The Federalist Era
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Thomas Jefferson was the head of the State Department, which handles relations with other nations. He named Alexander Hamilton to manage the nation's money at the Department of the Treasury.
Hamilton proposed that the federal government take over and pay off the states' wartime debts. He argued that paying off the debt as a nation would build national credit and make it easier for the nation to borrow money. When borrowing money from citizens during the American Revolution, the government issued bonds. These are notes that promise repayment of borrowed money in the future. While waiting for repayment, many bond owners— shopkeepers, farmers, and soldiers—sold their bonds. They accepted less money than the bonds' stated value |
Hamilton also asked Congress to create a national bank—the Bank of the United States. The proposed bank would hold government funds and make debt payments
At that time, different states and banks issued their own currencies. Having a national currency would make trade and all other financial actions much easier.
Madison and Jefferson opposed a national bank, believing it would only help the wealthy. They argued that the Constitution did not give Congress the power to create a bank
The tariffs would raise money for the government and protect American industries from foreign competition.
The government had the right to impose direct taxes on the people and called for taxes to pay the national debt.
At that time, different states and banks issued their own currencies. Having a national currency would make trade and all other financial actions much easier.
Madison and Jefferson opposed a national bank, believing it would only help the wealthy. They argued that the Constitution did not give Congress the power to create a bank
The tariffs would raise money for the government and protect American industries from foreign competition.
The government had the right to impose direct taxes on the people and called for taxes to pay the national debt.
In 1791 Congress passed a tax on the manufacture and sale of whiskey. Their anger turned into violence in July 1794. An armed mob attacked tax collectors and burned down buildings. This protest, called the Whiskey Rebellion
President Washington issued the Proclamation of Neutrality, which prohibited Americans from fighting in the war. The proclamation also barred French and British warships from American ports. Congress responded to the conflict by creating a new navy in 1794.
Debate over the national bank highlighted these differences. The Constitution gave Congress specific powers to do such things as issue and borrow money. To Hamilton, this implied that the federal government could create a bank to help with these tasks
Jefferson thought the bank was wrong
The French viewed the 1794 Jay's Treaty as an American attempt to help the British in their war with France. To punish the United States, the French seized American ships that carried cargo to Britain.