The Federalist EraChapter 9

Early Changes

During Washington’s presidency, he focused mostly on foreign affairs and military matters – he left the financial issues to his secretary of the treasury-Alexander Hamilton

The national debt (amount of money owed) was growing. He needed to find a way to pay it off

• 1790 U.S. debt was $54,000,000 (million dollars) • In 2009 dollars this is $4,100,000,000,000 (Trillion dollars)• Debt (2012) was $15,260,000,000,000 (Trillion dollars)

what is it now????• debtclock

– Hamilton's plan» He wanted to the federal government to pay back loans

made from foreign countries, individual citizens, as well as state governments

Opposition to the plan• Congress agreed to pay the states• Paying back the citizens caused an issue

– The government had issued bonds to citizens. Many of the citizens who bought these had resold them for less than face value to speculators

» Hamilton proposed that these bonds be bought back at their original value

» Opponents believed that this would make the speculators rich

» Original bond holders felt betrayed» *Southern states objected because they had

accumulated less debt than the northern states and felt the would pay than their fair share

Compromise– If the capital was moved south, than the

southern states would agree to Hamilton’s plan

• A special district was created between Maryland and Virginia along the banks of the Potomac River

– Washington D.C.– Hamilton and Jefferson’s views on the direction of the

country differed as well» Hamilton wanted a manufacturing economy with

protective tariffs to protect business (people would depend upon each other)

» Jefferson wanted an agrarian economy (people would depend upon themselves)

Reminder For Mrs. Ballantyne:

• Talk about bonds, speculators and Hamilton vs. Jefferson

The National Bank– This was another proposal that brought to light the

separate views of Jefferson and Hamilton• Hamilton’s idea for a national bank would enable a source of

loans for business and people (only 8 banks existed in the nation in 1792)

• Jefferson and Madison opposed this idea– They claimed it was unconstitutional

» He believed in a strict constitution

– Hamilton believed in a loose constitution

» Government could take reasonable action not forbidden by the constitution

» In the end Washington and Congress agreed with Hamilton and in February 1791 charted the Bank of the United States (this did provide stability for the U.S. economy.)

• The debt reduction plan and formation of the national bank were ideas to help bring economic stability to the United States.

• Challenge– Brainstorm and list at least 3 ideas that would

help to reduce the current US debt (16.3+ trillion dollars). Be able to intelligently discuss these in class tomorrow!