HAMILTON’S ECONOMIC POLICY

FOCUS QUESTION Describe the difference between the two major political parties today.

HAMILTON’S BACKGROUND Extremely gifted individual Born illegitimate in the Caribbean Arrived in New Jersey in 1772 to attend college Served as Washington’s aide during the War Settles in New York Tied to no one state or region Had a national vision

HAMILTON’S PRINCIPAL GOALS Achieving independence from Great Britain Replacing the ineffective government of the Articles of Confederation with the more effective one of the Constitution of 1787 Establishing a modern, articulated financial system, not just public credit, for the US

HAMILTONIAN ECONOMIC POLICIES Hamilton was tasked with two major projects Restore the nation’s credit Stabilize the American economy The U.S. was deeply in debt. Without credit, the economy would falter To restore credit, old debts had to be paid

THREE TIER SYSTEM Restore Credit Develop Revenue Manage Money Supply

REBUILD THE NATION’S CREDIT Funding at Par Pay off the old debt by taking out new debt Establishes the full faith and credit of the U.S. government Pay current bond-holders Original bond-holders left out Assumption Congress will pay the debts of the states Sets the national government as supreme over the states Several states had already paid off their debts

DEVELOP REVENUES Set a tariff on imported goods Helped protect industry Caused trouble for exporters Established an excise tax on whiskey Angered western farmers

MANAGE THE MONEY SUPPLY Established a Bank of the U.S. Owned by national government and investors All federal revenues deposited in the B.U.S. The Bank could loan money, as any other bank might. Many unfamiliar with banking Many felt the Bank was unconstitutional

RESULTS The national economy rebounded Credit was available Trade increased Many profited Profits, however, were largest among the wealthy. As a result, two political parties develop Federalists Democratic-Republicans