AP US HISTORY

Hamilton’s Economic Program

Cornerstones of Hamiltonian Policy

1. funding at par – full funding 2. assumption of state debts3. establishment of a National Bank4. establishment of a protective tariff to

benefit domestic manufacturing5. excise taxes to assert the power of the

national government

Hamilton’s Goals

1. strengthen the national government2. win the support of the wealthy elite3. encourage the growth of American industry

through protectionism4. maintain a public debt so citizens have a

stake in the survival of the government

1. Full Funding

Foreign debt $11.7 m, domestic debt $42.4 m, state debt $21.5m

Options available – default, partial, or full funding

Chose full funding – Why? Establish credit of the US with foreign governments Means of establishing support of the elite for the

government

The accumulation of a national debt would insure the loyalty of those to whom it was owed to

The accumulation of capital in the Northeast

2. Assumption of State Debts

Federal government would assume state debts – Why? Compromise necessary Tie the states more closely to the federal government Loyalty of state bond holders Creation of a federal debt Designed to cause money (capital)

3. First Bank of the United States

Would serve as depository for federal fundsCapitalized at $10m – one fifth owned by the

federal government and four fifths by private investors (elite)

It was oversubscribed in two hoursDeposits would be loaned to finance industry

and commerceThe elite would have a stake in the survival of

the federal governmentMajor debate over the constitutionality of the

bank

4. Protectionism

Concept of revenue versus protective tariffFirst tariff in 1789Hamilton favored a protective tariff to benefit

infant industriesIndustry and commerce would support the

federal governmentWho would benefit most from a protective

tariff? The elite of the north would again have a financial

stake in the federal government

5. Excise Tax Policy

Excise tax on whiskey – why whiskey?Whiskey was the preferred drink of the south

and the west while rum or cider was the preferred drink of the north and east (rum was excluded)

Flow of tax money would be from the south to the north

Flow of money from agrarian to industrial areas

Balance Sheet of Hamilton’s Economic Plan

Masses were largely untouched by the policies of Hamilton

Hamilton believed that the benefits of his program would eventually trickle down to the masses

His program strengthened the federal government but failed to provide a sense of national unity

Increased sectionalism as a result of discriminatory economic policy

It established a direction for the country – proactive rather than reactive