In the 1790s, the most important problems facing the newly formed American government were concerning the large debt as a result of the war for independence. As a result of the revolution, the federal government had acquired a debt of almost $54 million including interest. The states owed another $25 million. Paper money issued under the Articles of Confederation was nearly worthless. The person chosen to help resolve these problems was Treasury Secretary Alexander Hamilton.
The problem facing Hamilton was the huge national debt. He proposed that the government assume the entire debt of the federal government and the states. He wanted to use new tax revenues such as excise tax and new tariffs to help pay for the cost of the debt. Although his plans were put into effect, they may not have been the most beneficial or even necessary actions. In fact, the country soon became one in constant national financial trouble. For Hamilton, money was not a concern, as was the situation with most of his supporters.
States like Maryland, Pennsylvania, North Carolina, and Virginia, which had already paid off their debts, saw no reason why they should be taxed by the federal government to help pay off the debts of other states like Massachusetts and South Carolina. Hamilton's critics claimed that his plans would provide enormous profits to his supporters, and that as a federalist, he was trying to fully tie the states to the federal government.
For over six months, a bitter debate raged in Congress, until James Madison and Thomas Jefferson helped Hamilton engineer a compromise. In exchange for southern votes, Hamilton promised to support locating the national capital on the banks of the Potomac River, the border between two southern states, Virginia and Maryland.
Alexander Hamilton's plan was not only unnecessary and improper, but could be considered self serving. Many of the state and domestic debts could have easily been "side stepped," and... [continues]
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