AN02b2_A New Nation: Finances and Financial Crisis
Timeline: 18th & 19th C.
FQ: How did finances become an obstacle for the young nation and continue to be so?
I. How to Handle Debt?
A. Why even worry about it?
B. State Debt.
C. National Debt.
II. Factions/ Political Parties
Federalists (Hamilton) vs. Anti-Federalists (Jefferson, Democratic-Republicans)
Activity: Please align these ‘party stances’ to the early factions of the nation.
1. Strong National Gov’t
2. Fear of Mob Rule
3. Limited National Gov’t
4. Fear of Absolute power
6. Well educated ruling elite
7. Loose Interpretation of the Constitution.
8. Payment of only national debt, Not State debt
9. National Bank
10. Manufacturing Economy
11. Agrarian Economy
12. Strict Interpretation of Constitution
III. Hamilton’s Plan to Solve Nation’s Debt Problem
A. Bank of the United States: Collect taxes, standardize the currency, make investments, issue bonds, etc.
“Elastic Clause” vs. Strict Interpretation of the Constitution (Art. 1, Sec.8, Clause 18)
B. National Gov’t to assume debts of the States. Angered the Southern states who had nearly finished paying their debts.
C. District of Columbia: ‘Carrot’ to entice southern states to support Hamilton’s debt plan. It Worked!
D. The Multifaceted Risks of the Whiskey Rebellion 1789
Farmers upset by excise tax (to raise revenue on whiskey distilled from corn). Hamilton, and the Executive Branch, had to enforce the law as expected and according to the US Constitution. Rebellion was put down after a military force was sent to enforce the tax. This was an early test of the young nation’s federal system and established a precedent for the supremacy of laws from the national government.
IV. Challenges keep coming
A. Bank of the US
1. Renewing the charter
2. Undermining the Bank
3. Specie Standards & Bimetalism