumption of state debts incurred during the Revolution • Government subsidies to encourage American manufacturing and a protective tariff on imported goods to raise revenue and to protect America’s new and developing industries from foreign competition • An excise tax on liquor and spirits to aid in raising revenue to fund the nation’s debts. • A national bank that would serve as a depository for federal funds, in turn providing both a stable currency and a source of capital for loans to fund the development of business and commerce

Hamilton’s Financial Program Support Opposition All three ingredients in his plan—funding, assumption, and the bank—were vigorously contested in Congress, with Madison leading the opposition. The watchword of the critics was consolidation, an ideological cousin to monarchy Opponents of the program feared the program served the interests of the wealthy elite at the expense of indebted small farmers and Revolutionary War Veterans • Support for the Hamiltonian program came chiefly from northern business interests and merchants

Hamilton’s Financial Program • After much political wrangling and bargaining, Congress adopted several components of the Hamiltonian program including • Funding the debt at face value with current bond holders • Federal assumption of state debt • In exchange for critical southern support for his assumption bill, Hamilton agreed to provide Jefferson and Madison with northern support for placing the national capital in the South • The bargain (struck over dinner at Jefferson’s apartment) led to the passage of the Residence Act, which called for the temporary relocation of the capital from New York City to Philadelphia while a new capital was constructed on the banks of the Potomac River on a site to be chosen by Washington himself

Bank of the United States • Of all the components of Hamilton’s economic program, the creation of a National Bank sparked the most heated debate • Congress passed the bill over the objections of Madison, Randolph, and Jefferson • Before signing the bill into law, Washington asked Hamilton and Jefferson to compose written opinions on the constitutionality of the bank bill • Washington’s request sparked the first debate on whether the Constitution should be interpreted broadly or strictly

Bank of the United StatesJefferson’s Viewpoint “I consider the foundation of the Constitution as laid on this ground: “all powers not delegated , to the United States, by the Constitution, nor prohibited by it to the states, are reserved to the states, or to the people.) (XIIth amendment.) [actually Amendment X] To take a single step beyond the boundaries around the powers of Congress, is to take possession of a boundless field of power, no longer susceptible of any definition.”

Bank of the United StatesJefferson’s Viewpoint • Jefferson argued forcefully thatthe “Constitution allows only the means which are ‘necessary,’ not those which are merely ‘convenient,’ for affecting the enumerated powers.” According to Jefferson, a national bank, although “convenient,” was not absolutely necessary. • In Jefferson’s view, what the Constitution does not permit, it forbids. Calling for a strict interpretation of the Constitution, Jefferson argued that the Constitution did not specifically authorize Congress to create a bank. Therefore, he concluded that the states, not Congress, had the power to charter banks.

Bank of the United StatesHamilton’s Viewpoint “Now it appears to the Secretary of the Treasury that this general principle is inherent in the very definition of government and essential to every step of the progress to be made by that of the United States, namely: That every power vested in a government is in its nature sovereign and includes , by force of the term, a right to employ all the means requisite and fairly applicable to the attainment of the ends of such power…”

Bank of the United StatesHamilton’s Viewpoint • Hamilton argued persuasively that “there was natural and obvious relation between the institution of a bank and the objects of several of the enumerated powers of the [federal] government,” specifically the power to collect taxes, the power to regulate trade and the power to provide for the common defense. • Because a national bank was “necessary and proper” in order to carry out these powers, Hamilton maintained that Congress had the implied power to charter a bank. “The incorporation of a bank is a constitutional measure;…the objections taken to the bill, in this respect, are ill-founded.”

Washington’s Decision • Although Jefferson urged Washington to veto the bank bill, writing “the negative of the President is the shield against the invasions of the legislature,” Hamilton’s arguments prevailed and Washington signed the bill into law thus chartering the Bank of the United States • The Bank of the United States (built in Philadelphia, then the nation’s temporary capital) began operations in 1791 under a charter that granted it the right to continue for twenty years

Impact • Congress failed to act on Hamilton’s call to subsidize manufacturing interests. In addition, the tariff passed by Congress was for revenue raising purposes and set at a rate that was too low to protect America’s industries. • Nevertheless, once enacted, Hamilton’s program had many effects he had intended and won the support of influential segments of the population.

Impact • Hamilton’s program quickly restored the public credit and commercial productivity surged • The trade in treasury bonds soared, both at home and abroad. Hamilton also promoted the financial markets that flourished on Wall Street in the early 1790's. By the time city brokers gathered under the famous buttonwood tree in 1792 to create the forerunner of the New York Stock Exchange, they traded five securities: three issues of Treasury bonds and the stocks of the Bank of New York and the Bank of the United States, Hamilton had conjured all these entities into being. • In addition to the creation America's first central bank and funding the country's debt, Hamilton's many accomplishments as Secretary of Treasury also included the creation of America’s first budget and tax system, the customs service, and the Coast Guard

Settlers in the eigthteenth-century American backcountry sometimes resorted to violent protest to express their grievances. Analyze the causes and significance of the Whiskey Rebellion.

The Whiskey Rebellion • In 1794, farmers in western Pennsylvania raised a major challenge to federal authority when they refused to a pay a whiskey excise tax. The tax had been enacted as part of Hamilton’s economic program to aid in raising revenue to fund the nation’s debt. • The excise tax aroused the anger of small, backcountry farmers, many of whom distilled whiskey from surplus grain. Outraged farmers began terrorizing “excisemen,” (federal tax collectors) • The backcountry protests and the threat and violence disrupted the collection of the tax, representing a challenge to the authority of the federal government • But the federal government did not leave settlement of the so-called Whiskey Rebellion to Pennsylvania, as the Confederation Congress had left Shay’s Rebellion to Massachusetts

The Whiskey Rebellion

The Whiskey Rebellion • President George Washington and Alexander Hamilton, mindful of Shay’s Rebellion, decided in the summer of 1794 on a forceful response • Washington, drawing upon his constitutional powers as Commander in Chief of the “militia of the Several States,” called out the militias of three states, raising an army of nearly fifteen thousand men and personally led the troops, along with Hamilton, to western Pennsylvania to confront the challenge • Faced with this overwhelming display of force, organized resistance to federal authority soon collapsed • Exercising a high degree of restraint, Washington then pardoned two of the ringleaders who had been convicted of treason

The Whiskey RebellionSignificance • Whereas Shay’s Rebellion demonstrated the weakness of the Articles of Confederation and the need for a stronger government, the Whiskey Rebelliondemonstrated, for the first time under the new Constitution, the strength of the new federal government • Washington’s prompt use of force showed that it was no longer acceptable to challenge unpopular laws with the type of mob actions used during the Stamp Act crisis • Although lingering resentment among small farmers toward the federal government helped elect Thomas Jefferson in 1800, the central government had marshaled impressive power to uphold federal law against defiant citizens

Foreign Policy in the Years of the Early Republic • In 1789, the French Revolution erupted and Europe was soon plunged into war. Jefferson’s recent experience in Paris as a witness to the onset of the French Revolution had confirmed his conviction that a global struggle on behalf American ideals had just begun and that it had a moral claim on American support. • Thomas Jefferson and his supporters were sympathetic to the French cause and called for the United States to enter the war on the side of France.

Foreign Policy in the Years of the Early Republic • Washington was pleased to receive the key to the Bastille from Lafayette; he also knew as well as or better than anyone else that the victory over Great Britain would have been impossible without French economic and military assistance. But he was determined to prevent his warm memories of Rochambeau’s soldiers and de Grasse’s ships at Yorktown from influencing his judgment about the long-term interests of the United States. • Tight presidential control over foreign policy was unavoidable at the start because Jefferson did not come on board until March of 1790. Washington immediately delegated all routine business to him but preserved his own private lines of communication on French developments, describing reports of escalating bloodshed he received from Paris “as if they were the events of another planet.” • Complicating matters further, under the terms of the Franco-American alliance of 1778, the United States was a French ally, bound to defend her possessions in the West Indies. The crisis became more acute as France called upon the United States to honor the terms of the alliance and aid the French in the war.

Washington’s Proclamation of Neutrality Believing the United States to be too weak to fight a war and opposed to risking American independence, Washington issued a Proclamation of Neutrality in 1793 to keep the United States out of the conflict. Arguing that the Franco-American alliance had been made with the French monarchy and not the French Revolutionary government, Washington reasoned that the United States had no treaty obligation to aid the French in an offensive war.

The Citizen Genet Affair • The French foreign minister to the United States, Citizen Edmund Genet, brazenly objected to Washington’s policy and attempted to do all in his power to drag the U.S. into war on the side of France. • The brash, impetuous Genet managed to alienate some of the most ardent admirers of the French Revolution including Jefferson himself, who described his behavior in a letter to Madison as “incorrigible.” • In September, of 1793 Genet learned that the Cabinet had requested his recall. Meanwhile, in France, the Girondist government had fallen, the Jacobins were in power, and Robespierre was looking into the complaints about Genet. • Genet’s successor, Citizen Fauchet, arrived in January 1794. He carried with him documents condemning Genet’s conduct as criminal. At Hamilton’s urging, Washington refused to permit Genet to be extradited back to France, where he almost certainly would have faced the guillotine. • Genet was thirty-one, his career was over, and he was facing permanent exile. The sale of his furniture, carriage and horses brought in just enough money to buy a small farm on Long Island. Citizen Genet became a citizen farmer and married Miss Cornelia Clinton, daughter of the governor of New York. He became a naturalized American citizen and never saw France again.

Foreign Policy in the Years of the Early RepublicThe Jay Treaty (1794) • A number of issues strained relations between the United States and Great Britain. • Firstly, the British refused to evacuate forts in the Northwest Territory. Secondly, British naval commanders, ignoring America’s maritime rights as a neutral, seized some 250 American merchant ships trading with the French West Indies. Worse yet, in a flagrant violation of American sovereignty, commanders of the Royal Navy impressed scores of American sailors into service on English vessels.

Foreign Policy in the Years of the Early RepublicThe Jay Treaty (1794) • With Anti-British sentiment already on the rise, it was reported that the governor general of Canada had delivered a war-like speech to the Indians on the northwestern frontier. • Determined to avoid war with Great Britain, Washington dispatched Chief Justice John Jay to London with orders to negotiate a treaty resolving the crisis.

Foreign Policy in the Years of the Early RepublicThe Jay Treaty (1794) • Jay brought back a treaty in which the British pledged to evacuate the chain of posts on United States soil. The promise inspired little confidence since it had been made before in Paris (to the same John Jay!) in 1783. • In addition, Britain consented to pay damages for the recent seizures of American ships. But, the British stopped shorted of pledging anything about future maritime seizures and impressments or about supplying arms to Indians. Lastly, Jay was forced to make concessions by binding the United States to pay the debts owed British merchants on pre-Revolutionary accounts.

Foreign Policy in the Years of the Early RepublicThe Jay Treaty (1794) Diplomatic Consequences • Although the treaty strained relations with France, the treaty kept the peace with Great Britain, established undisputed sovereignty over the entire Northwest, and produced a reasonably satisfactory commercial relationship with Great Britain, whose trade was important to the United States. • Most importantly, Spain feared that Jay’s Treaty foreshadowed an Anglo-American alliance, thereby significantly strengthening America’s ability to exploit European rivalries in pursuit of American interests.

Foreign Policy in the Years of the Early RepublicThe Jay Treaty (1794) Domestic Consequences • Led by Jefferson, southern planters vehemently opposed the Jay’s Treaty, which was derided as akin to surrender to the British, as well as a betrayal to southern interests. • Opponents bitterly protested that Southern planters would have to pay the major share of pre-Revolutionary debts while rich New England shippers would collect damages for the British seizure of their merchant vessels. • Angry mobs hanged, burned, and guillotined “Sir” John Jay in effigy. The unpopular treaty exacerbated deepening political divisions, contributing to the development of political parties.

Foreign Policy in the Years of the Early RepublicPinckney’s Treaty (1795) • Jay’s Treaty had unforeseen (and beneficial) consequences for the United States. • Seeing the treaty as a sign that the United States was drawing closer to Great Britain, Spain agreed to Pinckney’s Treaty in 1795, granting the United States free navigation of the Mississippi River and the right of deposit at New Orleans (the right to reload goods on ocean-going ships without having to pay duties to Spain). • Lastly, Spain agreed to cede disputed territory north of Florida to the United States.

Emergence of Political Parties • The Founding Framers at Philadelphia had not envisioned the existence of permanent political parties. • Regarding organized opposition to the government- especially a democratic government based on popular consent-as disloyal, they saw parties as sources of corruption and vehicles for self-interest and ambition. • Washington’s election by unanimous vote of the Electoral College in 1789 underscored the popular belief that America would remain free from the dangerous effects of the formation of permanent factions.

Emergence of Political Parties • Nonetheless, during Washington’s administration, political parties began to coalesce around the divergent economic policies and political philosophies of Alexander Hamilton and Thomas Jefferson. • The Federalist party supported Hamilton’s programs while opponents led by Jefferson and Madison formed the Democratic-Republican party. • The French Revolution and the question over whether to support France further deepened political divisions between Federalists, who supported Washington’s policy of neutrality and Democratic-Republicans who sympathized with France.

Emergence of Political Parties Federalists Democratic-Republicans Led by Thomas Jefferson and James Madison Drew support from the South, small farmers, and urban artisans Favored a weak central government and a strict interpretation of the Constitution Opposed the national bank and protective tariffs Favored agricultural interests Favored the French over the British in foreign affairs • Led by Alexander Hamilton and John Adams • Drew support from New England and eastern port cities • Favored a strong central government and a loose interpretation of the Constitution • Supported the Hamiltonian economic program including the national bank and protective tariffs • Favored commercial interests • Favored the British over the French in foreign affairs

The Farewell Exhausted after the diplomatic and partisan battles of his second term, Washington decided to retire. Assisted by Alexander Hamilton, the president wrote a Farewell Address (actually a letter for publication in a Philadelphia newspaper) in late 1796. In this message, which had enormous influence because of Washington’s prestige, the president • cautioned the United States to “steer clear of permanent alliances with any portion of the foreign world.” • warned against the formation of permanent political parties

The Federalist Era Analyze the contributions of John Adams in helping to establish a stable government after the adoption of the Constitution.

The Election of 1796 • The election of 1796 was the first contested presidential election in American history and pitted the Federalist candidate vice-president John Adams against the Democratic-Republican candidate, former secretary of state Thomas Jefferson. • With Washington’s retirement from office, open partisan rivalries were laid bare. The tone of the election was acrimonious as Federalists attempted to identify Jeffersonians with the violence of the French Revolution and Democratic-Republicans accused the Federalists of favoring monarchism while condemning the Jay Treaty.

The Election of 1796 • Adams won by a slim margin of three electoral votes. In accordance with the Constitution as originally written, Jefferson, with the second highest number of electoral votes, was elected vice-president. • The election of a Federalist candidate, John Adams, as president, and a Democratic-Republican candidate, Thomas Jefferson, as vice-president exposed a flaw in the Electoral College System which had resulted from the formation of permanent political parties. The method of electing the president and vice-president would later be changed by the Twelfth Amendment.

Quasi War with France • Although American relations with Great Britain and Spain improved as a result of Jay’s and Pinckney’s Treaties, relation’s with revolutionary France quickly deteriorated as French warships began to attack American merchant vessels, seizing nearly 300 by mid-1797. • Understanding the importance of keeping the new nation out of war, Adams dispatched a trio of special envoys to Paris to find a way out of the crisis.

The XYZ Affair • Upon reaching Paris, Adam’s envoys were approached by agents of the French foreign minister (later identified as X, Y, and Z in published dispatches). Among other concessions, the French spokesmen demanded a bribe of $250,000 before any negotiations could begin. • The American envoys were indignant and refused. When Adams learned of the incident, he sent a message to Congress denouncing the French insults and urged Congress to undertake military preparations. • In response, Congress suspended commerce with France, created a Department of the Navy, and appropriated funds for the construction of new warships. The United States soon found itself embroiled in an undeclared war with France.

Quasi War with France • War hysteria and anti-French sentiment swept through the United States. “Millions for defense, but not one cent for tribute” became the slogan of the hour. • In the end, Adams resisted enormous pressure to ask for a declaration of war against France. Realizing that war must be avoided while the country was relatively weak, Adams instead used diplomacy to settle rather than expand the undeclared naval war with France (1798-1800.) The resulting Convention of 1800 officially ended the Franco-American Alliance. In a concession to France, the United States agreed to pay the damage claims of American shippers. • Although his actions undoubtedly contributed to his failure to win a second term, Adams, in resisting internal and external pressures for war with France, made possible a peaceful and independent entry into the new century. Adams not only avoided the hazards of war, he also unknowingly smoothed the path for a peaceful purchase of Louisiana three years later.

The Alien and Sedition Acts • Taking advantage of the strong emotions stirred up by the undeclared naval war against France, Federalists passed a series of laws known as the Alien and Sedition Acts (1798). The acts were intended to weaken the Democratic-Republican opposition.

The Alien and Sedition Acts

The Alien and Sedition Acts • Federalists defended the measures as an appropriate response to legitimate concerns about how disloyal aliens and criticism of the government might endanger the nation’s security and safety • Democratic-Republicansclaimed that all four laws exceeded the limits on constitutional powers delegated to the national government • Charged that the Sedition Act muzzled legitimate political dissent in violation of First Amendment guarantees of freedom of speech and freedom of the press

The Kentucky and Virginia Resolutions • With Federalists in control of all three branches of the federal government, Madison and Jefferson believed that the Alien and Sedition Acts embodied a threat to individuals caused by unchecked Federalist power. • In response, two states passed resolutions in 1798-1799, one written anonymously by Jefferson and adopted by the Kentucky legislature and another drafted by Madison and approved by the Virginia legislature.

The Kentucky and Virginia Resolutions • The Kentucky and Virginia Resolutions, as they were known, formulated a State’s Rights doctrine. Using the ideas of John Locke, the resolutions asserted that the national union had been formed by a “compact” among sovereignstates and that the national government only possessed those powers expressly granted to it by the Constitution. • The Kentucky Resolution further asserted that whenever the national government exercised any powers beyond those delegated to it by the Constitution, its acts were “unauthoritative, void, and of no force.” In other words, if the states decided that the central government had exceeded the constitutional limits on its authority, the Kentucky Resolution claimed that the states had the right to “nullify” federal laws.

The Federalist Era