American History I
Notes from 3/13/01

Washington’s two terms as President (1789-1797) were fraught with difficulties. The political stability of the republic depended in large part on Washington’s leadership ability, and on the commitment of the country’s political and economic elite to the republican form of government set out in the newly ratified constitution. Factions had emerged during the constitutional debate; Washington’s task was to bring both federalists and anti-federalists together in the new government.

Washington’s Vice-President (John Adams) and Secretary of Treasury (Alexander Hamilton) were both federalists; his Secretary of State (Thomas Jefferson) was and anti-federalist (later called Democratic-Republican). In many ways, the divisions in Washington’s administration (especially between Hamilton and Jefferson) reflected many of the tensions in the broader society.

1. Assumption of the Debt. As Secretary of the Treasury, Hamilton was concerned about putting the new nation on a sounder financial footing. During the Revolution, both the states and the Continental Congress had issued lots of IOU’s (loan certificates) when they didn’t have the cash to pay soldiers and suppliers. With the war over, many people where holding these IOU’s, and they weren’t sure whether they would ever see their money. Hamilton felt it important to assume these debts, because it would signal to European countries that the U.S. was responsible and solvent and make it easier to conduct trade and attract foreign investment. His plan was to exchange IOU’s for treasury issued bonds, which would pay interest at maturity.

Many people opposed this plan, including James Madison, then a member of Congress. First, some states had already hunkered down and paid of their debts, so the plan seemed to reward those that had procrastinated. Second, many soldiers and small farmers who hit hard times had sold their IOU’s for pennies on the dollar to wealthier investors or speculators. These speculators in turn were buying up western land cheaply with the certificates, in expectation of future settlement. The assumption plan would cut off their supply of "cut-rate" securities. Hamilton’s proposal was initially defeated in the House of Representatives.

In order to get some key Virginian congressmen to switch votes, the administration promised to support a move of the federal capital to northern Virginia, on the Potomac River. A new vote was taken, and the assumption plan was passed.

2. The Bank of the United States. Hamilton also wanted to establish a Bank of the United States, which would be a private institution funded in part by the federal government. A central bank like the Bank of England would help facilitate commercial transactions, and serve as the main depositary for the U.S.

Madison and Jefferson saw the Bank as an unconstitutional extension of federal power. The constitution did not give Congress the authority to charter such a bank they argued, and they felt that Hamilton was bent on creating a tyranny over the states. Hamilton won the debate in Congress (and eventually the Supreme Court would decide that the Bank was in fact constitutional); but the public was becoming increasingly concerned about the federalists going too far. As the authors of the text state,

"[T]he general public looked on [Hamilton’s] actions with growing fear and hostility. Many persons associated huge national debts and privileged banks with the decay of public virtue." (page 210).

3. The Report on Manufactures. In 1792, Hamilton suffered his first major setback. He had recommended that the federal government get more involved in economic policy, mainly to stimulate manufacturing in the new country. But many in Congress felt that such a policy would favor northern cities over farmers in the south and west. Thomas Jefferson felt that cities bred vice; he argued that the government should favor agriculture over manufacturing. Jefferson wrote:

Foreign policy concerns dominated Washington’s second term (1793-1797). In 1789, the French Revolution erupted, resulting in the beheading (in 1793) of the French monarchs who had supported the Americans during the Revolution. Federalists feared that the violence and lawlessness associated with the Reign of Terror in France would spread to the United States. As war between England and France escalated, these Federalists were more sympathetic to the English. On the other hand, people like Jefferson (who were now calling themselves Republicans, or Democratic-Republicans) sympathized more with the French, even though they also deplored the violence of the French Revolution.

The U.S. embarked on a policy of neutrality. But this was difficult, and tensions began to run high as people became concerned about foreign intrigue and espionage. Washington sent the Supreme Court Justice, John Jay, to England to negotiate a neutrality treaty there, after the English began a policy of seizing American trading vessels. The resulting treaty (Jay’s Treaty) was highly unpopular in the United States, because it seemed that the Americans had given up too much. When the Senate ratified a modified version of the Treaty in 1795, there was widespread protest. For a brief time, it really looked like civil war would break out. Only because George Washington remained so popular did tensions subside. But by the conclusion of this controversy the divisions between Federalists and Republicans were permanent; a two-party system was here to stay.

Washington decided against running for a third term as President, setting a precedent that would last until 1940, when Franklin Roosevelt was re-elected for a third term. (After Roosevelt died in 1945, the constitution was amended to limit presidents to two terms). In his famous Farewell Address (1796) to the nation, Washington warned against the emerging partisanship in politics. He also warned against the United States becoming entangled in foreign affairs, as it become during his second term. Although Washington’s remarks were unable to stop the formation of the party system, his isolationist view on American involvement abroad would be an important component of our foreign policy throughout the 19^th century.

Washington was succeeded by his Vice-President, John Adams. Adams’ Vice-President was Thomas Jefferson, even though Jefferson and Adams were political opposites. That’s because the way the constitution was originally written, whoever got the second most votes in the electoral college would be vice-president, regardless of his political affiliation. (In 1804 the constitution was amended to make the candidates for President and Vice-President run on the same ticket.)

During Adams’ administration, the foreign policy issues continued to dominate. Adams lacked Washington’s personality and prestige, and had difficulty with members of his own cabinet who viewed Hamilton as the true leader of the federalist party. (Hamilton could not have been president because he was born in the British West Indies.)

As war in Europe continued, Adams tried to maintain Washington’s commitment to neutrality. He sent diplomats to France to work out agreements there, but the French officials demanded excessive bribes before sitting down to negotiate. This became known as the XYZ Affair (because in correspondence the ministers who demanded the bribes were referred to anonymously as X, Y and Z). The Affair touched off another storm of protest in the United States, and people began to question the loyalty and patriotism of those who remained sympathetic to the French.

It is during these tense times that Adams moved to silence the political opposition. Two sets of laws were passed, known as the Alien and Sedition Acts (1798). The Alien Acts allowed the president during wartime to deport foreigners without any kind of trial or proceeding. Because the U.S. was not officially at war, Adams did not exercise this power. The Alien Acts also imposed a 14-year "probationary" period before new immigrants could vote. This was aimed at recent immigrants like the Irish and Scotch-Irish, who tended to support Jefferson’s party, the Democratic-Republicans. The Sedition Act was even more troubling. It made it a crime to criticize the federal government, punishable by fines and imprisonment. There were people actually prosecuted in the federal courts under this law, despite its clear violation of the First Amendment (freedom of speech and press).

In the election of 1800, no candidate won a majority in the electoral college. Thomas Jefferson and Aaron Burr each received 73 electoral votes, John Adams got 65, and another federalist named Charles Pinckney received 64. When no candidate gets a majority of electoral votes, the constitution says that the House of Representatives decides the election. (The only other time this would happen would be 1824.) The House ultimately voted for Thomas Jefferson. The big question now would be whether there would be a peaceful transition of power from one political party to another, something that had happened only very rarely in history up to that point.