Hamilton’s Economic Plan

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)