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CHAPTER 7 Hammering Out a Federal Republic, 1787–1820 213

Devising the New Government Once the military savior of his country, SKILLS & PROCESSES
Washington now became its political father. At age fifty-seven, the first president DEVELOPMENTS AND PROCESSES
possessed great personal dignity and a cautious personality. To maintain continu- How did the debate over the balance
ity, he adopted many of the administrative practices of the Confederation and asked between liberty and order influence
Congress to reestablish the existing executive departments: Foreign Affairs (State), the formation of political parties?
Finance (Treasury), and War. To head the Department of State, Washington chose
Thomas Jefferson, a fellow Virginian and an experienced diplomat. For secretary of
the treasury, he turned to Alexander Hamilton, a lawyer and his former military aide.
The president designated Jefferson, Hamilton, and Secretary of War Henry Knox as
his cabinet, or advisory body.
The Constitution mandated a supreme court, but the Philadelphia convention
gave Congress the task of creating a national court system. The Federalists wanted
strong national institutions, and the Judiciary Act of 1789 reflected their vision. Judiciary Act of 1789
The act established a three-tiered system: it created federal district courts in each Act that established federal district courts
state and three circuit courts above them to which the decisions of the district courts in each state and three circuit courts to hear
appeals from the districts, with the Supreme
could be appealed. The Supreme Court would then serve as the appellate court of Court serving as the highest appellate court
last resort in the federal system. The Judiciary Act also specified that cases arising in the federal system.
in state courts that involved federal laws could be appealed to the Supreme Court.
This provision ensured that federal judges would determine the meaning of the
Constitution.

The Bill of Rights The Federalists kept their promise to consider amendments
to the Constitution. James Madison, now a member of the House of Representa-
tives, submitted nineteen amendments to the First Congress; by 1791, ten had been
approved by Congress and ratified by the states. These ten amendments, known as the
Bill of Rights, safeguard fundamental personal rights, including freedom of speech Bill of Rights
and religion, and mandate legal procedures, such as trial by jury. By protecting indi- The first ten amendments to the Constitution,
vidual citizens, the amendments eased Antifederalists’ fears of an oppressive national officially ratified by 1791. The amendments
safeguarded fundamental personal rights,
government and secured the legitimacy of the Constitution. They also addressed the including freedom of speech and religion,
issue of federalism: the proper balance between the authority of the national and state and mandated legal procedures, such as trial
governments. But that question was repeatedly contested until the Civil War and by jury.
remains important today.

Hamilton’s Financial Program
George Washington’s most important decision was choosing Alexander Hamilton as EXAM TIP
secretary of the treasury. An ambitious self-made man of great intelligence, Hamil- Consider the ways that Hamilton’s
ton was a prominent lawyer in New York City who had married into the influential Financial Plan helped spur the
Schuyler family, which owned land in the Hudson River Valley. At the Philadelphia growth of the first political party
convention, he condemned the “democratic spirit” and called for an authoritarian system in the U.S.
government and a president with near-monarchical powers.
As treasury secretary, Hamilton devised bold policies to enhance national author-
ity and to assist financiers and merchants. He outlined his plans in three pathbreaking
reports to Congress: on public credit (January 1790), on a national bank (Decem-
ber 1790), and on manufactures (December 1791). These reports outlined a coherent
program of national mercantilism — government-assisted economic development.
Hamilton’s system immediately sparked disagreement and eventually drove a wedge
between him and fellow Federalists Jefferson and James Madison.

Public Credit: Redemption and Assumption The financial and social implica- Report on the Public Credit
tions of Hamilton’s “Report on the Public Credit” made it instantly controversial. Alexander Hamilton’s 1790 report
recommending that the federal government
Hamilton asked Congress to redeem at face value the $55 million in Confederation should assume all state debts and fund the
securities held by foreign and domestic investors (Figure 7.1). His reasons were national debt — that is, offer interest on
simple: as an underdeveloped nation, the United States needed good credit to secure it rather than repaying it — at full value.
Hamilton’s goal was to make the new country
loans from Dutch and British financiers. However, Hamilton’s redemption plan would creditworthy, not debt-free.
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