Hamilton’s Economic Plan

BackgroundNational and State government had very large amount of debt after years of war

Dealing with the nations economy became a dividing point between southern planters and northern businessmen

Hamilton as Secretary of Treasury under the President Washington, with his support, created a three part plan

Deal with National Debt

Gain Revenue

US banking System (National Bank)

Expectations of New Nation

Improved trade, free from restrictions

Government protection

Stable Economy

One united nation

Fair tax laws (specifically wanted by farmers)

Right to settle in western lands

No government interference in daily life

Simpler trade laws

Protection from foreign competition

1. Deal with National Debt

Hamilton’s plan Pay foreign debt first

Gradually repay citizens who bought bonds

Federal Government absorb states’ debtSouth didn't’t want this, but agreed as long as the capital would be moved to neutral location closer to the south

United States owed $11.7 million to other countries

Owed $40.4 million to citizens Bondholders who needed money sold their bonds to speculators for less then they bought them for

2. Gaining Revenue Hamilton wanted higher tariffs would make the price of foreign goods rise

Would bring in money (revenue)

Would promote buying American, in hopes of protecting from foreign competition

promote new business

Jefferson opposed because he feared it depended too much on business and manufacturing

Didn’t like the idea of depending on other people’s work to make a living, unlike farmers

Lower tariffs would keep products farmers bought at a lower price

3. US Banking System

Hamilton Create a National Bank for the Federal government to safely deposit money into

Create national mint to issue own moneyEach state creates their own bank 20 year trial- suggestions in hopes of lessening strong negative reaction from states rights activists

Jefferson opposed idea Too much power to federal government Constitution does not give congress power to create a bank

US Banking System (cont.)

Hamilton Loose constructionist Necessary and Proper Clause allowed government to create a national bank

Thought the government had the right to “take reasonable actions that the Constitution does not specifically forbid”

Jefferson Strict constructionist Necessary and Proper Clause is to be used in very special situations

Constitution does not give government right to create a national bank

Felt the federal government should only do what is specifically stated in the constitution