Alexander Hamilton’s Financial Plan:
Alexander Hamilton, as Secretary of the Treasury, wanted to…
Debt CAN lead to good credit if you acquire debt responsibly
“If we assume the debts, the union gets a new line of credit, a financial diuretic”
One of the most pressing problems facing the new government of the United States was the economy. As a result of the American Revolution, the federal government had acquired a huge debt: $54 million including interest. The states owed another $25 million combined. Paper money issued under the Continental Congresses and Articles of Confederation was worthless. Foreign credit was unavailable. Who would lend to such a young nation? Additionally, not every state had an equal amount of debt. Some states, especially in the South, had already paid their debt and they felt they shouldn’t be responsible for the states that still owed. How would our nation be united if we couldn’t help each other?
Hamilton’s Point of View:
He proposed that the government assume, or take over owing, the entire debt of the federal government AND the states, and use tax money collected from the states and sell bonds to pay off the debts. He felt that if the United States was to be a nation together, they must come together and help each other pay off debts to make the country stronger as a whole.
States like Maryland, Pennsylvania, North Carolina, and Virginia, which had already paid off their debts, saw no reason why they should be taxed by the federal government to pay off the debts of other states like Massachusetts and South Carolina.
For six months, a bitter debate raged in Congress, until James Madison and Thomas Jefferson engineered a compromise. In exchange for southern votes on his financial plan, Hamilton promised to support locating the national capital on the banks of the Potomac River, the border between two southern states, Virginia and Maryland.
Alexander Hamilton, as Secretary of the Treasury, wanted to…
- Pay back bonds in full to establish a good reputation (good credit)
- Assume (take over) state debt and pay it off to establish a good reputation (good credit)
- Raise revenue for the government to pay back bond debt, state debt, and new money to run programs
- Use tariffs and excise taxes to raise this money
Debt CAN lead to good credit if you acquire debt responsibly
“If we assume the debts, the union gets a new line of credit, a financial diuretic”
One of the most pressing problems facing the new government of the United States was the economy. As a result of the American Revolution, the federal government had acquired a huge debt: $54 million including interest. The states owed another $25 million combined. Paper money issued under the Continental Congresses and Articles of Confederation was worthless. Foreign credit was unavailable. Who would lend to such a young nation? Additionally, not every state had an equal amount of debt. Some states, especially in the South, had already paid their debt and they felt they shouldn’t be responsible for the states that still owed. How would our nation be united if we couldn’t help each other?
Hamilton’s Point of View:
He proposed that the government assume, or take over owing, the entire debt of the federal government AND the states, and use tax money collected from the states and sell bonds to pay off the debts. He felt that if the United States was to be a nation together, they must come together and help each other pay off debts to make the country stronger as a whole.
States like Maryland, Pennsylvania, North Carolina, and Virginia, which had already paid off their debts, saw no reason why they should be taxed by the federal government to pay off the debts of other states like Massachusetts and South Carolina.
For six months, a bitter debate raged in Congress, until James Madison and Thomas Jefferson engineered a compromise. In exchange for southern votes on his financial plan, Hamilton promised to support locating the national capital on the banks of the Potomac River, the border between two southern states, Virginia and Maryland.
|
|