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Hamilton's Economic Plans & Political Parties

• Alexander Hamilton aimed to establish a strong national bank and impose a whiskey tax to enhance government revenue.
• He advocated for high taxes on foreign products to promote American manufacturing.
• Hamilton's proposals sparked significant debate, leading to the formation of political parties.

Debates and Emergence of Political Parties

• Those who supported Hamilton's vision aligned with one political party, while those who opposed it formed another.
• The birth of American political parties is attributed to Alexander Hamilton's economic plans.

Hamilton vs. Jefferson & Madison

• Hamilton's primary opponents, Thomas Jefferson and James Madison, believed his plans granted excessive power to the federal government.
• They viewed Hamilton's proposals as too intrusive into the economy.
• At the time, the national debt was approximately $52,000,000$, with state debts around $25,000,000$.
• Hamilton proposed consolidating these debts into a total national debt of $77,000,000$ to be managed by the federal government.

Assumption of State Debts

• Hamilton's plan involved the federal government assuming state debts, which was met with mixed reactions.
• States like Virginia, which had already paid off most of their debt, felt the plan was unfair.
• They argued that it benefited Northern states like Rhode Island at the expense of Southern states like Virginia.
• Hamilton sought a compromise to ensure the passage of his economic plan, as its failure would jeopardize his other proposals.

The Dinner Table Bargain

• Thomas Jefferson invited Hamilton and James Madison to dinner to discuss a compromise.
• The Founding Fathers often used such gatherings to resolve political issues through civil discourse.
• These dinners involved elaborate multi-course meals and drinks, providing a setting for negotiation.
• Jefferson, known for his ice cream-making skills, served it as a delicacy to his guests.

The Compromise

• Hamilton sought Jefferson and Madison's support for his plan to assume state debts.
• In exchange, Jefferson and Madison proposed moving the national capital from New York City to a location in the South near Virginia.
• Jefferson suggested an area off the Potomac River between Virginia and Maryland, described as a swampy area.
• Hamilton agreed to use his influence to move the capital to the South, leading to a handshake agreement.
• This dinner is considered a pivotal moment in American history due to the significant decisions made.

Moving the National Capital

• Hamilton initiated the process of moving the national capital to what is now Washington, D.C.
• He presented the issue as a matter of national urgency to Congress.
• Despite initial reservations, Congress eventually approved the proposal, influenced by Hamilton's commitment.
• The construction of the capital took six years due to the need to drain the swampy area and build infrastructure.
• The location of the capital today is a result of the bargain struck between Hamilton, Jefferson, and Madison.

The National Bank Controversy

• The creation of a national bank remained a contentious issue, pitting Hamilton against Jefferson and Madison.
• Jefferson and Madison strongly opposed the national bank, requiring Hamilton to gain the support of George Washington.

Washington's Role

• George Washington, highly respected, served as a central figure in the government, often sought for his final approval.
• Hamilton and Washington shared a close relationship, stemming from their time together during the Revolutionary War.

Hamilton's Early Life

• Hamilton was born in the West Indies, the son of a single mother, and faced a challenging upbringing.
• Despite his difficult circumstances, Hamilton displayed remarkable intelligence and aptitude for economics.
• He secured a job at a merchant store and quickly demonstrated his business acumen, eventually managing the store's operations.
• Recognizing his potential, the people of his island raised money to send Hamilton to college in America.

College and the Revolution

• Hamilton attended King's College (now Columbia University) in New York, where he excelled academically and socially.
• He became a dedicated patriot and formed a group of students to practice military drills in preparation for the Revolutionary War.
• Hamilton joined George Washington's army and quickly gained Washington's attention due to his leadership and bravery.

Relationship with Washington

• Washington recognized Hamilton's intelligence and appointed him to his staff as an advisor.
• Hamilton's advice stemmed from being an intelligent 19 year old during the American Revolution.
• Some historians says, they developed a close father-son relationship, marked by mutual respect and occasional disagreements.
• Washington played matchmaker to Hamilton and Eliza Skyler, whom Hamilton eventually married.

Secretary of the Treasury

• Following the war, Washington appointed Hamilton as the Secretary of the Treasury, relying on his expertise.
• Hamilton's career almost derailed because of a sex scandal.

The Reynolds Affair

• While serving as Secretary of the Treasury, Hamilton became involved in an affair with Mariah Reynolds.
• Mariah Reynolds showed up at Hamilton's house and Hamilton took pity on her.
• Mariah's husband, James Reynolds, blackmailed Hamilton, demanding money in exchange for his silence.
• Hamilton unwisely complied with the blackmail demands, leading to further extortion.
• The affair and blackmail became public when Hamilton revealed the details in a newspaper to clear his name from accusations of public corruption.
• The scandal damaged Hamilton's reputation and hindered his political career.
• Eliza never confronted her husband about affair and they continued to cherish each other even after the scandal.

The National Bank Debate

• Hamilton proposed the creation of a national bank to stabilize the American economy.
• Jefferson and Madison opposed the bank, arguing that it was unconstitutional.
• They adhered to a strict constructionist view, believing the Constitution should be interpreted literally.
• Hamilton advocated for a broad constructionist view, arguing that the Constitution could be interpreted to allow for implied powers.
• He pointed to the Necessary and Proper Clause (Article I, Section 8) to justify the creation of the bank. $\text{Article I, Section 8}$
• This debate marked the first major constitutional debate in American history.

Washington's Decision

• Washington sought the advice of both Jefferson and Hamilton on the constitutionality of the national bank.
• Despite his reservations, Washington ultimately sided with Hamilton, supporting the creation of the bank.
• Washington's support was crucial in gaining Congressional approval for the bank bill.

Political Parties Emerge

• The debates surrounding Hamilton's economic policies and the French Revolution led to the formation of two distinct political parties: the Federalists and the Democratic-Republicans.
• The Federalists, led by Hamilton, favored a strong central government, industry, and a loose interpretation of the Constitution.
• The Democratic-Republicans, led by Jefferson, advocated for strong state governments, agriculture, and a strict interpretation of the Constitution.
• Federalists were primarily located in the North and East, while Democratic-Republicans were concentrated in the South and West.

The French Revolution

• The French Revolution initially garnered support from Americans who saw it as an extension of their own revolution.
• However, as the revolution grew more radical and violent, with mass executions and the Reign of Terror this began to cause concern in America.

Initial American Response

• Americans initially were sympathetic to the cause for revolution.

Evolution of the French Revolution and American Sentiment

• Americans began turning against the revolution when the revolutionaries started murdering rich people and land only and it was deemed excessive.
• The symbol of the guillotine was a sign of the excessiveness of the French Revolution.

Execution of Louis XVI

• Eventually Louis XVI was killed for being a king.

Impact on American Politics

• These events would have a profound impact on American party politics further solidifying divisions as each party attempted to portray the other in the worst possible light.
• Britain was against the Revolution and the French declared war on them.
  They were essentially asking for the US to help them.

Edmond Genet

*Edmond Genet was sent to talk to George Washington about signing an alliance with France and helping them during the war.

Hamilton's View

• Alexander Hamilton was against helping from almost day one.
• He wanted to remain neutral during this war.
• Hamilton felt that this was a war that they couldn't afford, and didn't have the army and navy to involve themselves with the war.

Jefferson's View

• Thomas Jefferson love what the French were doing, even through all the blood and murder.
• He argued that blood of patriots had to water the tree of liberty.
• He also wanted them to be neutral, but he felt that congress had to do this, and not the president.

Washington took Hamilton's side on this

• It solidified parties further, with one having more sympathy for the British, and the other with the French.