Monday, March 3, 2008
Hamilton, Economics, and the Capital
The most important member of George Washington’s cabinet was arguably Alexander Hamilton. As Secretary of the Treasury, Hamilton faced the tremendous burden of tackling the nation's debt crisis. The Revolutionary War had left the states with massive debts, and many European nations were reluctant to establish credit with American merchants. To correct the problem, Hamilton proposed that the national government should assume the debts of the states, that a national bank be established, and that all holders of war bonds/securities be paid at face value. By assuming the states debts, Hamilton was essentially doing what he felt the national government had been given power to do. As Joseph Ellis points out, "the federal government was implicitly, even covertly, assuming sovereign authority over the economics of all the states."
Opponents of Hamilton's economic plan saw it as an evil scheme to wrestle power away from the people and to secure it for the national government. Some suggested that Hamilton was doing this by shifting the balance of power from the legislative branch (Congress) to the executive branch (the Presidency). Other opponents had a different take on Hamilton's economic plan. Many saw it as a carbon copy of England, which would benefit the rich at the expense of the poor. Many southern leaders interpreted the plan as "the prostration of agriculture at the feet of commerce."
There were also many in the public who lamented the fact that war bonds, which had been used to pay war veterans, were being bought up by rich speculators. These speculators were paying well below face value for the bonds, and then waiting for Hamilton's plan to go into effect. These speculators knew they stood to gain huge profits once Hamilton's plan was accepted. Critics argued that many veterans were being swindled out of their money. Congressman James Jackson called the speculators, "rapacious wolves seeking whom they may devour."
Eventually, opponents of Hamilton's plan (especially the Virginia elite) would lend their support for it, in exchange for the location of the new national capital to be located on the Potomac. Thomas Jefferson and James Madison used their political influence to sway public support in favor of Hamilton's plan. In return, the new capital of the nation was established in Virginia. Many leaders within the government felt that this compromise "gave birth to combinations, parties, intrigues, jealousies...to such a degree to give serious alarm to the friends of the government." Hamilton's economic plan served as one of the first hurdles for the infant nation to learn to overcome. Whether the compromise was seen as a good or bad thing, it did prove that politicians with differing opinions could find a way to come to a compromise and get things done.