Hamilton’s Debt Plan
HAMILTON’S ECONOMIC PROGRAM & THE JEFFERSONIAN OPPOSITION
Background
When Hamilton became Secretary of the Treasury in September 1789, the United States was in financial
trouble. The government had little money, few sources of revenue, and millions of dollars in debt from the
Revolutionary War. The paper currency issued by the Continental Congress during the Revolution was virtually
worthless, and a confusing multitude of state and foreign currencies circulated. Unemployment was rising and
government bonds were trading at a fraction of face value.
Hamilton proposed a series of measures to resolve these problems and promote American prosperity. First,
the federal government would assume the states’ Revolutionary war debts, easing the burden on the states and
consolidating public creditors in a single group who would then depend on the survival of the federal government.
Second, the government would impose new tariffs and excise taxes as sources of revenue to pay American and
foreign creditors thereby establishing national credit and the value of government securities. Third, it would form a
central bank that would hold government deposits, handle payments on the debt, and issue bonds that would circulate
as a stable and uniform currency, facilitating business transactions and commercial ventures. Finally, the government
would use subsidies and protectionist tariffs to encourage the growth of American manufacturing and commerce.
Ultimately, Hamilton hoped his policies would help America become a commercially and politically
influential nation rivaling any European power.
DIRECTIONS:
1. In your document group, read your assigned document independently.
a. Note the arguments the author makes.
b. If you are having trouble, raise your hand to receive guidance.
2. In your jigsaw group, give your peers time to read your document independently; then, lead a
discussion of the author’s main argument(s).
a. DO NOT just tell them what the document means.
b. Help lead them to a better understanding of the document.
Document A: Thomas Jefferson, Notes on the State of Virginia; The following excerpt has become the classic
statement of his agrarian ideal.
The political economists of Europe have established it as a principle that
every state should endeavor to manufacture for itself: and this principle, like many
others, we transfer to America, without calculating the difference of circumstance
which should often produce a difference of result. In Europe…Manufacture
must…be resorted to of necessity…to support the surplus of their people. But we
have an immensity of land…Is it best then that all our citizens should be employed
in its improvement, or that one half should be called off from that to exercise
manufactures and handicraft arts for the other? Those who labour in the earth are
the chosen people of God…whose breasts he has made his peculiar deposit for
substantial and genuine virtue. It is the focus in which he keeps alive that sacred
fire, which otherwise might escape from the face of the earth…Dependance begets
subservience and venality, suffocates the germ of virtue, and prepares fit tools for
the designs of ambition…While we have land to labour then, let us never wish to
see our citizens occupied at a work-bench, …let our work-shops remain in Europe.
It is better to carry provisions and materials to workmen there, than bring them to
the provisions and materials, and with them their manners and principles. The loss
by the transportation of commodities across the Atlantic will be made up in
happiness and permanence of government. The mobs of great cities add just so
much to the support of pure government, as sores do to the strength of the human
body. It is the manners and spirit of a people which preserve a republic in vigour.
Hamilton’s Debt Plan
Document B: Thomas Jefferson, “To the President of the United States (George Washington),” September 9,
1792. Jefferson wrote this letter in response to inquiries from President Washington concerning Jefferson and Hamilton’s
mutual hostility. In this excerpt, Jefferson expresses his fears that Hamilton’s financial system is designed to subvert
republican government by corrupting the legislature and extending Hamilton’s personal influence.
[Hamilton’s] system flowed from principles adverse to liberty, & was calculated to
undermine and demolish the republic, by creating an influence of his department
over the members of the legislature. I saw this influence actually produced, & it’s
first fruits to be the establishment of the great outlines of his project by the votes of
the very persons who, having swallowed his bait were laying themselves out to
profit by his plans:… These were no longer the votes then of the representatives of
the people, but of deserters from the rights & interests of the people: & it was
impossible to consider their decisions, which had nothing in view but to enrich
themselves, as the measures of the fair majority…For, in a Report on the subject of
manufactures it was expressly assumed that the general government has a right to
exercise all powers which may be for the general welfare, that is to say, all the
legitimate powers of government…Thus the object of these plans taken together is
to draw all the powers of government into the hands of the general legislature, to
establish means for corrupting a sufficient corps in that legislature to divide the
honest votes…& to have that corps under the command of the Secretary of the
Treasury for the purpose of subverting…the principles of the constitution…
Document C: James Madison, “Speeches in the First congress—First Session. April 9, 1789. Duties on
Imports.” Madison gave this speech in the House in defense of a tariff bill he had proposed. In this excerpt, he expresses
his preference for free trade and a free market, while conceding the necessity of some government interference in
commerce and manufacturing.
I [am a] friend to a very free system of commerce, and hold it as a truth, that
commercial shackles are generally unjust, oppressive, and impolitic; it is also a
truth, that if industry and labor are left to take their own course, they will generally
be directed to those objects which are the most productive… We should find no
advantage in saying that every man should be obliged to furnish himself, by his
own labor, with those accommodations which depend on the mechanic arts, instead
of employing his neighbor, who could do it for him on better terms. It would be of
no advantage to the shoemaker to make his own clothes to save the expense of the
tailor’s bill, nor of the tailor to make his own shoes to save the expense of
procuring them from the shoemaker. It would be better policy to suffer each of
them to employ his talents in his own way. The case is the same between the
exercise of the arts and agriculture—between the city and the country—and
between city and town; each capable of making particular articles in abundance to
supply the other: thus all are benefited by exchange, and the less this exchange is
cramped by Government, the greater are the proportions of benefit to each. The
same argument holds good between nation and nation, and between parts of the
same nation. In my opinion it would be proper also for gentlemen to consider the
means of encouraging the great staple of America, I mean agriculture; which I
think may justly be styled the staple of the United States…With respect to the
object of manufactures, other countries may and do rival us; but we may be said to
have a monopoly in agriculture; the possession of the soil, and the lowness of its
price, give us as much a monopoly in this case as any nation or other parts of the
world have in the monopoly of any article whatever; but with this advantage to us,
that it cannot be shared nor injured by rivalship. . . .
Hamilton’s Debt Plan
Document D: Alexander Hamilton, Report of the Secretary of the Treasury of the United States, on the
Subject of Manufactures, December 5, 1791. Hamilton proposes and defends government promotion of
manufacturing. Congress did not accept his proposals, but the report remains an important statement of Hamilton’s
economic vision.
It ought readily to be conceded, that the cultivation of the earth, as the
primary and most certain source of national supply; as the immediate and chief
source of subsistence to man; as the principal source of those materials which
constitute the nutriment of other kinds of labor; as including a state most
favourable to the freedom and independence of the human mind; one, perhaps,
most conducive to the multiplication of the human species; has intrinsically a
strong claim to pre-eminence over every other kind of industry…
That it is even more productive than every other branch of industry,
requires more evidence than has yet been given in support of the position. That its
real interests, precious and important as…they truly are, will be advanced, rather
than injured by the due encouragement of manufactures, may, it is believed, be
satisfactorily demonstrated…
That manufacturing establishments not only occasion a positive
augmentation of the produce and revenue of the society, but that they contribute
essentially to rendering them greater than they could possibly be, without such
establishments. These circumstances are…
…Additional employment to classes of the community not ordinarily
engaged in the business.
The promoting of emigration from foreign countries.
The furnishing greater scope for the diversity of talents and dispositions
which discriminate men from each other.
The affording a more ample and various field for enterprize.
The creating in some instances a new, and securing in all, a more certain
and steady demand for the surplus produce of the soil. . .
…the United States…can indeed, without difficulty, obtain from abroad
the manufactured supplies, of which they are in want; but they experience
numerous and very injurious impediments to the [trade] of their own
commodities…The regulations of several countries, with which we have the most
extensive intercourse, throw serious obstructions in the way of the principal staples
of the United States. . .
…There seems to be a moral certainty, that the trade of a country which is
both manufacturing and agricultural, will be more lucrative and prosperous, than
that of a country, which is merely agricultural. . . Not only the wealth, but the
independence and security of a country, appear to be materially connected with the
prosperity of manufactures….there has been sufficient experience, that the
aggregate prosperity of manufactures, and the aggregate prosperity of agriculture
are intimately connected. . .
Hamilton’s Debt Plan
Discussion Questions: Answer the following questions in your group. Be sure to record your answers
below.
1. Why did Jefferson and Madison object to Hamilton’s economic program? What motives did Jefferson
attribute to Hamilton?
2. How did Hamilton’s and Madison’s views of the government’s proper role in the economy differ?
(Hint: You will probably want to draw on Documents C and D.)
3. Jefferson, Madison, and Hamilton all believed agriculture was the foundation of the economy and of
society (See Documents A, C, and D). In what ways did their views on the role of agriculture differ?
4. Jefferson and Madison believed economic independence through ownership of land was essential to
political independence and integrity; wage laborers and businessmen were too dependent on employers
and customers and too driven by economic insecurity to make sufficiently independent and disinterested
political decisions. Today, most Americans are not farmers and depend on salaries or wages for their
income. Are Jefferson and Madison’s concerns still relevant today? Why or why not?