AP US HISTORY Hamilton’s Economic Program

Cornerstones of Hamiltonian Policy 1. funding at par – full funding 2. assumption of state debts 3. establishment of a National Bank 4. establishment of a protective tariff to benefit domestic manufacturing 5. excise taxes to assert the power of the national government

Hamilton’s Goals 1. strengthen the national government 2. win the support of the wealthy elite 3. encourage the growth of American industry through protectionism 4. maintain a public debt so citizens have a stake in the survival of the government

1. Full Funding Foreign debt $11.7 m, domestic debt $42.4 m, state debt $21.5m Options available – default, partial, or full funding Chose full funding – Why?  Establish credit of the US with foreign governments  Means of establishing support of the elite for the government The accumulation of a national debt would insure the loyalty of those to whom it was owed to The accumulation of capital in the Northeast

2. Assumption of State Debts Federal government would assume state debts – Why?  Compromise necessary  Tie the states more closely to the federal government  Loyalty of state bond holders  Creation of a federal debt  Designed to cause money (capital)

3. First Bank of the United States Would serve as depository for federal funds Capitalized at $10m – one fifth owned by the federal government and four fifths by private investors (elite) It was oversubscribed in two hours Deposits would be loaned to finance industry and commerce The elite would have a stake in the survival of the federal government Major debate over the constitutionality of the bank

4. Protectionism Concept of revenue versus protective tariff First tariff in 1789 Hamilton favored a protective tariff to benefit infant industries Industry and commerce would support the federal government Who would benefit most from a protective tariff?  The elite of the north would again have a financial stake in the federal government

5. Excise Tax Policy Excise tax on whiskey – why whiskey? Whiskey was the preferred drink of the south and the west while rum or cider was the preferred drink of the north and east (rum was excluded) Flow of tax money would be from the south to the north Flow of money from agrarian to industrial areas

Balance Sheet of Hamilton’s Economic Plan Masses were largely untouched by the policies of Hamilton Hamilton believed that the benefits of his program would eventually trickle down to the masses His program strengthened the federal government but failed to provide a sense of national unity Increased sectionalism as a result of discriminatory economic policy It established a direction for the country – proactive rather than reactive