3.2 – Hamilton’s
Economic Plan
American History I
Unit 3 – The New Nation
Day 2 – Alexander Hamilton’s Economic Plan
Five parts of Hamilton’s
Economic Plan
1.
2.
3.
4.
5.
Funding
State Debt Assumption
National Bank
Protective tariff
Excise tax
(1) Funding
• The first thing the US needed to do was
pay its debts (over 80 million dollars)
• Funding Plan: issuing new bonds for old
bonds; borrowing the money and paying
back later
• The government would issue new bonds
and replace the old ones (sold during
the war) for more than their original
value
• Some found out about the plan early
and tried to buy up the seemingly
worthless bonds before the plan came
out
• Hamilton believed the wealthy would
participate in buying and the US needed
their help
(2) State Debt Assumption
• The US govt. would assume
state debts to make them
debt free
• The south was upset
because they had little
debt; the north had higher
debt
• Why would this upset the
south?
• The capital would be in a
more southern location (i.e.
Washington DC!!!!!)
(3) National Bank
• Set up to have one currency in
the US and build confidence in
the US
• Necessary & Proper Clause of
the Const. allowed for this
• Hamilton’s belief regarding the
Constitution allowed him to create the
National Bank.
• Easier to do business
• Before this, each state make their own
currency and it wasn’t always equal
• It would give more confidence
in the Federal Government
• Anti-Federalists against it
A New Capital:
Washington, DC
• Congress decides to build
the capital on swamp land
called “Foggy Bottom”
• Border of Virginia, and
Maryland (Potomac River)
• Located in the middle of the
country
• Created a compromise in
Congress (North vs. South)
• Most financial people lived
in the North East
• Satisfied southerners in
Congress (Anti-Federalists)
(4) Tariffs
Protective tariffs
• Tax on imports (foreign goods) to
protect American goods
(5) Taxes
Excise tax:
• Type of Sales Tax (specific items)
• The excise tax was placed on many items including whiskey,
which was profitable
• Whiskey production was the main source of income for many
western settlers and the tax was not well liked
Whisky Rebellion (1794)
• Rebellion against taxes in Hamilton’s
plan on the frontier of Pennsylvania
• Washington sent out 13,000 militia and
stopped the rebellion.
• Showed the power of the federal
gov’t & that they wouldn’t accept
rebellion (Ability to enforce laws)
• Opposite of Shays’ Rebellion
• Leads to more support for the
Democratic-Republican Party among
the common people
• The Federalists were seen as a party
against the common people
Video – G.W. & Whiskey Rebellion
Political Parties
Authors of the Constitution wanted to
avoid political parties
Why do you think this was the case?
They felt these groups were
“factions” that threatened the unity
of a republic
However, two political parties form…
Federalists & DemocraticRepublicans (Anti-Federalists)
Alexander Hamilton vs. Thomas
Jefferson
• Hamilton wants a STRONG
government (Federalist)
• Believes there should be a bank to
cover it!
• Against Jefferson
• Jefferson is a DemocraticRepublican (formerly an
Anti-Federalist) and wants
STRONGER STATE gov’ts
• Against Hamilton
• Thought the states should have
more power and that a national
bank would give WAY TOO MUCH
power too the gov’t
http://www.youtube.com/
watch?v=Vy7FJJ_ud84
Formation of Political Parties
Problem: What happens when people disagree about the government?
Solution: Political parties
Issue
Hamilton
Jefferson
Strong Federal
Government
Loose interpretation
(loose translation)
Want national bank
(loose interpretation)
Based on shipping and
manufacturing
Pay national and state
debt (taxes)
Weak Fed. and Strong
State Government
Strict interpretation
(strict translation)
No national bank
(strict interpretation)
Foreign Policy
Support Britain
Support France
Political Party
Federalists
Democratic-Republican
Government Power
Constitution
National Bank
Economy
National Debt
Based on farming
Payment of only
national debt
Script Writing
• When Washington became the first President, the
country was a mess. To help fix this problem, he
created a position called the Secretary of Treasury
to take care of financial issues. Washington
appointed Alexander Hamilton. Another member
of Washington’s cabinet, Jefferson, disagreed with
Hamilton.
• Your task: Create and film a skit in which Hamilton
& Jefferson sit down with a mediator to work out
their differences.
Skit must include:
•
•
•
•
•
Introduction of all parties involved
Background on the 3 parts of Hamilton’s plan
Hamilton’s point of view on why the plan is good (North)
Jefferson’s point of view on why the plan is bad (South)
A conclusion to the mediation – either a compromise (which
was what happened historically), or a disagreement (mediation
didn’t work)
• Use info from your notes and the textbook (p. 285-286)
• Skit is worth 10 points
Questions
• What are the five parts of Hamilton's economic
plan?
• Why was the U.S. capital moved to Washington
D.C.?
• What does the Whiskey Rebellion in 1794 show
about the United States government?
Vocabulary
• Tariff
• National Bank
• Whiskey Rebellion (1794)