Page 13 - 2021-bfw-henretta-10e

CHAPTER 7 Hammering Out a Federal Republic, 1787–1820 215

Creating a National Bank In December 1790, Hamilton asked Congress to charter
the Bank of the United States, which would be jointly owned by private stockhold- Bank of the United States
ers and the national government. Hamilton argued that the bank would provide sta- A bank chartered in 1790 and jointly owned
bility to the American economy, which was chronically short of capital, by making by private stockholders and the national
government. Alexander Hamilton argued
loans to merchants, handling government funds, and issuing bills of credit — much that the bank would provide stability to the
as the Bank of England had done in Great Britain. These potential benefits persuaded American economy, which was chronically
Congress to grant Hamilton’s bank a twenty-year charter and to send the legislation to short of capital, by making loans to
merchants, handling government funds, and
the president for his approval. issuing bills of credit.
At this critical juncture, Secretary of State Thomas Jefferson joined with James
Madison to oppose Hamilton’s financial initiatives. Jefferson charged that Hamilton’s
national bank was unconstitutional. “The incorporation of a Bank,” Jefferson told
President Washington, was not a power expressly “delegated to the United States
by the Constitution.” Jefferson’s argument rested on a strict interpretation of the
Constitution. Hamilton preferred a loose interpretation; he told Washington that
Article 1, Section 8, empowered Congress to make “all Laws which shall be necessary
and proper” to carry out the provisions of the Constitution. Agreeing with Hamilton,
the president signed the legislation.

Raising Revenue Through Tariffs Hamilton now sought revenue to pay the annual
interest on the national debt. At his insistence, Congress imposed excise taxes, includ-
ing a duty on whiskey distilled in the United States. These taxes would yield $1 mil-
lion a year. To raise another $4 million to $5 million, the treasury secretary proposed
higher tariffs on foreign imports. Although Hamilton’s “Report on Manufactures” Report on Manufactures
(1791) urged the expansion of American manufacturing, he did not support high A proposal by treasury secretary Alexander
protective tariffs that would exclude foreign products. Rather, he advocated mod- Hamilton in 1791 calling for the federal
government to urge the expansion of
erate revenue tariffs that would pay the interest on the debt and other government American manufacturing while imposing
expenses. tariffs on foreign imports.
Hamilton’s scheme worked brilliantly. As American trade increased, customs rev-
enue rose steadily and paid down the national debt. Controversies notwithstanding,
the treasury secretary had devised a strikingly modern and successful fiscal system; as
entrepreneur Samuel Blodget Jr. declared in 1801, “the country prospered beyond all
former example.”

Jefferson’s Agrarian Vision
Hamilton paid a high political price for his success. As
Washington began his second four-year term in 1793,
Hamilton’s financial measures had split the Federalists
into bitterly opposed factions. Most northern Federal-
ists supported the treasury secretary, while most south-
ern Federalists joined a group headed by Madison
and Jefferson. By 1794, the two factions had acquired
names. Hamiltonians remained Federalists; the allies of
Madison and Jefferson called themselves Democratic
Republicans or simply Republicans.
Thomas Jefferson spoke for southern planters and
western farmers. Well-read in architecture, natural
history, agricultural science, and political theory, Jef-
ferson embraced the optimism of the Enlightenment. Two Men, Two Visions of America Thomas Jefferson (left) and Alexan-
der Hamilton confront each other in these portraits, as they did in the political
He believed in the “improvability of the human race” battles of the 1790s. Jefferson was pro-French, Hamilton pro-British. Jefferson
and deplored the corruption and social divisions that favored farmers and artisans; Hamilton supported merchants and financiers.
threatened its progress. Having seen the poverty of Jefferson believed in democracy and rule by legislative majorities; Hamilton
laborers in British factories, Jefferson doubted that argued for strong executives and judges. Still, in the contested presidential
election of 1800, Hamilton (who detested candidate Aaron Burr) threw his
wageworkers had the economic and political indepen- support to Jefferson and secured the presidency for his longtime political
dence needed to sustain a republican polity. foe. Left: White House Collection/White House Historical Association. Right: Yale University Art Gallery.
Copyright © Bedford, Freeman & Worth Publishers. Distributed by Bedford, Freeman & Worth Publishers.
Strictly for use with its products. Not for redistribution.

08_edwardsAPHS10e_28115_ch07_210_243_3pp.indd 215 15/09/20 8:55 PM