Part 23 (1/2)

202. The National Debt.--The National Debt was the price of independence. During the war Congress had been too poor to pay gold and silver for what it needed to carry on the war. So it had given promises to pay at some future time. These promises to pay were called by various names as bonds, certificates of indebtedness, and paper money. Taken all together they formed what was called the Domestic Debt, because it was owed to persons living in the United States. There was also a Foreign Debt. This was owed to the King of France and to other foreigners who had lent money to the United States.

[Sidenote: Hamilton as a financier.]

[Sidenote: His plan.]

[Sidenote: Objections to it.]

203. Hamilton's Financial Policy.--Alexander Hamilton was the ablest Secretary of the Treasury the United States has ever had. To give people confidence in the new government, he proposed to redeem the old certificates and bonds, dollar for dollar, in new bonds. To this plan there was violent objection. Most of the original holders of the certificates and bonds had sold them long ago. They were now mainly held by speculators who had paid about thirty or forty cents for each dollar.

Why should the speculator get one dollar for that which had cost him only thirty or forty cents? Hamilton insisted that his plan was the only way to place the public credit on a firm foundation, and it was finally adopted.

[Ill.u.s.tration: ALEXANDER HAMILTON. ”He smote the rock of the national resources and abundant streams of revenue gushed forth. He touched the dead corpse of the public credit and it sprang upon its feet.”--WEBSTER.]

[Sidenote: The state debts. _Source-Book_, 186-188.]

[Sidenote: Hamilton's plan of a.s.sumption.]

[Sidenote: Objections to it.]

[Sidenote: Failure of the bill.]

204. a.s.sumption of State Debts.--A further part of Hamilton's original scheme aroused even greater opposition. During the Revolutionary War the states, too, had become heavily in debt. They had furnished soldiers and supplies to Congress. Some of them had undertaken expeditions at their own expense. Virginia, for example, had borne all the cost of Clark's conquest of the Northwest (p. 116). She had later ceded nearly all her rights in the conquered territory to the United States (p. 135). These debts had been incurred for the benefit of the people as a whole. Would it not then be fair for the people of the United States as a whole to pay them? Hamilton thought that it would. It chanced, however, that the Northern states had much larger debts than had the Southern states. One result of Hamilton's scheme would be to relieve the Northern states of a part of their burdens and to increase the burdens of the Southern states. The Southerners, therefore, were strongly opposed to the plan. The North Carolina representatives reached New York just in time to vote against it, and that part of Hamilton's plan was defeated.

[Ill.u.s.tration: AN OLD STAGECOACH. The house was built in Lincoln County, Kentucky, in 1783.]

[Sidenote: Question of the site of the national capital.]

[Sidenote: Jefferson and Hamilton.]

[Sidenote: The District of Columbia.]

205. The National Capital.--In these days of fast express trains it makes little difference whether one is going to Philadelphia or to Baltimore--only a few hours more or less in a comfortable railroad car.

But in 1791 it made a great deal of difference whether one were going to Philadelphia or to Baltimore. Traveling was especially hard in the South. There were few roads or taverns in that part of the country, and those few were bad. The Southerners were anxious to have the national capital as far south as possible. They were also opposed to the a.s.sumption of the state debts by the national government. Now it happened that the Northerners were in favor of the a.s.sumption of the debts and did not care very much where the national capital might be. In the end Jefferson and Hamilton made ”a deal,” the first of its kind in our history. Enough Southerners voted for the a.s.sumption bill to pa.s.s it. The Northerners, on their part, agreed that the temporary seat of government should be at Philadelphia, and the permanent seat of government on the Potomac. Virginia and Maryland at once ceded enough land to form a ”federal district.” This was called the District of Columbia. Soon preparations were begun to build a capital city there--the city of Was.h.i.+ngton.

[Ill.u.s.tration: A LADY OF THE ”REPUBLICAN COURT.”]

[Sidenote: Hamilton's plan for a United States bank. _McMaster_, 201]

[Sidenote: Jefferson's argument against it.]

[Sidenote: The bank established.]

206. The First Bank of the United States.--Two parts of Hamilton's plan were now adopted. To the third part of his scheme there was even more opposition. This was the establishment of a great Bank of the United States. The government in 1790 had no place in which to keep its money. Instead of establis.h.i.+ng government treasuries, Hamilton wanted a great national bank, controlled by the government. This bank could establish branches in important cities. The government's money could be deposited at any of these branches and could be paid out by checks sent from the Treasury. Furthermore, people could buy a part of the stock of the bank with the new bonds of the United States. This would make people more eager to own the bonds, and so would increase their price. For all these reasons Hamilton thought the bank would be very useful, and therefore ”necessary and proper” for the carrying out of the powers given by the Const.i.tution to the national government. Jefferson, however, thought that the words ”necessary and proper” meant necessary and not useful. The bank was not necessary according to the ordinary use of the word. Congress therefore had no business to establish it. After thinking the matter over, Was.h.i.+ngton signed the bill and it became a law. But Jefferson had sounded the alarm. Many persons agreed with him, many others agreed with Hamilton. Two great political parties were formed and began the contest for power that has been going on ever since.

CHAPTER 20

RISE OF POLITICAL PARTIES

[Sidenote: Formation of the Federalist party. _McMaster_, 202.]