Federalist Party

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Federalist Party

"Seldom in the nation's history has there been a period so extraordinary in accomplishment as the first decade under the Constitution...."

This paper is going to be a step by step evaluation of arguably the most important decade in American History. The time period covered in this paper is 1789-1801. These are the years in which the Federalists had the most influence in the new government. They accomplished an amazing amount in these 12 years.

The Federalist Party was one of the first political organizations in the United States. The members of this party supported a strong central government, a large peacetime army and navy, and a stable financial system.

Although the first president, George Washington, was not a Federalist, his Secretary of the Treasury, Alexander Hamilton, was the developer and leader of the Federalist party. Hamilton believed in a loose interpretation of the Constitution so that the central government could become more powerful. Also Hamilton, along with the other party members, believed that commerce and manufacturing were more important than agriculture.

Financial Dilemma

During the first two years of the new federal government the biggest problem was that of raising money. At first the Congress adopted a small tariff on imports. This was a start but not nearly enough. The government needed this money to maintain its own existence and to be able to pay of the debt. The existence of the government was a necessity, but there was a lot of discussion as to whether the debt should be payed off.

The mare magnitude of the debt seemed to compel some measure of avoidance. In 1789, the national debt totaled more than $50 million, $11,700,000 of which was owed to France and Spain and the private bankers of Netherlands, while $40 million was in the form of securities held by citizens of the United States. The interests owed to the bankers were being payed off by loans from the bankers themselves. The government didn't even have enough money to pay the Barbary corsairs for release of captive sailors!

When Congress couldn't come up with a solution that was satisfactory, they turned to Alexander Hamilton with the dilemma. He soon proceeded to draw up a full report entitled "Report on Public Credit." In this paper Hamilton proceeded to show that the only way for a new government to establish credit was to deal honestly with its creditors -for in many cases they would be the people to whom the government must look to for future loans.

This policy received strong opposition from Madison and other soon to become Republicans (second political party in America). The federalists held strongly, but only with the passing of the Assumption Bill (movement of capital more toward the South) where they able to pass the bill.

This achievement was significant, but lacked two things which would be necessary to carry it out. For one it lacked a circulating medium, and two it lacked a central bank. Hamilton then proposed a remedy. He wanted to establish a corporation that was to be called the Bank of the United States. This bank was to serve as the principle depository for government funds. It was also to serve as the issuer of bank notes.

This was a loose interpretation of the constitution. Again Madison led the opposition to no avail. But Hamilton held strongly to his belief that even the most uncompromising opponent of the bank "would, in one month's experience as head of that department of the treasury, be compelled to acknowledge that it is an absolutely indispensable engine in the management of the finances, and would quickly become a convert to its perfect constitutionality." This plan favored the central government.

The bank made little banks, who couldn't compete, go out of business. The rich ended up being able to buy a part in the bank and so got richer, and the poor and middle class didn't get the benefits. The central government was becoming self sufficient, and less dependent on the states.

What Hamilton did is make the nation stronger in the eyes of other nations. This is a great accomplishment. If the Federalists (they didn't call themselves that until 1792) weren't in power the nation would have been weaker and more decentralized.

Foreign Difficulties

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