Alexander Hamilton was one of the most influential figures in shaping the United States. After helping convince the states to ratify the Constitution, Hamilton was appointed by President George Washington to become the nation’s first Treasury secretary. In this position, Hamilton issued a series of reports that moved U.S. economic policy and constitutional interpretation in the direction that is largely followed today.
Report on the Public Credit
Hamilton’s first report to Congress included a proposal in which the federal government would absorb all state debts incurred during the War for Independence. Since the war was fought mostly in the North, this meant that southern states would help finance the debt of northern states. Congressmen whose states had no debt argued that they should not have to pay debts of other states. They also argued that there was no provision in the Constitution for such a plan.
Hamilton set a precedent by arguing that assuming state debts was an "implied power" of the federal government, even though it was not among the enumerated powers in the Constitution. This notion of "implied powers" has been applied many times through the years, including today.
Ultimately the southern congressmen agreed to Hamilton’s plan when the northern congressmen agreed to move the national capital to the South. The federal assumption of state debts set the trend of placing the federal government in control of the national economy, which continues today. It also led to the creation of Washington, DC, the future national capital.
Report on a National Bank
Hamilton’s second report called for creating a national bank to hold government tax revenue, meet the government payroll, and issue national currency. Most importantly to Hamilton, the bank would become a steady source of credit to the federal government.
Southerners objected to his proposal because the southern populace (largely comprised of planters and farmers) was suspicious of a central bank that could infringe on state sovereignty by allowing private investors to spend public money. Furthermore, many argued that there was no constitutional provision to charter a national bank.
Hamilton argued that a national bank was an "implied power" that was "necessary and proper" under Article I, Section 8 of the Constitution. President Washington reluctantly agreed and signed the national bank bill into law. The Bank of the United States became the forerunner of today’s Federal Reserve System.
Report on Manufactures
Hamilton’s third report advocated creating a national economic system similar to the British mercantilist system. This included enacting protective tariffs (i.e., taxes) on imported goods to make American products cheaper and more desirable. This also included using taxpayer revenue to fund "internal improvements" to build roads, bridges and other infrastructure projects.
Opponents argued that funding internal improvements was unconstitutional because there was no provision for the federal government to use taxpayer money to subsidize favored businesses. Others opposed the plan because it was suspiciously similar to the British system that so many Americans had just fought to get rid of.
Hamilton countered that his plan could be legal under the "general welfare" clause of the Constitution. Although Congress initially rejected this proposal, it reemerged under future administrations and was eventually adopted by the Whig, Republican and Democratic parties. Today subsidizing businesses is largely known as "pork barrel spending," and it plays a major role in American politics.
Hamilton’s Legacy
Alexander Hamilton’s support of accumulating national debt, creating a national bank, and funding internal improvements became the basis of the "American System" adopted by the Whig Party in the 1800s. When the Whigs disbanded, they were replaced by the Republicans, who implemented many of Hamilton’s goals when they took control of Congress and the presidency in 1861.
Since then, the proposals in Hamilton’s reports have been fully enacted in one form or another. There is a vast national debt, banking is centrally planned through the Federal Reserve System, and many businesses and industries are routinely subsidized with taxpayer money. Over 200 years after his death, Alexander Hamilton’s vision for America is now a reality.
Sources
DiLorenzo, Thomas J.: Hamilton’s Curse (New York, NY: Crown Publishing Group, Random House, Inc., 2008)
Schweikart, Larry and Allen, Michael: A Patriot’s History of the United States (New York, NY: Penguin Group, Inc., 2004)
Walter Coffey - Walter Coffey is a freelance writer who resides in Houston, Texas. Walter has written several works of historical fiction and non-fiction, ...
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