U.S. History

Chapter 10: Launching the New Nation

Section 2: Hamilton & National Finances

Settling the Debt

•Paying the national debt was Hamilton’s largest challenge

Secretary of the Treasury Alexander Hamilton

Settling the Debt

•The debt:

–$11.7 million owed to foreign countries

–$40.4 million owed to citizens in the form of bonds

Settling the Debt

•Bonds—certificates that represent money owed to private citizens by the U.S. government

Settling the Debt

•Bonds sold to speculators

•Speculators—people who buy items at low prices in hope that the value will rise

Settling the Debt

Alexander Hamilton:

proposes repaying bonds at full value

Thomas Jefferson:

Believed idea cheated original bondholders

U.S. population: 303,716,510Amt per citizen: $30,150.00.

As of December 5, 2007

The States’ Debts

•Hamilton proposes federal government assume $21.5 million of debts from the states

•Believed it would help national economy

The States’ Debts

•Problem: southern states had few war debts

•Southerners disliked capital in New York

The States’ Debts

•The plan:

–Hamilton will convince Northerners to move capital

– Jefferson & Madison will convince southern states to accept Hamilton’s debt plan

The States’ Debts

• The result:

– Congress approved debt plan

– Area along the Potomac chosen as new capital

Hamilton vs. Jefferson

Alexander Hamilton:

Believed in a strong central government

Thomas Jefferson:

Believed in preserving states’ rights

Hamilton vs. Jefferson

•Hamilton desired to promote manufacturing & business

Hamilton vs. Jefferson

•Protective tariff—tax on imported goods to raise the prices of foreign goods in order to protect domestic products

Chevrolet Silverado Toyota Tundra

$20,000 $18,000

Chevrolet Silverado Toyota Tundra

$20,000$18,000

+ $4,000 tariff = $22,000

Hamilton vs. Jefferson

• Jefferson wanted to promote an agricultural society

• Believed low tariffs would benefit farmers

The Debate over the Bank

Alexander Hamilton:

Proposes a national bank for government to deposit its money

Thomas Jefferson:

Questioned the authority of the government to establish a national

bank

The Debate over the Bank

•Hamilton says bank allowed under the “necessary & proper clause”

“The Congress shall have Power…To make all Laws which shall be necessary

and proper for carrying into Execution the foregoing Powers, and all other Powers

vested by this Constitution in the Government of the United States…”

--United States Constitution Article I, Section 8

The Debate over the Bank

•Loose construction--the federal government can take any reasonable actions that the Constitution does not specifically prohibit

The Debate over the Bank

• Jefferson believed “necessary & proper” clause should be used only in special cases

The Debate over the Bank

•Strict construction—federal government can only do what the Constitution specifically says it can do

The Debate over the Bank

• February 1791: Congress chartered the Bank of the United States

Hamilton Jefferson

Bonds

Democracy

Economy

Tariffs

National Bank

Constitution