Lesson 2: Solving National Problems

Lesson Focus

The new nation faced huge debts. This lesson explores Alexander Hamilton's financial plan to create stability and how his vision for a strong government sparked intense national debate.

People to Know

Alexander Hamilton, Thomas Jefferson

Learning Objectives

• Analyze Alexander Hamilton's financial program and the heated opposition it faced from key political rivals.
• Describe the challenges settlers faced during westward expansion, including conflicts with Native American nations and internal rebellions.

The new government urgently needed money, leading to a debate over tariffs.
Northern states wanted a high protective tariff to shield their industries, but Southern states, fearing higher costs, opposed it.
In a 1789 compromise, Congress passed a revenue tariff. This low tax on imports was designed to provide income for the government rather than protect specific businesses, providing a first step toward financial stability but not solving the larger debt crisis.

The U.S. owed millions from the Revolutionary War, threatening its survival.
Treasury Secretary Alexander Hamilton proposed that the federal government pay all foreign and domestic debts, including war bonds, at full value. His plan also included the Assumption Act of 1790, where the national government took on the debts of the states.
This controversial plan successfully restored the nation's credit but angered opponents who saw it as unfair to original bond holders.

To create a stable economy, Hamilton proposed creating a national bank.
This bank would hold government tax money, issue a single national currency backed by gold and silver, and provide large loans to the government and businesses. This idea was a key part of his vision, outlined in his Report on Manufactures, to make the U.S. an industrial power.
Note that the Bank of the United States was established in 1791 for 20 years.

Thomas Jefferson and James Madison feared Hamilton's plans gave the central government too much power.
Madison attacked the Funding Bill as a giveaway to speculators and argued the national bank was unconstitutional because it was not an enumerated power. Hamilton defended it as an implied power necessary to govern.
This conflict led to a major political deal: southerners supported the Assumption Act in return for moving the nation's capital to the South.

The government faced armed resistance in the West from Native Americans and settlers.
To secure the frontier, President Washington sent General Anthony Wayne to defeat a coalition of Native American forces at the battle of Fallen Timbers in 1794. That same year, Washington personally led an army to crush the Whiskey Rebellion, a farmer revolt against an excise tax.
These decisive actions proved the new federal government was strong enough to enforce its laws.

The rapid settlement of the West created new states and new political ideas.
As Kentucky (1792) and Tennessee (1796) joined the Union, they reflected the frontier spirit that any man who helped build the nation deserved a voice in government.
Their state constitutions expanded suffrage by allowing all white men to vote, regardless of property ownership. This move challenged the more restrictive voting rights common in the eastern states and expanded American democracy.