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Chapter 7 Section 2: Hamilton and National Finances
Transcript of Chapter 7 Section 2: Hamilton and National Finances
Hamilton wanted to pay the foreign debit immediately and gradually repay the total value of all bonds.
Thomas Jefferson disagreed with this plan because he thought it cheated bondholders out of money.
In the end, more politicians agreed with Hamilton, and in 1790 the government exchanged old bonds for new, reliable ones that were guaranteed.
Jefferson Opposes Hamilton
Hamilton and Jefferson soon began to disagree about the authority of the central government.
Hamilton believed in a strong central government, while Jefferson wanted to protect the powers of the states.
Moving the Capital
In order to get his plan for states' debt approve, Hamilton knew he needed to support of Southern politicians.
These men wanted the location of the nation's capital moved because they thought having the capital in New York City gave the Northern states too much power.
A compromise between Hamilton, Jefferson, and Madison allowed the national capital to be moved to Philadelphia in 1791 for 10 years.
For the permanent location, Washington chose a place on the Potomac River that included part of Maryland and Virginia. This would eventually become Washington, D.C.
In Canvas, go to this course, and then “Discussions” on the left side.
Select the discussion topic titled “Bellwork for January 14, 2014”.
Type your answer in the “Reply” field below the original post.
Once you have completed the Bellwork, hit the “Post Reply” button.
The states owed $25 million for Revolutionary War expenses.
Hamilton wanted the fedral government to pay $21.5 million of this debt. He believed this would help the economy because state would not have to spend so much on repayment and could spend this money to develop business and trade.
The Southern states did not want to help the federal government pay off the debts of other states.
Chapter 7 Section 2: Hamilton and National Finances
Settling the Debt
As Secretary of the Treasury, Hamilton's biggest challenge was paying off the national debt (money owed by the United States) from the Revolutionary War.
The U.S. owed about $11.7 million to foreign countries and about $40.4 million to U.S. citizens.
During the war, the government raised money with bonds (certificates of debt that carry a promise to back the bonds at a higher price). But, the government could not afford to keep this promise.
Bondholders who needed money sold their bonds for less than the original value to speculators (people who buy items at low prices in the hope that the value will rise).
Hamilton wanted a government that balanced power between the people and wealthier citizens.
He believed this approach would protect liberties while keep the people from having too much power.
Jefferson believed that the average person was more than capable of running the country, although he felt they needed to be well-informed.
Hamilton wanted to promote manufacturing and business.
Hamilton believed in high tariffs. These protective tariffs would raise the price of foreign goods.
Hamilton hoped this would cause Americans to buy U.S. goods.
Jefferson believed farmers were the most important part of the American economy. He wanted to help farmers by keeps the cost of goods low, so he opposed high tariffs.
The National Bank
Hamilton wanted to start a national bank where the government could deposit its money. He believed this was important to secure the national economy.
Hamilton also thought the United States should build a mint, so it could start issuing its own money.
He wanted to bank to have a 20-year charter, and each state should have their own state banks so the national bank would not have a monopoly.
Both Jefferson and Madison believed the Constitution did not give Congress the power to create a bank, but Hamilton quoted to "elastic clause".
Hamilton believed in a loose construction (the interpretation that says the federal government can take reasonable actions in special cases a long as they are not specifically forbidden by the Constitution ) of the Constitution.
Jefferson believed in strict construction (the position that says the Constitution allows only necessary means to deal with new situation and should not be stretched merely because politicians find it convenient) of the Constitution.
President Washington and Congress agreed with Hamilton, and the Bank of the United States was established in 1791. It played an important role in making the economy of the U.S. more stable.