Hamilton and National Finances

A.Settling the Debt 1. Alexander Hamilton becomes Secretary of Treasury

Hamilton and National Finances 2. Hamilton has to pay off the national debt (amount of money owed by the U.S. to its lenders) a. US owes $11.7 mill to other countries

Hamilton and National Finances b. US owes $40.4 mill to citizens 3. Debt in the form of bonds - certificates that represent $ owed

Hamilton and National Finances a. govern promised to buy bonds back with interest so that people would profit b.govern could NOT buy back bonds from Revolutionary War

Hamilton and National Finances c. people worried and sell their bonds to speculators – people who buy items at low prices in the hopes that value will rise

Hamilton and National Finances 4. Hamilton says pay foreign debt ASAP and pay back bonds in full over time a. This means speculators would make profit

Hamilton and National Finances 5. Jefferson opposes Hamilton’s plan – not fair to original bondholders “Immense sums were flinched [stolen] from the poor and ignorant.” - Jefferson

Hamilton and National Finances B.The States’ Debts 1. States owed $25 mill from Rev. War 2. Hamilton wants federal government to pay for 21.5 mill

Hamilton and National Finances a. States in debt would not have to spend so much on repayment 3. Large, Southern states (Va. and NC) had few war debts and didn’t want federal govern to help other states

Hamilton and National Finances 4. Hamilton knows he needs help of Southern states to get plan approved a. He makes a compromise and moves capital from NY to along Potomac River (present day DC)

Hamilton and National Finances C. Hamilton vs. Jefferson 1. Hamilton and Jefferson disagree about authority of central govern a. Hamilton – strong central govern to balance power 1. little faith in common man

Hamilton and National Finances b. Jefferson – protect power of states 1. defends right of people to rule country

Hamilton and National Finances 2. Hamilton & Jefferson disagree over how America should grow a. Hamilton – new forms of economic growth 1. promote manufacturing and business

Hamilton and National Finances 2. pass protective tariff – tax on imported goods - force Americans to buy U.S. goods

Hamilton and National Finances b. Jefferson – does not want to depend too much on business and manufacturing 1. Farmers good example – they don’t depend too much on others to make living

Hamilton and National Finances D. The Debate Over the Bank 1. Hamilton wants national bank so govern. could deposit money a. also build national mint – place where coins are made

Hamilton and National Finances b. asks for 20 year charter – evaluate progress after 20 years c. Each state should start own bank as well

Hamilton and National Finances 2. Madison and Jefferson do not like national bank idea 3. Hamilton says “elastic clause” of Constitution gives govern power to react to new situations

Hamilton and National Finances “to make all laws which shall be necessary and proper” Article I, Section 8

Hamilton and National Finances a. Hamilton’s view known as loose construction – federal govern can take any reasonable actions that the Constitution does not specifically forbid it from taking

Hamilton and National Finances 4. Jefferson does NOT agree with Hamilton again a. Necessary and proper clause only for special cases

Hamilton and National Finances b. Jefferson’s view known as strict construction – federal govern should do only what Constitution specifically says

Hamilton and National Finances 5. Washington and Congress agree with Hamilton – security for economy a. Bank of United States opened in February 1791