Economic Problems/ Hamiltons Financial Plan

As the first secretary of the treasury, Alexander Hamilton faced the task of
straightening out the nations finances. First of all, the new government
needed to pay its war debts. During the Revolution, the United States had
borrowed millions of dollars from France, the Netherlands, and Spain. Within
the United States, merchants and other private citizens had loaned money to
the government. State governments also had wartime debts to pay back.
By 1789, the national debt totaled more than $52 million. Most government leaders agreed that the
nation must repay its debts to win the respect of both foreign nations and its own citizens. These
nations would do business with the United States if they saw that the country would pay its debts. If
the nation failed to do so, no country would lend it money in the future. Hamilton came up with a
financial plan that reflected his belief in a strong central government. He thought the power of
the national government should be stronger than that of the state governments.
In 1790, Hamilton presented his plan to Congress. He proposed three steps to improve the nations
finances.
1. paying off all war debts
2. raising government revenues
3. creating a national bank
The secretary of the treasury favored tariffs. A tariff is a tax on imported goods. It serves two
purposes: raising money for the government and encouraging
the growth of American industry.
Hamilton also called for the creation of a national bank. Such

bank would meet many needs. It would give the government a

safe place to keep money. It would also make loans to
businesses and government. Most important, it would issue
bank notespaper money that could be used as currency. Overall, Hamiltons plan would strengthen
the central government. However, this worried Jefferson and Madison.
Hamiltons Financial Plan

1. Why was it important for the United States to pay off its war debt?

2. What was Hamiltons 3-step plan to pay off the nations debt?
3. What benefit did the protective tariff give the American economy?
4. Why did Hamilton think it was important to have a national bank?

Washingtons Cabinet
The Constitution also gave Congress the task of creating
departments to help the president lead the nation. The
president had the power to appoint the heads of these
departments, who were to assist the president with the
many issues and problems he had to face. These heads of
departments became his cabinet. The Congress created
three departments.

In his first major task as president, Washington chose talented people to run them. For secretary of
war, he picked Henry Knox, a trusted general during the Revolution. It was Knoxs job to oversee the
nations defenses. For secretary of state, Washington chose Thomas Jefferson. He had been serving
as U.S. minister to France. The State Department oversaw relations between the United States and
other countries. Washington turned to the brilliant Alexander Hamilton to be the secretary of the
treasury. Hamilton had to manage the governments money. Hamiltons ties to the president began
during the war when he had served as one of Washingtons aides. To advise the government on legal
matters, Washington picked Edmund Randolph as attorney general. These department heads and the
attorney general made up Washingtons cabinet. The Constitution made no mention of a cabinet.
However, Washington began the practice of calling his department heads together to advise him.

Washingtons Cabinet
1.
2.
3.
4.

What was the purpose of the presidents cabinet?

Describe the job of the Secretary of Wars job. (What was he in charge of?)
Describe the job of the Secretary of State.
Describe the job of the Secretary of the Treasury.

Washington Retires
In 1796, President George Washington decided that two terms in office was enough. Washington
believed two terms were the most any President should serve. For the next 130 years, Presidents
followed this precedent by not seeking more than two terms. Washington had come to the
presidency greatly admired by the American people. Throughout his eight years in office (17891797),
he had tried to serve as a symbol of national unity. In large part, he succeeded.

Americans listened more closely to Washingtons parting advice on foreign policy (relations with
the governments of other countries). He urged the nations leaders to remain neutral and steer clear
of permanent alliances (friendships) with any portion of the foreign world. He warned that
agreements with foreign nations might work against U.S. interests. His advice served to guide U.S.
foreign policy into the twentieth century.

Washington's Legacy
1. How many terms did Washington believe presidents should serve?
2. Summarize Washingtons parting advice on foreign policy.
*Summary = Topic + what about the topic*

Proclamation of Neutrality
During Washingtons Presidency, war between France and Britain
then broke out in 1793. Thomas Jefferson and his supporters
continued to favor the French revolutionaries, while Alexander
Hamilton, John Adams, and other Federalists favored the British.

The United States had won its independence largely through the
military and financial support of France. Some French leaders thought it was time for the Americans
to return the favor. Additionally, a treaty from 1778 still bound the two nations together. Hamilton
and the Federalists, however, pointed out that Britain was the United States most important trade
partner.

Hamilton and his supporters were able to persuade Washington that Frances war was not the United
States problem. Washington finally became convinced that there was nothing to be gained if the
United States involved itself in this European conflict. Compared to European powers, the United
States was weak militarily. To avoid being drawn into the conflict, Washington adopted a policy
of neutrality the United States would avoid taking sides in any European conflict or becoming
involved in any foreign war.

Proclamation of Neutrality
1. What is a policy of neutrality?
2. Why did George Washington choose neutrality?

Washington's Farewell Address

Washington used his Farewell Address to give his countrymen
his advice as a departing friend on what he saw as the
greatest threats to the nations survival. Washington
addressed relations between the North and the South and the
importance of moral virtue. He warned against the rise of
political parties and the challenges of foreign policy.

In his Farewell Address, Washington warned of possible dangers ahead:

Foreign Policy:
The great rule of conduct for us in regard to foreign nations is in extending our commercial
relations, to have with them as little political connection as possible. It is our true policy to steer
clear of permanent alliances with any portion of the foreign world.

Domestic Policy:
Let me now . . . warn you . . . against the [harmful] effects of the spirit of (political) party. . . . This
spirit, unfortunately . . . exists in different shapes in all governments . . . but in those of the popular
form, it is seen in its greatest rankness and is truly their worst enemy.
George Washington, Farewell Address

Washington's Farewell Address

1. Summarize the warning Washington gave about Foreign Policy.
2. Summarize the warning Washington gave about Domestic Policy.