Washington’s Cabinet

Washington’s Cabinet

Alexander Hamilton - Secretary to the Treasury - Acquired a knowledge of public finance in setting up the Bank of New York.

Thomas Jefferson - Secretary of S tate - acted as a minister to France since 1784

General Henry Knox - Secretary of War - fought in the War of Independence

Edmund Randolph- Attorney General - former governor of Virginia

How successful was Hamilton’s Financial Programme?

How did Hamilton plan to deal with America’s economy? Where were there some successes?

  • First report on public credit - Public debt would be placed into one pot for the government to deal with

  • Second report on public credit - Hamilton created an excise tax on distilled spirits to raise revenue to deal with the public debt, this was passed in March 1791

  • Hamilton also decided to create a national bank based upon the Bank of England - this would act as a way to collect taxes, be a source of loans for commerce and isue paper money

What opposition did he face?

  • Southern states opposed the national debt scheme as most of the debt was incurred by Northern states and the debt proposal was rejected - therefore, a compomise made allowances to those who had settled their debts and nation capital would be placed in the South.

  • Madison, Jefferson and Randolph opposed the national bank as they believed that it had gone past the powers delegated to them in the constitution. Washington countered this, saying that it fell within the powers of the treasury secretary

Report on Manufactures

  • Encouraged manufacturing, laid down a comprehensive plan for industrialisation through protective tariffs and subisdies for new industries and inventions

  • Rejected since Congress was not ready for such bold economic planning

Report on the national bank

  • $10m in capital - 1/5 by gov, 4/5 by private investors

  • Allowed for tax collection

  • Issue paper money

  • Source of financing for loans for commerce

Contributed to economic development, banknotes maintained their value

Overview

Financially, they were successful: they restored public credit and ensured that foreign capital flowed into the USA. Productivity increased and prosperity returned.

However, his measures helped to sharpen divisions and gave them political form. Many southerners feared that this would help to strengthen the northern bankers and speculators, at the expense of the states.