Published on March 13, 2014
HAMILTON’S ECONOMIC PLAN
ALEXANDER HAMILTON 1st Secretary of the Treasury Protégé of Washington Born on St. Croix, became an orphan at 13 Attended King’s College (Columbia University) Was an “agitator” prior to the Revolution as a speaker and pamphleteer Washington’s aide during the Revolution A hero at the siege of Yorktown
ECONOMIC PLAN Hamilton wanted to put the new nation on solid financial footing Most important was tying the wealthy to the financial interests of the nation
ECONOMIC PLAN F Fully fund the national debt As Assume state debts T Tariff (Protective Tariff) E Excise Tax N National Bank
FUND THE NATIONAL DEBT After the Revolutionary War, the United States owed money to those who helped pay for it Much of this debt was owed to private, wealthy Americans who bought government “securities” from the Congress under the Articles of Confederation (AOC) This made them part owners of the United States of America (USA) under the AOC
FUND THE NATIONAL DEBT Hamilton wanted to settle the question of how a person can own a government and get rid of the securities These investors could exchange their securities for interest-bearing bonds (an “IOU” but without the ownership)
ASSUME STATE DEBTS During the American Revolution, states incurred debts to help finance and the war and outfit their troops Hamilton wanted to make these debts part of the national debt instead of having the states have to deal with it individually This would make the states more cooperative instead of competitive
ASSUME STATE DEBTS Sectional differences emerge Many southern states had already significantly or entirely paid down their debts Most northern states still held much debt, Massachusetts having the largest Southern states did not want to help the northern states pay down their debts (via the federal government)
ASSUME STATE DEBTS A Settlement Is Reached A compromise that moved the nation’s capital to the south in exchange for support from southern states The land for Washington, DC would come from territory from Virginia and Maryland – it helps that the land was owned by George Washington
PROTECTIVE TARIFF In order to protect domestic manufacturing, a tax should be placed on imports (tariff) This would increase the price of imported goods encouraging Americans to buy the less expensive domestic goods
EXCISE TAX Hamilton sought a tax on distilled spirits, especially whiskey, but why? 1. Revenue for the government 2. To pick on poor farmers Angry farmers in western Pennsylvania revolt Washington leads a force of 13,000 (part of the way) to put down this “Whiskey Rebellion”
EXCISE TAX Hamilton’s Motives (?) Create a crisis (a la Shays’ Rebellion) that would allow the federal government to use force to combat it Show the states that the federal government is a “real” government and that it would use force in the states when necessary
NATIONAL BANK A national bank would issue banknotes (paper money) to provide a uniform currency Government bonds held by the bank would back the would back the value of the banknotes Private investors would supply $8M of the capital and name 20 members of the board of directors The government would provide $2M and name 5 members of the board of directors The bank would help aid in the bookkeeping needs of the government It would help Congress regulate the value of currency (as per the Constitution) – but was it necessary?
ECONOMIC PLAN Hamilton got 4 out of 5 of his points of his plan right away The idea of a protective tariff could only be postponed before the interests of domestic industry would become an important issue across the aisle (for both political parties)
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