Launching the New Ship of State ( ) AP US Unit 4 - Chapter 10 October 19, 2010

America in 1789 Population was doubling every 25 years –First census (1790) recorded 4 million people –Philly was the largest city with 42,000 – 90% of the population was rural –95% of the population lived east of the Appalachians If you did live west of the Appalachians you lived in KY, TN, or OH

What was at Stake The Founding Fathers were trying to construct a large republic – something previously un-attempted and thought to be impossible

Washington as President Unanimously elected in 1792 The first capital was in NYC

Making Changes from the Beginning - the First Cabinet Washington began setting precedents right away by establishing a cabinet. At first only 4 people in the cabinet: Secretary of State: Thomas Jefferson Secretary of Treasury: Alexander Hamilton Secretary of War: Henry Knox Attorney General: Edmund Randolph

Bill of Rights States had ratified the Constitution based on the assumption that a Bill of Rights would be included Madison didn’t want a state based convention to propose the amendments, so he rammed them through Congress

The Amendments 1-3: Basic Rights and Old Fears of England 4-8: Rights of the Accused –Don’t forget the property right deal slapped onto Amendment 5 9 and 10 Limiting the rights of the Federal Government

Alexander Hamilton Financially brilliant, conservative, either liked or hated Wanted to shape the fiscal policy of the US to favor the wealthy who would then lend support and money to the government. When they thrived, the benefits would trickle down to the lower classes.

Making the Federal Government a Trustworthy Financial Institution.. Funding national debt at par: face value PLUS interest –Downside:those in the know bought bonds from veterans and other poor for pennies on the dollar before news of the government’s decision had reached those original holders –Upside for Hamilton: strengthened the federal government so it was fiscally reliable and was a stab at those who still wanted a weak federal government

Assumption of State Debts Known as “assumption” –This was about what to do with debts incurred during the Revolutionary War –Upset states like VA who had already dealt with their debt Therefore it was not originally passed by the Senate Hamilton got Jefferson to coerce those in VA to pass the assumption bill if the new capital was moved to the Potomac -> Washington D.C.

Hamilton’s Theory of National Debt Debt was actually a good thing –The more people the government owed money to, the more people would have a vested interest in the well-being of the nation

Hamilton’s 3-Step Plan Place tariffs on imports Excise taxes on things like Whiskey –Both of these would raise money to pay off the interest on the national debt Create a National Bank –This would ALSO help with building American manufacturing up to the level of American agriculture. AH’s 3 rd report on American Manufacturing said this would help because: Diversify your economy Felt would actually help agriculture –FREAKED OUT Jefferson

Hamilton and the National Bank Banks had never existed before in America because great concentrations of wealth in the colonies were a threat to the mother country Hamilton wanted a federal bank to: –Be a powerful private institution in which the government held stock –To stimulate business by keeping surplus federal funds in circulation –To print much needed paper money in a sound national currency

Is a National Bank Constitutional? Jefferson said no – the Constitution never said anything about a bank (strict constructionist) Hamilton said yes – the Constitution never prohibited a bank (loose constructionist) –Article I Secion VIII para 18: Congress may pass laws “necessary and proper” to carry out the powers vested in government agencies –Also Congress had the right to regulate commerce When the Constitution designates an end (regulating commerce), it implies the means to the end

Hamilton vs. Jefferson They were complete political opposites Pro-Banker; Urban; Yay development - Manufacturing should = Agriculture Pro-Agriculture; Rural; No development - should be a nation of small farmers

First Bank of the US (BUS) Bank of US was created in 1791, chartered for 20 years, in Philly with a capital of $10 million –Joint public/private venture 1/5 of the capital was held by the federal government Rest of stock was rapidly bought by investors

Whiskey Rebellion – 1794 Those who made whiskey on the frontier and even used it as a medium of exchange felt that Hamilton’s tax put too much burden on them Brought collections to a halt by tar and feathering the collections officers

Whiskey Rebellion – 1794 Washington summoned the militia of several states to help put down this rebellion –They actually showed up By the time the militia got there – no big deal, rebellion was really tiny

Whiskey Rebellion – 1794 IMPORTANT: showed that the federal government could and would use its power to control events in the nation. Also strengthened and gave respect to the fledgling government