hello and welcome to our federalist beginnings lecture today we're looking at the beginning of the new federal government under the united states constitution we'll look at what hamilton's financial plan was who was for or against it and why and what parts were actually instituted from that plan we'll look at why washington was reluctant to go to war and who in the world was at war that drew the united states into that question anyway and what did the emerging political parties which came to be known as the federalists and the democratic republicans believe and just a note before we get started we will be eventually be talking about a party called the democratic republicans they bear no relation to either major party today when we get to the founding of today's major political parties i will be sure and point that out that we are getting to that point but we're nowhere near that point yet we've got to get at least to the 18 20s before we do that so there was a newness and a radical uncertainty of this new constitutional system every decision set a precedent congress authorized the state department to take care of foreign affairs the secretary of state which in this case is thomas jefferson will take care of foreign affairs they authorized the treasury department to take care of the nation's finances the economies the secretary of treasury alexander hamilton will be in charge of that and they authorized the war department to take care of the nation's defense now today that is the department of defense but at the time they called it the war department either way its job is to protect the nation the defense of the nation the department heads the heads of these individual departments were linked to the president who appointed and dismissed them although with senate confirmation under the constitution these appointments had to be confirmed by con congress and eventually they came to be known as the president's cabinet his chief advisory body so if you're one of the heads of these individual departments in the federal government specifically an executive branch you are part of the president's cabinet president washington surrounded himself with some good people all of whom had faith in him even if they didn't agree with him or with each other his secretary of state was thomas jefferson who'd been in france for most of the war he was still in france when the constitution was written so he hasn't really been around but he's very well known and now he's coming back to be part of this government secretary of the treasury is alexander hamilton uh who we'll be talking more about today speaker of the house was james madison of course the architect of the constitution is now leading the house of representatives and will also be part of washington's cabinet because of that the house of representatives held open sessions while the senate met behind closed doors in secrecy until a dispute in 1797 forced a change in the senate rules and they began to meet an open session as well twice yearly circuit court sessions meant the most visible public face of the new government were federal judges and the judiciary act of 1789 established 13 district courts one for each state and appeals went to one of three circuit courts at the time supreme court justices served on the circuit courts and actually had to make the circuit right around the nation to hear cases as you'll read about this week that won't last for very long it was a very unappealing part of the job appeals from circuit courts then went to the supreme court of the united states which had the final say now the law limited federal court's jurisdiction to legal issues based on the constitution or the laws and treaties of the national government washington's cabinet debated how best to get the country on solid financial footing because frankly it was failing economically before the constitution was implemented they wanted to have credibility with other nations and treasury secretary hamilton had a fundamentally good plan but it was also a very controversial plan the biggest issue was the debt which the united states owed in millions of dollars particularly to france and to war veterans because remember they had paid them on bonds on those pieces of paper that said i owe you and we'll pay you later right so they owe a lot of money to a lot of people so this is what hamilton proposed this is not what he gets this is what he wants he wants a whiskey tax he wants to establish the government's authority to levy an internal tax because remember people have a direct say in this government that is representation required for taxation he wants to levy that first internal tax the first of several excise tax so that if an american farmer is growing wheat and they turn that into whiskey and sell it they would have to pay a tax on that whiskey that they're selling he wants a tariff on imported goods to promote u.s industry and to raise revenue and remember at this point britain has a ton of tariffs on the united states the us basically can't export to britain but they can import british goods so they've got this massive trade deficit and under the articles the us was helpless to kind of retaliate with tariffs against england in response to their tariffs so now he wants to be able to issue those tariffs he also wants them to raise revenue he wants to fund the national debt at full face value by issuing new government bonds payable at four percent interest so the idea is that you would bring in those old bonds under the articles government trade them in for new ones based on the constitution's government and a promise to pay by this new government which of course is more financially solvent because they actually have the power to tax the federal government would then assume state war debt as well and rishi reissued that debt as interest paying bond so if you're holding a state bond right from the state of massachusetts or the state of rhode island you could bring that in as well and exchange them for federal bonds and this would give the nation's creditors an economic stake in the stability of the nation the nation's economic stability would be more important than any one individual state so it would make state financial interest second to the federal government here's the problem who's still holding those bonds at this point we've had a massive depression after the war very poor farmers the people who actually fought the revolution are they still holding those bonds no they sold them so they could survive the depression now it's really wealthy creditors holding all those bonds and they're going to get rich off of this scheme so people think well this isn't right we're not actually paying the people who served in the military we're not actually paying the people who you know sold goods knowing that they might not get paid we're paying the people who you know bought those bonds up for pennies on the dollar because speculators and bankers had those bonds by this point in time and they bought them up really cheaply during that depression so this is why this part of the million is so controversial because you're not actually going back and paying those soldiers or those merchants or who whoever you're paying whoever's bought up that debt whoever's bought up that bond the plan also included the creation of a central or national bank known as the bank of the united states that would be jointly owned by federal government and private investors it's basically modeled off of the british bank which did the same thing it could make loans to businesses it would create a marketplace for public securities for those bonds and it would raise their value and it would provide the nation with a stable currency so no more having individual states all issue their own currency their own type of money now we'd have one stable currency protected by the bank of the united states hamilton proposed the u.s bank issue that paper currency backed by a small reserve of species specie is gold or silver now today our money is not backed up by gold or silver what backs up our money in the united states of america today our faith in the u.s government being here tomorrow so if you believe the us government is still going to stick around that money is worth something if not it is not actually backed up by any real gold or silver silver sitting in fort knox or something it is not based on a gold or silver standard hamilton's plan would also include aid to businesses he thought the u.s needed to diversify it was a largely agrarian it was mostly farmers so he wanted some manufacturing he wanted them to stop buying manufactured goods from overseas and make them in the united states instead he wanted to use protective tariffs as part of this plan too so you'd put tariffs on imported goods to make them more expensive than domestic products which maybe can't be made as cheaply because there's not as much industry in the united states just yet so for example he wanted tariffs on iron steel and shoemaking which would encourage people to buy american iron steel or shoes he also wanted direct subsidies to assist with startup costs for new industries so direct subsidy is literally a cash payment to businesses if they will start a business that basically doesn't exist in the united states yet because he thinks it will be good for the american economy we still use words like this like subsidy when we're talking about subsidized loans in which the government literally pays the interest on your student loans while you're in school unsubsidized loans you pay that interest or more worryingly it gets wrapped into the principal and then by the time you graduate you owe a ton of money so try not to do that he also argued that this would foster inter-regional economic dependency instead of international economic dependency so yeah he says the south is probably still going to be majority i mean excuse me majority agriculture the north is majority agriculture but those other regions can rely on what manufacturing exists in the united states typically in new england as opposed to manufacturing that exists in england or france or spain so he wants inter-regional dependency not international dependency since most southern states had actually already paid back most of their war debt with the exception of south carolina hamilton's plan was seen as disproportionately advantageous to the north so the south has paid off their debt right the the north in most cases has not so it's seen as as kind of being a bailout for northern states in a way that southern states just wouldn't benefit from there is a ton of debate about hamilton's plan madison and jefferson work together to oppose hamilton's plan in the u.s government madison will raise his objections from the house but jefferson will not come out and open opposition he's a member of washington's cabinet he felt it would be inappropriate so he'll raise his concerns during cabinet meetings and working behind the scenes both madison and jefferson argue that the bank was frankly unconstitutional there is nothing in the u.s constitution that gives the federal government the power to have a national bank and the argument came down to their interpretation of the constitution in federalist 85 hamilton argued for a broad or loose construction of the constitution make sure you have that a broad or loose construction of the constitution which basically means if the constitution doesn't specifically bar the federal government from doing it it can do it right this is also how students like to read syllabi it didn't say i couldn't do it i can do it right so hamilton defends the bank this way the opposite argument is the strict construction which is the idea that if it doesn't explicitly say you can do it you can't do it right so broad versus strict so hamilton's going for a broad construction he defended the bank with the implied powers clause sometimes called the necessary and proper clause and it says that the us government has implied power to pass laws not specified in the constitution as long as they are necessary and proper for the federal government's specified responsibilities hamilton argued that any power that could be implied from the words of the constitution and was not specifically barred by any constitutional provision was legitimate or legal that is a broad construction hamilton specifically cited the government's power to tax and to ensure the nation's economic stability and he says the bank is necessary and proper to carrying out those specified responsibilities on the other hand jefferson argued for a strict construction of the constitution with any power not explicitly authorized by the document being unconstitutional or illegal so a strict constructionist says if it's not in the constitution the government doesn't have the power to do it so strict versus loose and as i said this is often how professors read our syllabi versus how students read our syllabi but in a fight between us it's the dean that gets to decide and the government it's the supreme court that gets to decide but remember washington is the one appointing justices to the court which you're reading about this week they're probably going to side with him on this one the ratification of the constitution in 1788 began this shared conversation about the constitution that has become central to american government and politics so the supreme court would resolve this particular conflict over fiscal policy today but the supreme court has barely been formed at this point and the judicial branch was the most inactive part of the us government john jay the first chief justice happened to be on hamilton's side again he's been appointed by washington who supports hamilton's plan here so even those who don't like hamilton's plan really don't think that there's much of anything they can do with the courts to try to stop this another argument against hamilton's plan was just that it was unfair that it would hurt southern farmers to benefit financial and manufacturing interests which happened to be in the north uh and jefferson said the plan was an attempt to enrich the wealthy who had bought the bonds up and he pointed out that hard times had forced a lot of normal people to sell their bonds to speculators hamilton countered that the people who gave up those bonds did so in good faith they had a choice he said that's how economics works there's risk involved people who bought those bonds took a risk and they bet on the government and hamilton says don't tell me about veterans who sold their bonds hamilton was his lieutenant colonel and chief aide to general washington he was there for that hellish winter at valley valley forge madison and jefferson did not fight in the revolutionary war so even if they have a good point about this not really being a fair system for the servicemen now veterans who would be left unpaid they're not in a good position to make that point against hamilton and washington who had actually served militarily in that war hamilton believed that if the country was going to succeed economically that wealthy people needed to be closely aligned with the federal government they needed to know that the only way to profit was to make sure the country survived hamilton did not want to pay off the national debt ever he wanted a permanent debt and he wanted the government making interest payments as they came due he argued that this debt in government securities would serve as a prop for the support of the wealthy they'd buy that debt as bonds and securities but they only get paid if the government survives and thrives so when people argue today about how much of the nation's debt is owned by foreign countries hamilton would have said great right those countries aren't going to invade the united states they need the u.s to continue doing well so that they make money they have a vested interest in the us surviving so he has this idea that the perpetual debt will prop up the u.s government and serve to kind of get loyalty from wealthy people and in today's talk for other nations who are buying into that debt those opposed to this idea argued that this kind of debt was taxation without representation for future americans who wouldn't have a say in how these tax dollars are actually spent so proceed to the next part of the lecture to hear about the fight over hamilton's plan one of the most popular broadway musicals in history is hamilton and in that musical cabinet debates are set up as rap battles and you're going to listen to this cabinet debate done in spoken verse as part of an online charity event with the original broadway cast so first you're gonna see george washington who will turn it over to jefferson with madison who has a cough by his side followed by hamilton's rebuttal