One of the most important developments in American history is the formation of the two party system. Since Jefferson and Hamilton fought for the support of the nation, American politics has been characterized by the battle between two ideologies. The split between Americans began with the Federalist and Democratic-Republican parties. The Federalists, led by Hamilton, believed in a national bank, high tariffs, good relations with Britain, and were strong proponents of northern business. The Democratic-Republicans, led by Jefferson and Madison, were against a national bank, favored relations with the French revolutionaries, desired an economy based on southern agriculture, and championed states rights. The differences between the two parties in economic and foreign policy would be instrumental in the development of the two party system and would play an important role in forming the policies that shaped our nation.
The American Revolution and The Critical Period in the United States saw an amassing debt around the country. The problem was serious as the United States had over a 54 million dollar debt . The debate over how to resolve this crisis became heated and caused much strife around the nation. Alexander Hamilton, the Secretary of the Treasury, proposed a three step-plan that would strengthen the new federal government and fix the economy. In his “Reports on the Public Credit” Hamilton put forth the first part of his plan. He proposed that the Federal government take the burden of paying off the states debts. He insisted that congress create a fund to pay off the states debts “at par”, meaning with interest, so that the United States would be seen as responsible in the international community . While many agreed with Hamilton (The Northern States) many did not (The Southern States). The south had already settled the majority of their debt and felt that they would be carrying an unfair burden. Thomas Jefferson, the Secretary of State, was an outspoken opponent to Hamilton’s plan and suggested that individual states were better off paying their own debts. Jefferson believed that a reliance on the Federal government could have dangerous repercussions. Hamilton’s plan would eventually be adopted. In order to pay off the national debt, the plan would include a large tax on whisky passed. Western farmers, who usually had smaller distilleries, were especially angered by this new tax, as they had to pay more than their eastern competition, which usually had larger distilleries. In 1794 angry farmers in Philadelphia rebelled when men from the government came to collect their taxes . This insurrection would be known as the “Whisky Rebellion” and embody the nations discontent with the new tax. Troops would eventually be sent to put out the Rebellion and the tax would go on until it would be repealed by Jefferson and the Democratic-Republicans. An interesting point to note is that beside the Whisky tax, Jefferson would keep many of Hamilton’s economic policies when he became president in 1801.
The Second Tenet of Hamilton’s plan was the creation of a National Bank. Although there was no mention of a National Bank in the constitution, Hamilton abided by a loose interpretation of the Constitution, meaning that anything not stated in the document was acceptable . On the other hand Hamilton’s political rival, Jefferson, abided by a strict interpretation of the constitution, meaning that anything not stated in the document was forbidden, this pitted Jefferson against the idea of a national bank. Hamilton sought to stabilize and improve the nations credit, and to improve the handling of the financial system by the United States government with the passage of his Bank bill . In congress Jefferson and Madison would argue that the bank would promote the commercial interests of the north and hurt the agrarian community in the south and that such a proposal would damage local banks around the nation. Hamilton and the Federalists would...
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