Alexander Hamilton as the Secretary of the Treasuryalexander-hamilton.gif

Hamilton originally believed that a stable and effective government needed an "enlightened" ruling class. Hence the new government needed the support of the upper class and wealthy.

Assuming the debt:
  • He proposed the new government take responsibility for the existing public debt. Many of the depreciated certificates of indebtedness that was issued during and after the Revolutionary War, were in the hands of wealthy speculators.
  • The government should call them in and exchange them for interest-bearing bonds, payable at definite dates.
  • He also recommended that the debts the states had accumulated during the War should be assumed by the federal government, encouraging state and federal bondholders to look to the central government for payment. He wanted to create a large and permanent national debt with new bonds being issued while old ones were paid off. The result would be that creditors (the wealthy classes most likely to lend money to the government) would have a permanent stake in the survival of the government.
firstbank.jpg
First bank of the US

Creating a National bank: there were a few banks in the country in the big cities (Boston, Philadelphia, New York). He believed that:
  • a new national bank would help the absence of a good banking system
  • It would provide loans as well as currency to businesses, while giving the government a place to put its federal funds.
  • It would help collect taxes and scatter the government's expenditures.
  • It would keep up the price of government bonds through judicious bond purchases.
  • It would be chartered by the federal government, have a monopoly of the government's own banking business, and would be controlled by directors (one fifth would be appointed by the government)

Proposal on taxes
: The funding and the assumption of taxes would need new sources of revenue, so he proposed 2 taxes:
  • An excise, paid by distillers of alcohol liquors, which would fall on places like Pennsylvania, Virginia, and North Carolina
  • A tariff on imports, that would raise revenues + protect American manufacturing from foreign competition

Opposition: Few Congressmen objected to his plan for funding the national debt, but some did oppose his plan to accept debt at face value. They believed if the federal government was to assume responsibility for these bonds, some would return to the original purchasers. His proposal that the government assume state debts had a lot of controversy. His opponents argued that if the government took over the state debts, the people of the states with few debts would have to pay takes to service the larger debts of other states. In order to pass this bill, he negotiated with Virginians. They agreed to move the capital to D.C., in exchange for Virginia's support of the bill.

The House, Senate, and the President finally approved of the bill. The Bank of the United States began in 1791, with a charter that let it continue for 20 years. He also won passage with the excise tax (revisions were made to reduce the burden on small distillers), the tariff passed in 1792.

Results:
  • His plan restored public credit
  • the bonds of the US sold at here and outside the US at prices above their value
  • Speculators made large profits
  • Manufacturers profited from the tariffs, and merchants in the seaports benefited from the new banking system
BUT
  • Small farmers complained from the disproportionate tax burden, as most had to pay the excise tax and indirectly the tariff.
  • People still started to feel that Hamilton's plan favored the elites


To have some background info on Hamilton, go to: http://americanrevwar.homestead.com/files/hamilt.htm
To learn about his political career check out: http://www.u-s-history.com/pages/h367.html
To learn more about the first bank of the united states visit: http://www.ushistory.org/declaration/revwartimeline.htm
and http://www.u-s-history.com/pages/h443.html

Sources:
textbook
http://www.u-s-history.com/pages/h367.html
http://americanrevwar.homestead.com/files/hamilt.htm
http://famousamericans.net/presidentjamesmadison.com/JohnQAdams.com/alexanderhamilton.org/
http://www.digitalhistory.uh.edu/database/article_display.cfm?HHID=6