Chapter 3
The Parties Begin
“Liberty for the whale means death for
the minnow”
• What does this saying mean?
• How does this relate to the United States?
All About Power
• Political parties developed
because of a disagreement
between Jefferson and
Hamilton
• They were both concerned
about liberty and power
• How do you balance the two?
– Government powerful enough to
keep order
– Make sure that the government
doesn’t oppress people
Hamilton’s Idea
• In favor of a strong government
– Should be run by aristocrats
• Feared the masses (the
ordinary people)
– Why didn’t he trust them?
• Wanted government by the few
• Knew that the country needed
checks and balances to work
• Encouraged industry
Jefferson’s Idea
• In favor of states’ rights
– Wanted a weak federal
government
– Why?
• Thought ordinary people
could govern themselves
– If they were educated
• Wanted an amendment to
provide free education
• Did this happen?
• Wanted a nation of farmers
The Parties Begin
Hamilton’s Followers
• Federalist Party
• Conservative on most issues
Jefferson’s Followers
• Democratic-Republican
Party
– Sometimes called the
Republican Party
– Not like the Republican Party
of today
– Eventually led to today’s
Democratic Party
• Liberal on most issues
Money Issues
• America was turning into a capitalistic society
• Basic parts of capitalism:
– Capital
• Money (or goods that can be turned into money)
– Credit
• Borrowing power (ability to borrow money)
– Collateral
• Promise something of value to a lender if you can’t pay
them back
Money Issues
• Governments also need to borrow money
– Bonds
• Promise to pay back amount loaned (plus interest)
• Bond holders are called Investors
– Interest
• Charge for borrowing money
Money Issues
• The Congress under the Articles of
Confederation borrowed money
– Why?
– Didn’t pay off the debt properly
• After the Constitution was written, there were
disagreements over what should be done with
the debt
Money Issues
• There were rumors that the government
wouldn’t pay the investors back
– What would you do if you loaned someone money
and you didn’t think they would pay you back?
• Investors sold their bonds to other people for less than
they were really worth
– The people who bought the bonds from the
investors are called speculators
• Taking a risk
• Why?
Attempts to Fix the Money Problem
• Jefferson
– Said new government shouldn’t have to pay off
the debt
• Why not?
• Shouldn’t be responsible for the mistakes of the old
government
• Didn’t want the speculators to get richer
Attempts to Fix the Money Problem
• Hamilton
– Wanted the government to pay off the debt
• Why?
– Made a deal with Madison and Jefferson
• They agreed to pay off the debt
– His financial plan was very successful
• Paid off the debt by the time he left the cabinet
• The United States had good credit
• Why is this important?
– Established free enterprise
• Keep government rules for businesses at a minimum