A New Government: 1789–93

The new federal government created by the U.S. Constitution went into effect on March 4, 1789. During the next several years, as the new government was being organized, intense political debates erupted. They would be some of the sharpest political conflicts in the nation's history and would shape America for the next two centuries. The central issue in most of the debates involved the role of government in people's lives. Out of this debate grew political factions, groups of people who hold viewpoints on political matters different from other groups. Late in the 1790s, these factions evolved into organized political parties, something the Founding Fathers had not anticipated.

Selecting a national leader

Before the U.S. Constitution could be put into use, the nation needed to elect members to the House of Representatives and Senate as well as a president and vice president. The Constitution did not provide specific requirements for electing representatives and senators, so each state arranged their own elections. Popular votes (the votes of regular citizens) did not become part of presidential elections until 1824. Until then, citizens called electors were the only ones who voted (see Chapter 3). Each state was allotted a certain number of electors, determined by the number of representatives the state had in Congress. The states had various ways of choosing their electors. Some states allowed the public to vote directly for electors. In other states, members of the legislature chose the electors.

Under the system then in place, all presidential and vice presidential candidates were listed on the same ballot. During the presidential election, each elector voted for two candidates—one vote for president and one vote for vice president. Each vote, however, counted as a presidential electoral vote. The candidate receiving the most electoral votes became president, while the second-place finisher became vice president.

Words to Know

Anti-Federalists: Those who opposed the U.S. Constitution during its ratification process in 1787 and 1788 because they preferred to have a weak central government with most governing powers held by the states.

bond: A paper certificate the government sells to raise money; the government buys back the certificate (repays the money) at a later date.

excise tax: A tax on a product manufactured or sold within the nation.

Federalists: Those who supported a strong central government for the United States and promoted adoption of the U.S. Constitution during its ratification process.

political factions: Groups of people who hold viewpoints on political matters different from other groups.

Republicans: Those who favored a weak central government and strong state governments; became the Democratic-Republicans.

speculators: People who take financial risks by buying something at a low price with the hope that its value will rise and a profit can be made by reselling.

The electors cast their ballots for president on February 4, 1789, a date established by the Continental Congress. However, only ten of the thirteen states actually voted in the first presidential election. New York, led by Governor George Clinton (1739–1812), who opposed creation of a chief executive in the federal government, did not hold elections. Rhode Island and North Carolina were still waiting to have their new state constitutions ratified. The electoral ballots were not counted until Congress first met, which was not until two months later. On April 6, sixty-nine electoral votes from the ten states were tallied. George Washington's name was selected on all sixty-nine ballots; electors from every state had given Washington their votes—and, therefore, the presidency. John Adams (1735–1826) came in a distant second with thirty-four votes, ahead of several other candidates, so he became vice president. Both Washington and Adams had sided with the Federalists during the constitutional debates. Federalists also won the majority of seats in both houses of Congress.

After the election, Washington left his home at Mount Vernon in Virginia to take office in New York City, the location of the new government. Washington felt a combination of great anticipation and dread, knowing he would be responsible for guiding the creation of a fully working government. All along his route to New York, cannons roared and bells rang as large, jubilant crowds came out to greet him.

One of Washington's main goals was to create national unity and stability. Washington hoped to calm Anti-Federalist fears about the newly empowered national government. Anti-Federalists were those who opposed the new constitution during the ratification process in 1787 and 1788. They preferred a weak central government and greater governmental powers for the states. Upon taking office, Washington took some deliberate steps to shape the public's image of the presidency and encourage unity among the states. He wore a rather plain brown suit to his inauguration on April 30 at Federal Hall to show he was a common citizen, not an all-powerful ruler and not royalty. He also made political appointments from various parts of the country. Washington toured the country so people could see that the president was approachable. As head of state, he showed both great dignity and great humility. He freely used symbols and ceremony to highlight the importance of the presidency, but he carefully downplayed the importance of the individual serving as president. Most of all, Washington knew that everything he did would set an example for future presidents.

Washington did not limit his appointments to people who shared his political beliefs. His top appointments included Thomas Jefferson (1743–1826) as secretary of state, Alexander Hamilton (1755–1804) as secretary of the treasury, Henry Knox (1750–1806) as secretary of war, and Edmund Randolph(1753–1813) as attorney general. Both Jefferson and Randolph were Anti-Federalists. This group of top presidential advisers became known as the Cabinet.

A new Congress

The first Congress under the new constitution got off to a slow start. A flu epidemic was racing through New York City. (In early America, without vaccinations that are now common, the flu often proved deadly.) Many newly elected congressmen became ill and failed to appear on March 4, 1789, when Congress was scheduled to convene at Federal Hall.

Once the congressional members did gather, they had plenty of important issues to resolve. Their first priority was the creation of a bill of rights to satisfy public concerns about the increased strength of the central government, concerns that were raised during the constitutional ratification process. Congress hoped that a bill of rights would also defuse disgruntled Anti-Federalists who might be inclined to undermine the new federal government. Under the leadership of James Madison (1751–1836), a Virginian newly elected to the House of Representatives, the task was accomplished, and the first ten amendments to the Constitution were adopted as the Bill of Rights in December 1791 (see Chapter 3).

The amendments recognized individual liberties including freedom of religion, freedom of speech, and freedom of the press. They also guaranteed citizens the right to assemble and to petition government concerning grievances. In addition, when charged with a crime, Americans were guaranteed the right to a lawyer and to a speedy public trial with an impartial jury. The amendments promised protections against cruel and unusual punishment and unreasonable search and seizure; they also guaranteed that no citizen would be tried twice for the same crime (known as double jeopardy) or be forced to testify against one's self. Most important to those concerned about the strong new central government, the tenth amendment reserved for the states all responsibilities that the Constitution did not clearly assign to the federal government.

Creating federal courts

After making the Bill of Rights official, Congress had the daunting task of creating a federal court system. During the colonial period in America, no distinct American legal system existed. The courts, criminal laws, and punishments varied from colony to colony. In the mid-1700s, a reform movement was growing that sought to standardize the justice system among the colonies. The American Revolution (1775–83) and the country's resulting independence from Britain greatly speeded up this reform.

During colonial times, the British courts in America were unfair, generally favoring British interests and denying colonists equal consideration. American leaders were so sensitive to this unfairness that they decided to do without a federal judiciary after declaring independence from Britain. They would place greater trust in their own local state court systems rather than a more distant central government's. Under the Articles of Confederation, adopted in 1781 as the nation's first constitution, the thirteen states each had their own judicial system, with no greater court ruling over them.

In 1787, the Constitution added a federal court system on top of the thirteen individual state court systems. The Constitution called for a supreme court (the highest court in a judicial system) and gave Congress the authority to establish other federal courts as it saw fit. The new Congress passed the Judiciary Act of 1789, legislation that organized the Supreme Court and created district and appellate levels of federal courts. District courts would hear original cases. Their decisions could be appealed to the appellate courts. The Judiciary Act of 1789 also established court jurisdictions (the types of cases the courts have legal authority to hear and the geographic areas where the courts can exercise their authority) and the positions of U.S. attorney, attorney general, and U.S. marshals. The U.S. Supreme Court met for the first time on February 2, 1790, at the Merchants' Exchange Building in New York City; the Court consisted of one chief justice, New York delegate John Jay (1745–1829), and five associate justices. The Court heard its first case in 1792.

The Constitution did not address criminal law (defining crimes and their punishments) except to identify the federal crime of treason (an attempt to overthrow one's own government). The states remained primarily responsible for dealing with crime in the United States. When Congress passed the Judiciary Act of 1790, it established sixteen federal crimes in addition to treason. These crimes included murder within federal installations such as forts or buildings, forgery (signing a false name) of federal documents, piracy (robbery) on the high seas, assault of a federal official, and perjury (while under oath, intentionally making a false statement or lying during a court appearance) in a federal court. Trials for these federal crimes were to occur in front of juries.

Another new characteristic of the federal judicial system was its total reliance on written laws. During colonial days, courts used the English common law system. In the common law system, judges were free to invent new laws as time passed and new issues came before the court. Under this system, the colonists were subject to the mercy of the British king and the British elite (upper class). Under the new federal law system, a person could not be prosecuted in a federal court for an action not specifically forbidden in the federal penal code (a written set of laws regarding crimes and punishment). This change lessened the judge's control and power in the courtroom and gave defendants (those accused of a crime) a better chance for a fair trial. The state judicial systems moved away from common law too, but this took place gradually, over many years.

Criminal punishment

The late eighteenth century would serve as an experimental period for the U.S. federal court system. Court decisions and legislation by the new federal and state legislatures began to accumulate, and the modern criminal justice system, composed of courts, police, and prisons, was just beginning to take shape.

Public humiliation, torture, and death were the common forms of punishment during colonial days. The most common forms of punishment included whippings, brandings (burning the skin with a red-hot stick or rod), and placement in a pillory (a wooden frame with holes that lock a person's head and arms in an uncomfortable position). Prisons did not exist. However, by 1781, the Eighth Amendment prohibited such cruel and unusual punishment, so American lawmakers had to find other ways of punishing criminals.

Pennsylvania led the way in punishment reform. Its state constitution, drafted in 1776, provided for the construction of prison houses, where criminals could be confined. In 1787, the nation's first prison reform organization, the Society for Alleviating the Miseries of Public Prisons, was formed in Philadelphia. Three years later, Philadelphia opened the Walnut Street Jail, a sixteen-cell prison house featuring solitary confinement. Inmates were placed in individual cells, each furnished with a Bible, and left to think over their crimes.

Economic growth

One of the major tasks of the new U.S. government was to stimulate economic growth. To accomplish this, the government needed to develop American industry, but in order to do that, it had to attract investors who could finance such development. Unfortunately, the United States did not have good credit; that is, investors did not believe the government would be able to pay back the money it received from them.

Investors had good reasons for their doubts: To finance the American Revolution, the Confederation—the government that existed before the signing of the U.S. Constitution—and the individual states had borrowed money from citizens and from foreign powers. By 1790, the U.S. government had not repaid those loans, and as a result, no one would loan the government more money. After eight financially disastrous years under the Articles of Confederation, the young nation was broke. In addition, the thirteen states continued to feud among themselves over trade competition, and the U.S. government still had no respect abroad.

Alexander Hamilton, President Washington's newly appointed secretary of the treasury, had specific ideas on how to solve the financial problems and create a firm economic footing. Hamilton wanted to use the newly established power of the federal government to promote the growth of capital (money for investment) for American businesses. To give investors confidence, Hamilton wanted the federal government to take responsibility for all war loans and repay them in full. Besides encouraging private financiers to invest in American businesses, he wanted to create a national banking system. Private citizens and businesses as well as the federal government could place money in the bank to earn interest. The banks could make profits by investing bank funds in new businesses. He also proposed that the national economy should not be so reliant on agriculture. He believed that other forms of business such as manufacturing and trade should be encouraged. Maintaining close economic ties to Britain was central to his plan.

Hamilton's first step

Hamilton introduced his economic plan in three steps in 1790 and 1791. In January 1790, Hamilton delivered to Congress an account of the nation's debts, largely owing to the costs of fighting the Revolutionary War. It was titled Report on the Public Credit. Hamilton reported that the United States owed $11 million in foreign loans and $40 million in domestic loans. In addition, the states owed $25 million, mostly in war debts. Hamilton proposed that the federal government could take over the state debts and then raise money to pay down the national debt by imposing taxes on U.S. citizens. (The Constitution had given Congress many new powers, including the authority to impose and collect taxes.) Southern leaders strongly opposed having the federal government take over state debts, because some Southern states had already paid off most of their debts through their profitable agricultural trade. The Northern states, such as Massachusetts, were still heavily in debt. Therefore, from the Southerners' point of view, the policy favored Northern states. Hamilton did not intend any favoritism. He simply believed the states and their creditors (those to whom money was owed) would have greater allegiance to the new central government if it was paying off the debts.

Paying off the debt included paying back citizens who held government-issued bonds. The bonds were slips of paper imprinted with the government's promise to repay the full purchase price to the citizen within a few years. Civilians purchased the bonds during the American Revolution to help finance the war; some soldiers received the bonds as pay for their service. At this period in history, most Americans were farmers; therefore, farmers made up the majority of people who purchased war bonds. However, the value of these bonds greatly decreased as the new Confederation went broke in the 1780s, and people could not cash in their certificates without losing considerable money on their investment. Through the 1770s and 1780s, speculators, mostly wealthy businessmen from the Northern cities, purchased many of the bonds from the original holders, sometimes for only 10 or 15 percent of the original value. Speculators are people who buy something at a low price with the hope that its value will rise so they can resell it for a large profit. Some Americans did not want the government to pay the speculators holding the bonds. They feared the speculators would accumulate too much money and form a wealthy class of financiers that could wield excessive influence over governmental matters.

Hamilton won this round of debate. In the summer of 1790, Congress passed legislation to begin funding payment of the debt and assuming state debts. However, in order to gain congressional approval, supporters of Hamilton's proposals had to compromise with their Southern opponents. Southerners did not like the fact that the nation's capital was in the North, in New York City; they wanted the capital moved closer to the South. Supporters of Hamilton's proposals agreed to move the nation's capital from New York to an undeveloped piece of land on the Potomac River, between Maryland and Virginia—this site would become Washington, D.C. In the meantime, while the new location was being prepared, the government moved from New York City to Philadelphia in 1790. This move was part of the agreement to gain Pennsylvania's support of Hamilton's plan.

As expected, the Northern speculators who had purchased the bonds from the farmers for very little money received thousands of dollars, and their wealth increased greatly. The farmers, of course, were out of luck, and they were furious. For instance, a farmer who bought a war bond for $100 began to fear that he would never be paid back when the government was broke in the late 1770s and 1780s. So he sold the $100 bond to a speculator for $5, reasoning that getting a little cash was better than getting nothing. The speculator bought lots of bonds this way. Then in 1790, Hamilton decided that the government should pay back the original value of all the bonds to everyone who was holding them. The farmer no longer held a bond; he had sold it and received $5 for his $100 investment. The Northern businessman/speculator had also invested $100, but

A Permanent Capital City

Congress decided in 1783 that the United States of America needed a permanent capital city. Every village, town, and city wanted to be the capital. Congress considered sites up and down the east coast but could not agree on a location.

In 1790, with a new constitution in place and George Washington serving as the nation's first president, the capital debate needed a resolution. President Washington favored a site somewhere along the Potomac River, between the Southern states of Virginia and Maryland. New Englanders made fun of the Potomac area, calling it a swamp full of wild beasts.

It took Washington's secretary of the treasury, Alexander Hamilton, to work out a compromise. Hamilton persuaded congressmen from the Northern states to agree to the Potomacsite, which was far enough south to please Southerners. In return, Southern congressmen agreed to support a key economic policy that Northern congressmen wanted to see approved. The deal was sealed. In July 1790, Congress passed the Residence Act, officially locating the new capital some-where along the Potomac River. Theact named Philadelphia, Pennsylvania, as the temporary capital from 1790 to 1800.

President Washington chose the exact location for the capital city—southeast of the hamlet of Georgetown, where the Eastern Branch (present-day Anacostia River) waterway met the Potomac River. Members of Congress were concerned that the site was too remote and indeed a swamp, but given Washington's honored reputation, they agreed to the president's choice on March 3, 1791. Maryland and Virginia donated the land that Washington chose to the national government. The land would be owned by the national government and therefore not be in any state.

Washington immediately hired surveyor Andrew Ellicott (1754–1820) and Ellicott's self-taught assistant, Benjamin Banneker (1731–1806), to survey the area and mark its boundaries. He next hired French-born American engineer Pierre-Charles L'Enfant (1754–1825) to lay out a street plan for the city.

Thomas Jefferson, who had been to the site, envisioned a small town surrounded by agricultural lands. Washington and L'Enfant instead planned a grand city of wide boulevards radiating from numerous plazas. L'Enfant visualized the capitol building on a hill at the center of the city. L'Enfant and the president were convinced the city would become the largest in North America, with hundreds of thousands of people. To finance the city's construction, the two men arranged to have city lots sold at an auction. Only a few people attended the auction, and they purchased just thirty-five lots; the auction raised less than $2,000. Despite this disappointing figure, Washington never wavered from his choice, but he realized the remote location might hinder the capital's growth for some time.

In 1792, a competition was held for the design of the capitol building. The prize for the winner was $500 and a city lot. The winning design came from William Thornton (1759–1828), a physician and amateur architect. On September 18, 1793, with great ceremony, Washington laid the capitol's cornerstone.

Construction began immediately, but access to the remote location was difficult. Workers, tools, and materials were hard to find. Nevertheless, the original north wing of the capitol was completed by fall 1800. Government employees packed furniture and files onto a few ships in Philadelphia's port and then proceeded by ship to the capitol site. On November 22, 1800, President John Adams spoke to a joint session of Congress (Senate and House of Representatives) in the new capitol.

During the winter of 1800, the capitol, one rectangular three-story building, housed the 32 members of the Senate; all 106 members of the House of Representatives; the Supreme Court; other courts; and the Library of Congress. On March 4, 1801, Thomas Jefferson was the first president to be inaugurated at the new capitol in Washington, D.C. (District of Columbia). The District of Columbia is a federal district established by Congress in July 1790 that is separate from any state and is directly governed by Congress. Columbia was chosen as the name because at the time it was a common nickname for the United States, like Uncle Sam later.

he purchased twenty bonds with that amount ($5 × 20 bonds = $100 investment). When Hamilton's policy went into effect, the speculator received $2,000 for his $100 investment (20 bonds × $100 full payback value = $2,000). Many speculators became very wealthy instantly.

With Hamilton's plan put into action, wealthy Americans gained faith that the new government could pay back loans. With prospects of receiving payment on the war bonds, they had a real interest in seeing that the new government prospered, just as Hamilton had figured. They were now willing to provide increased financial support to the federal government, and the government was ready to sell them more bonds—bonds that would raise money not for war but for economic development.

A controversial new bank

In December 1790, Hamilton unveiled more of his economic plan. To pay off debts, he argued, the United States needed strong trade, because much revenue could be gained from tariffs (taxes on imported goods). This meant keeping strong relations with Britain as well as opening up other foreign markets through trade agreements. Hamilton also anticipated that the industrial revolution (introduction of power-driven machines to produce goods) gaining momentum in Britain would be coming to America. America's industry had just begun with a newly established textile mill in Providence, Rhode Island. A stronger manufacturing industry would provide more goods for foreign trade, less reliance on foreign manufacturers, and a national economy less vulnerable to the ups and downs of the agricultural industry. Hamilton proposed a national bank, a national mint (an institution to make U.S. currency and oversee operation of a national economic system), increased tariffs, and a 25 percent excise tax (a tax on something manufactured or sold within the nation) on the manufacture of distilled liquors.

The national bank was to be a government-chartered (licensed) private financial institution where the U.S. government could have a place to deposit its newly gained revenue from taxes. It was to have $80 million in holdings, with $60 million of that amount coming through deposits by private citizens and companies. The money deposited would be available for investment in trade and manufacturing through loans to businesses.

James Madison immediately opposed the bank. He wrote to President Washington arguing that the federal government had no constitutional authority to create banks or to charter private corporations. Secretary of State Jefferson agreed. It appeared to Jefferson, Madison, farmers, and Southerners that the bank mostly benefited Northern businessmen: The businessmen could deposit their own money there, and the federal government could loan them money from the bank (money collected under Hamilton's tax policy) to start new manufacturing businesses and expand existing ones. Both Jefferson and Madison thought Hamilton's policies were misguided. In their view, the policies were hurting farmers, who made up most of the U.S. population, and undermining the republic by placing the wealth of the nation in the hands of a few.

America's First Factory

During the late eighteenth century, when the industrial revolution was taking place in Britain, the British made radical changes to their new textile factories. They tried to keep their factory operations secret so that Britain could continue to produce goods in great numbers more cheaply than other countries (this gave Britain a great advantage in trade). British authorities even attempted to block emigration of skilled workers to the United States so that no drawings of factory designs or machine details would be taken out of the country.

However, on September 1, 1789, a young textile worker named Samuel Slater (1768–1835), seeking financial gain, sailed to America with British machine designs and factory layouts for spinning mills memorized. He arrived in New York City in November. He soon learned that Moses Brown (1738–1836), a Quaker merchant in Pawtucket, Rhode Island, wanted to build a mill. Brown hired Slater to build a textile mill, and the mill was ready for operation a year later. Cotton yarn was produced there on December 20, 1790. The Slater Mill was America's first factory.

However, in a brilliantly written response, Hamilton countered that the Constitution gave the federal government implied (unwritten) powers to do whatever was necessary to carry out its responsibilities. The section of the Constitution he relied on is known as the "necessary and proper" clause. Hamilton claimed the federal government could not effectively collect taxes or regulate trade without a reliable banking institution where it could deposit its funds.

Again Hamilton won. His victory set an important legal precedent (model) for broadly interpreting the Constitution in future years. The measures he proposed gained congressional approval in late February 1791. An economic plan was now more fully in place.

The First Bank opened on July 4, 1791, in Philadelphia. Branch locations were in Boston, New York, Baltimore, and Charleston. The bank had immediate success in attracting private depositors. Creation of the First Bank spurred growth of other banks. In 1790, only three banks existed in the nation. By 1800, there were twenty-nine, mostly in the North. The capital available for investment was considerably greater than what had been available in colonial days when there were no banks and wealthy financiers held all money available for investment. Farmers, shippers, and manufacturers found it much easier to obtain loans.

Import taxes were charged on all foreign goods brought into the country, whether through Northern or Southern ports. The collected money went primarily to pay the Northern states' debt and to pay the Northern speculators for their war bonds. The tax collections overwhelmingly benefited Northern citizens and states.

The tax on whiskey was a reliable source of revenue, but it caused much resentment among rural citizens, particularly among small farmers. They often converted their corn crops into whiskey for ease of transport to markets, and they sometimes used whiskey as money to buy supplies in areas where real money was scarce. These people felt that the tax on distilled liquor was unfair, forcing them to pay more than their share for the wardebts.

In April 1792, Congress passed the Coinage Act, which established the U.S. Mint in Philadelphia. Since the Constitution gave the federal government sole authority to coin money and establish its value, the act established the first national monetary system, which would replace all the different state currencies (forms of money).

Hamilton's opposition organizes

Hamilton now boldly moved to the third phase of his economic plan. He recognized the difficulties America faced in establishing an economy independent from Great Britain's. Hoping to educate Congress about these challenges, he submitted his Report on Manufacturers to Congress in December 1791. The report described the various problems hindering industrial growth, including lack of capital and labor shortages. In the report, Hamilton proposed higher tariffs on imported goods to make domestic goods more competitive. He also proposed government funding for public works (roads, ports, or other facilities made for public use); promotion of inventions; and restrictions on the export of raw materials. But by now, opponents to Hamilton's plan were growing in number. Hamilton was winning congressional support, but the debates over his plan were renewing political divisions that had surfaced during the constitutional ratification debates.

James Madison and Thomas Jefferson charged that Hamilton's policies favored the North over the South, wealthy speculators over the common person, and the federal government over state governments. They feared Hamilton was recreating a British governmental system that favored the wealthy and placed tax burdens on ordinary citizens. Within Congress, representatives who wished to keep agriculture as the primary industry in America were becoming increasingly annoyed with Hamilton's proposals. In the end, Hamilton had far less success promoting the third part of his economic plan. Congress approved only a modest tariff increase in 1792.

Secretary of State Jefferson believed Hamilton was promoting the growth of an American aristocracy of financiers and speculators. Jefferson thought this would destroy the republic that he and others (including Hamilton) had worked so hard to establish. A republic is a country governed by the consent of the people and for the benefit of the people through elected representatives. Jefferson feared that the wealthy elite, not the common people, would end up running the country. In May 1792, after Hamilton presented his third set of proposals, Jefferson wrote a long letter to President Washington, complaining about the direction Hamilton's plan was taking. This disagreement over economic policy divided Jefferson and Hamilton, who were both key members of the president's Cabinet. Soon the two men were set in bitter opposition; each had a different view of how the nation should operate. The formation of political parties was beginning.

Washington seemed to clearly favor Hamilton's proposals, so Jefferson decided to go outside the government to rally public opposition against Hamilton. He used newspapers and pamphlets to promote the Anti-Federalist point of view. Jefferson hired poet Philip Freneau (1752–1832) to be editor of the National Gazette. This newspaper would publish Anti-Federalist perspectives, often in reaction to the Gazette of the United States, a paper that strongly favored the Washington administration. Jefferson also encouraged other journalists to speak out, including Benjamin Franklin Bache (1769–1798), editor of the Pennsylvania Daily Advertiser. Newspapers around the country took strong positions on one side or the other, and the number of new newspapers grew throughout the nation.

Jeffersonians and Hamiltonians

The two emerging sides were sometimes referred to as the Hamiltonians and the Jeffersonians. Political factions (groups who hold particular points of view on a political matter) were not new to Americans in the early 1790s. During the 1760s and early 1770s, as America reached a crisis in its relationship with Britain, and throughout the American Revolution, there were Loyalists (those who remained loyal to the rule of the British king) and Patriots (those who supported independence for the American colonies). After America's victory over Britain, thousands of Loyalists fled the United States, and during the 1780s U.S. political factions were less evident.

Two factions, the Federalists and the Anti-Federalists, developed during the constitutional ratification debates in 1787 and 1788. The Federalists supported a strong central government for the United States. They promoted adoption of the Constitution as written in Philadelphia during the summer of 1787. Those opposed to a strong federal government were called Anti-Federalists. The two groups were well-defined and the debates fierce. For example, the Anti-Federalists opposed the office of the presidency, which was first suggested in a draft of the Constitution. (Under the Confederation, the United States did not have an executive position such as president.) They argued that having a president rule the United States was no better than having a European monarch dominate the country. However, despite the passionate debate, most people believed that the political divisions would fade away once the Constitution was ratified.

Jefferson and his followers charged that Hamilton's policies of concentrating wealth in the hands of a few would eventually corrupt Congress and guide the nation's affairs. The newly strengthened federal government would undermine the very liberties the people had fought for in the American Revolution. Jefferson continually stressed the virtues of an agrarian (agricultural) society, unrestricted by a central government. He envisioned a thriving nation made up of farmers who would be dispersed across the landscape and who would use goods made in their own households or purchased from local shops. Jefferson disdained the idea of factories in large cities as was occurring in Britain, believing they could lead to political instability.

Republicans and Federalists

By early 1792, Jefferson, a master political organizer, and James Madison, a brilliant mind on governmental matters, began to call themselves and their followers Republicans. They chose that name, in part, to suggest that Hamilton did not support the ideals of republicanism on which the new country was built. Together, they sought people who shared their Republican point of view and asked them to run for public office in the 1792 elections. In reaction, Hamilton rounded up his own group of followers and gave them a familiar name, Federalists. The two groups were still not organized political parties.

The new Federalists were a somewhat different grouping of people than the Federalists who supported a strong national government during the constitutional ratification process in the late 1780s. The new Federalists supported Hamilton's aggressive economic policies, while some old Federalists sharply disagreed with Hamilton's plan. For example, Madison, lead author of the Constitution, disagreed with Hamilton's plan to maintain close ties with Britain. Madison disliked British postwar policies and attitudes toward the United States, including Britain's refusal to make trade agreements.

The new Federalists included merchants, manufacturers, and shippers living in the Northeast who had money and came from long-established prominent families. They were educated people and members of the older established religious denominations such as Congregationalists and Catholics. They distrusted democratic processes and the political wisdom of the common people. They wanted to have a powerful central government run by the elite—men of wealth who had education and special skills.

Unlike Hamilton's Federalists, Jefferson's Republicans had great faith in the people's ability to guide a government. Republicans generally opposed the traditional patterns of authority such as that seen in Britain and were often members of newly emerging religious groups such as the Baptists and the Methodists. The South was the major stronghold of Republicans, and farmers there rallied behind the Republican cause. They had gained new political power from the American Revolution through the republican form of government; farmers and planters now had greater influence as a result of being able to elect representatives in government. They did not want to see the wealthy once again control government and economics as occurred during colonial times.

One major difference between the Federalists and the Republicans was how they interpreted the Constitution. Hamilton and the Federalists preferred a broad interpretation of the powers of the federal government under the Constitution. Hamilton pointed out the "necessary and proper" clause to support this view; according to Hamilton's interpretation, this clause gave Congress the flexibility to establish whatever programs it believed necessary for the best interests of the nation. Republicans preferred a very strict interpretation of the Constitution. They believed that if a specific authority was not clearly granted to the federal government, then that authority ought to be held by state and local governments.

Election of 1792

Through 1792, the split between Jeffersonians/Republicans and Hamiltonians/Federalists continued to grow, but no actual political organizations had yet formed. President Washington lamented the emergence of the two political factions. Along with other Founding Fathers, he believed political parties were an evil that promoted selfish interest over the good of the nation. With the presidential election coming in the fall, Washington seriously considered retiring. Both Hamilton and Jefferson urged him to remain for a second term. Washington did not announce that he would run for reelection, but he did not announce his retirement either. Eventually, he decided to put his name on the ballot. Washington's worry over the growing political split was a key factor influencing his decision: He hoped that if he was reelected, he could provide some continued stability amid the political battles.

Washington was reelected as president, receiving all 132 electoral votes. John Adams came in second again with 77 votes, earning himself another term as vice president. Republican candidate and New York governor Clinton received 50 votes. The large number of votes for Clinton, a strong Anti-Federalist and political opponent of Hamilton in New York, indicated growing opposition to Hamilton's policies. However, Hamilton would stay on as secretary of the treasury, and the young nation would have continuity in leadership for four more years.

Creating a functioning economic system

New government economic policies introduced by Hamilton could help business only so much. Other obstacles to economic growth also required action. The nation's primitive roads were a prime example. The few roads in existence were narrow, barely wide enough for wagons, and they were virtually unusable in the wet winter months. Moving goods cheaply and efficiently was difficult. Farmers and manufacturers could move large quantities of cargo only by water, and then only downstream since they had no powered means of sending ships upstream.

The federal government did not have enough funds to finance road building, so private companies took on the task. Typically, a company would form to build a road between two specific locations. It would receive a corporate charter (a government-issued document establishing the legal existence of the company) from a state, sell stock to raise capital, and proceed with construction. Investors hoped to gain profits from tolls (user fees) charged to travelers and haulers using the roads. The Lancaster Turnpike, the first major toll road, was built between 1792 and 1794; it connected Philadelphia and Lancaster, Pennsylvania. The road surface was smooth flat stones laid on a gravel base. Water drained through the road very quickly, so it was passable even in winter. On other roads, logs laid side by side allowed passage through swampy areas. Bridges were often made of stone, but covered wooden bridges proved more durable.

States chartered hundreds of road companies prior to the War of 1812. By then, most major cities were connected by roads. Though greatly improving travel in general, the toll roads offered only limited help for transporting goods in bulk. Ground transport was still more expensive than water transportation.

Most business in early America took place on rivers and lakes and along the seacoast. However, waterfalls occur on almost all the streams draining toward the ocean a short distance from the Atlantic Coast. The falls present an obstruction to inland water traffic in many areas. Shippers had to carry their goods around the falls, increasing the costs and difficulty of hauling cargo on the river. Short canals were constructed at some falls, but passage was still difficult.

With most of Hamilton's economic policies in place, the building blocks for economic growth in manufacturing were set. However, farming remained the main driving force in the U.S. economy. Farmers continued to settle new frontier areas. Population expansion led to two new states, Vermont in March 1791 and Kentucky in June 1792, making fifteen total states in the union. The nation had survived well its first four years.

For More Information

Books

Aikman, Lonnelle. We, the People: The Story of the United States Capitol. Washington, DC: U.S. Capitol Historical Society, 1991.

Appleby, Joyce O. Inheriting the Revolution: The First Generation of Americans. Cambridge, MA: Belknap Press, 2000.

Ferling, John E. A Leap in the Dark: The Struggle to Create the American Republic. New York: Oxford University Press, 2003.

Ferling, John E. Setting the World Ablaze: Washington, Adams, Jefferson, and the American Revolution. New York: Oxford University Press, 2000.

Nash, Gary B., Julie R. Jeffrey, et al., eds. The American People: Creating a Nation and a Society. 4th ed. New York: Harper & Row, 1986.

Randall, Willard S. Alexander Hamilton: A Life. New York: HarperCollins, 2003.

Risjord, Norman K. Jefferson's America, 1760–1815. 2nd ed. Lanham, MD: Rowman & Littlefield Publishers, 2002.

Vidal, Gore. Inventing a Nation: Washington, Adams, Jefferson. New Haven, CT: Yale University Press, 2003.

Web Sites

"History of the United States Mint." U.S. Department of Treasury.http://usmint.gov/about_the_mint/mint_history/(accessed on July 30, 2005).

Independence Hall Association. "First Bank of the United States." Virtual Tour of Historic Philadelphia.http://www.ushistory.org/tour/tour_1bank.htm (accessed on July 30, 2005).

Library of Congress. "George Washington's First Inauguration." "I Do Solemnly Swear": Presidential Inaugurations.http://memory.loc.gov/ammem/pihtml/pi001.html (accessed on July 30, 2005).

U.S. Courts.http://www.uscourts.gov (accessed on July 30, 2005).