Hamilton and National Finances

Hamilton and National Finances Chapter 10 Section 2

Grew up running a shipping company in the West Indies • Businessman and Lawyer • Supported the Federalists • Secretary of the Treasury under George Washington • Had to figure out how to pay the national debt Alexander Hamilton

National Debt – money that a country owes either foreign lenders or its own citizens • U.S. debt post-Revolution • Foreign Nations = $11.7 million • U.S. citizens = $40.4 million • Mostly in the form of bonds • Hamilton – needed to stabilize finances. Wanted to: • Keep American trust • Pay debt immediately • Pay bonds over time The National Debt Issue

This is an example of a bond sold by the state of Massachusetts in 1779. When a bond is “cashed in,” it earns a certain percentage of interest over time. In this case, it will earn 6% each year. Government Bonds – a certificate that represents money owed by the government to a citizen; used primarily as a way for a government to raise money

Many people sold their bonds to speculators –people who would buy items at low prices in the hopes that the value would eventually rise • Initial buyers sold them thinking that the government would never repay their debts • Hamilton’s plan would pay the bond value in full = speculators make a big profit Bond Issues

Statesman from Virginia • Drafted the Declaration of Independence • Supported Anti-federalists • Against Hamilton’s plan for bond repayment • Not fair to the original bond owner • “Immense sums were thus filched (stolen) from the poor and ignorant” • Did not gain much support on this issue Jefferson Speaks Up

States collectively owed $25 mil for war expenses • Hamilton wanted federal government to pay $21.5 mil of this total • Increase support for federal government • Help national economy • States with few war debts (NC, VA) didn’t want to pay taxes to help pay the debts of other states • Hamilton needed help to get this passed… State Debts

Washington D.C.’s location is the result of a compromise between the North and South. The sketch shows the city in iann1800. The Washington D.C. Compromise

Hamilton worked out an agreement with southerners like Jefferson and Patrick Henry • If the southern states would support the national debt relief, Hamilton would get northern support to move the national capitol from New York to an area on the Potomac River • Became Washington D.C. • Philadelphia served as a temporary capitol while D.C. was under construction The Washington D.C. Compromise

Hamilton Jefferson • Strong central gov’t • Little faith in common person • Didn’t have sense to do what is “right” • Promote manufacturing and business • Higher taxes on imported goods • “protective tariff” • Protect powers of states • Most people are capable people • Have the right to govern themselves • Did not want to depend on manufacturing – farmers make best voters • Lower tariffs • Helps farmers by keeping import prices low Ideas of Hamilton and Jefferson

Hamilton wanted to create a national bank to keep the funds of the national government safe • Also wanted it to be a mint = place where money is printed or coined • Jefferson and others did not think that the government had the power to create a national bank • Was not listed in the Constitution Debate over the Bank

Then • Now The Bank of the United States

Loose Construction Strict Construction • Hamilton • The “Necessary and Proper” clause of the Constitution gives Congress the authority to create a Bank of the United States • Congress can do anything “necessary and proper” to meet the goals of the Constitution • Jefferson • The Constitution does not give Congress the authority to create a Bank of the United States • Government should only do EXACTLY what is listed in the Constitution • Didn’t think Bank was “necessary” Conflicting Constitutional Views

Hamilton and National Finances