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Unsettled Domestic Issues

18c. Growing Opposition

Jefferson's Plan for the City of Washington (1795)
Thomas Jefferson supported the plan to build the young nation's capital along the Potomac River; Alexander Hamilton disagreed with the selected site. Hamilton finally agreed to the idea when Jefferson pledged support for some of Hamilton's financial reforms.

The 1790s brought extraordinary divisions to the forefront of American life and politics. Strong differences about how best to maintain the benefits of the Revolution lay at the center of these conflicts. Hamilton's economic policies were among the earliest sources of tension. They sparked strong reactions not only from elected officials and ordinary farmers, but even split Washington's cabinet.

Thomas Jefferson, who was the secretary of state at the time, thought Hamilton's plans for full payment of the public debt stood to benefit a "corrupt squadron of paper dealers." To Jefferson, speculation in paper certificates threatened the virtue of the new American Republic. Even Madison, who had worked closely with Hamilton in co-authoring The Federalist Papers, thought the public debt repayment plan gave too big a windfall to wealthy financiers.

As a counter-measure Madison proposed that Congress should set aside some money for the original owners of the debts who tended to be ordinary Americans and not new investors and speculators.

On a pragmatic level Madison's idea would have been difficult to implement. Nearly half the members of Congress invested in public securities. They stood to benefit financially from Hamilton's plan. Its passage was doubly assured.

Alexander Hamilton
Many of Alexander Hamilton's economic policies were unpopular with people outside the northeast.

Hamilton's successful bid to charter a national Bank of the United States also brought strong opposition from Jefferson. Their disagreement about the bank stemmed from sharply opposed interpretations of the Constitution. For Jefferson, such action was clearly beyond the powers granted to the federal government. In his "strict interpretation" of the Constitution, Jefferson pointed out that the tenth amendment required that all federal authority be expressly stated in the law. Nowhere did the Constitution allow for the federal government to create a bank.

Hamilton responded with a "loose interpretation" that allowed such federal action under a clause permitting Congress to make "all Laws which shall be necessary and proper."

Neither side was absolutely right. The Constitution needed interpretation. In this difference, however, we can see sharply contrasting visions for the future of the republic.

Thomas Jefferson
Thomas Jefferson opposed Alexander Hamilton's fiscal policies.

Opposition to Hamilton's financial policies spread beyond the cabinet. The legislature divided about whether or not to support the Bank of the United States. This split in Congress loomed as a potential threat to the union because northern representatives overwhelmingly voted favorably, while southerners were strongly opposed. The difference stemmed from significant economic differences between the sections. Large cities, merchants, and leading financiers were much more numerous in the north and stood to benefit from Hamilton's plans.

Keen observers began to fear that sharp sectional differences might soon threaten the union. Indeed, the Bank ultimately found support in Congress through a compromise that included a commitment to build the new federal capital on the banks of the Potomac River. In part this stemmed from the fact that southern states such as Virginia had already paid off their war debt and stood to gain nothing from a central bank. While most of the commercial beneficiaries of Hamilton's policies were concentrated in the urban northeast, the political capital of Washington, D.C. would stand in the more agricultural south. By dividing the centers of economic and political power many hoped to avoid a dangerous concentration of power in any one place or region.

The increasing discord of the early 1790s pointed toward an uncertain future. The Virginian Jefferson and the New Yorker Hamilton serve as useful figureheads for the opposing sides. While Hamilton was an adamant elitist whose policies favored merchants and financiers, Jefferson, though wealthy, favored policies aimed toward ordinary farmers.

Their differences also extended to the branch of government that each favored. Hamilton thought a strong executive and a judiciary protected from direct popular influence were essential to the health of the republic. By contrast, Jefferson put much greater faith in democracy and felt that the truest expression of republican principles would come through the legislature, which was elected directly by the people. Their differences would become even sharper as the decade wore on.

On the Web
Hamilton's Opinion on the Constitutionality of the Bank of the United States
When Madison and other southern Congressmen cried foul on the proposition for a National Bank, calling it unconstitutional, it looked like the Bank was doomed. President Washington was all ready to veto the plan, until Hamilton presented his defense. Here is the text of that decisive defense in its entirety.
Thomas Jefferson on Money & Banking
When it came to the issues of money and banking, Thomas Jefferson had some pretty strong views. He insisted that the Constitution nowhere allow the Federal Government to form its own bank, and he didn't like the idea of paper currency one bit. This page is a compilation of fragments from Jefferson's writing on the subject of finance in the young nation. What would the country look like now if his suggestions had been followed?
James Madison Debates the Constitutionality of a National Bank
Just 2 years after he had joined on as President Washington's ally in Congress, James Madison did an about-face. Together with his fellow Virginian, Thomas Jefferson, he argued (unsuccessfully) against the Washington Administration's proposal for a national bank. Here is a recap of the case Madison made on the House floor. It is text-heavy and somewhat cumbersome, but the introduction is certainly worthwhile.
Madison in Opposition
Concerned about the federal government overstepping its bounds, James Madison teamed up with Thomas Jefferson to form a new party that would support a very limited interpretation of federal powers. But of all places to look for supporters, they turned to New York — a stronghold of federalism. Find out why the founders of the Republican Party sought allies in "enemy territory" at this brief chapter from a James Madison bio site.
The History of the District of Columbia
Washington, D.C. is a unique creation of the federal government. It is a combination of state, city and nation all wrapped into one. Where did this region spring from and why did America need a brand new capital city?
The incorporation of a bank and the powers assumed [by legislation doing so] have not, in my opinion, been delegated to the United States by the Constitution. They are nor among the powers specially enumerated. -Thomas Jefferson
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Think you're broke by today's standards? See how much today's $10 would have been worth 200 years ago. Maybe you should consider saving that allowance.
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