Chapter 3 The Parties Begin

“Liberty for the whale means death for the minnow” What does this saying mean? How does this relate to the United States?

All About Power Political parties developed because of a disagreement between Jefferson and Hamilton They were both concerned about liberty and power How do you balance the two? Government powerful enough to keep order Make sure that the government doesn’t oppress people

Hamilton’s Idea In favor of a strong government Should be run by aristocrats Feared the masses (the ordinary people) Why didn’t he trust them? Wanted government by the few Knew that the country needed checks and balances to work Encouraged industry

Jefferson’s Idea In favor of states’ rights Wanted a weak federal government Why? Thought ordinary people could govern themselves If they were educated Wanted an amendment to provide free education Did this happen? Wanted a nation of farmers

The Parties Begin Hamilton’s Followers Jefferson’s Followers Federalist Party Conservative on most issues Democratic-Republican Party Sometimes called the Republican Party Not like the Republican Party of today Eventually led to today’s Democratic Party Liberal on most issues

Money Issues America was turning into a capitalistic society Basic parts of capitalism: Capital Money (or goods that can be turned into money) Credit Borrowing power (ability to borrow money) Collateral Promise something of value to a lender if you can’t pay them back

Money Issues Governments also need to borrow money Bonds Interest Promise to pay back amount loaned (plus interest) Bond holders are called Investors Interest Charge for borrowing money

Money Issues The Congress under the Articles of Confederation borrowed money Why? Didn’t pay off the debt properly After the Constitution was written, there were disagreements over what should be done with the debt

Money Issues There were rumors that the government wouldn’t pay the investors back What would you do if you loaned someone money and you didn’t think they would pay you back? Investors sold their bonds to other people for less than they were really worth The people who bought the bonds from the investors are called speculators Taking a risk Why?

Attempts to Fix the Money Problem Jefferson Said new government shouldn’t have to pay off the debt Why not? Shouldn’t be responsible for the mistakes of the old government Didn’t want the speculators to get richer

Attempts to Fix the Money Problem Hamilton Wanted the government to pay off the debt Why? Made a deal with Madison and Jefferson They agreed to pay off the debt His financial plan was very successful Paid off the debt by the time he left the cabinet The United States had good credit Why is this important? Established free enterprise Keep government rules for businesses at a minimum