Hamilton's Funding The National Debt example essay topic

One must wonder where would America be today financially and economically without the aide of Alexander Hamilton. Sometimes credited as Father of the Treasury, had a profound effect on the American economy. Born illegitimate on the West Indies island of Nevis, left orphaned and penniless at the age of 13, educated by a local clergyman, and in spite of his ruthless beginnings became our countries first Secretary of the Treasury ("Who Is That Guy on the $10 Bill). His contributions include the establishment of credit of our young country, formation of a national bank, the Bank of the United States, and the proposition of tariffs that provided revenue and encouraged manufacturing. When Alexander Hamilton was appointed Secretary of the Treasury in September of 1789, he was faced with many dilemmas. The first dilemma was the national debt.

By December 1789, the total public debt was up to $74,500, 00 (Kraus 276). $12,000,000 of the debt was due to foreign countries for loans to finance the war, $22,500,000 of the debt was state debts, and $40,000,000 of the debt was the nation owed for other federal obligations (domestic debts) (Kraus 277). The nation was a crucial point in its existence and needed a solution to its financial problems. Hamilton sent the first part of his plan for the nations economic success, the Report on the Public Credit, to Congress in January 1790 (Sylla). He proposed that all the nations debts be paid off by par, meaning completely paid.

Hamilton argued that the debts had to be completely paid off to establish good federal credit, and Congress agreed (Sylla). The government's responsibility of the states debt was subject to debate for Congress. Most of the southern states had fulfilled paying off most of their debts and didn't want to assume the debts of the northern states, which happened to be quite an immense sum (Finseth). The first time the assumption bill was voted on in Congress it was defeated 31-29 (Wise 156). Then Hamilton arranged a deal with Thomas Jefferson to move the nations capitol to Virginia if his debt repayment plan passes Congress.

The bill passed ensuring that the states debts would be paid, and the capital was moved ("Who Is That Guy on the $10 Bill"). The domestic debt was not fully repaid because Hamilton believed that if the government owed citizens money, then they will work harder to keep the government prosperous. Hamilton said himself "A national debt, if it is not excessive will be to us a national blessing" (Finseth). His debt reduction plan achieved his goal to. ".. restore the faith in the government and public credit, attract foreign capitol to the united states and increase the effective stock of money, thereby stimulating the economy" (Sylla). The second part of Hamilton's plan for the success of the American economy involved the creation of a national bank. Sent to Congress was the Supplemental Report on 1790.

Though not specifically mandated in the Constitution, Hamilton felt it necessary to charter a national bank. The national bank was formed by Congress in 1791 and was given a twenty-year charter ("Bank of United States"). The banks 2 main purposes were to regulate all banking within the United States, and provide a stable currency for the country. Hamilton proposed that the bank be capitalized at $10 million from the sales of stocks. Four-fifths of the stock would be sold to the public, and the federal government would hold the other one-fifths (Brookhiser, 79).

Also the bank would provide a depository for federal revenue, an important lender to the federal government, operated across state lines and state bank notes were traded at a discount. The diverse branches of the bank were spread through out the nation aided fiscal operations and called for a more flexible financial system ('Who Is That Guy on the $10 Bill"). Hamilton's third major paper was the Report on Manufactures issued in 1791 ("Report on Manufactures"). This report outlined his plans for governmental support of the American industry. He wanted a protective tariff, one that taxed imports, to raise the nation's industry by making imported goods more expensive then goods made by American industry. Hamilton requested that Congress levy a protective tariff that would stimulate American industries in 1792 on all imported goods, especially wine, liquors, tea, and coffee.

He wanted to persuade Americans to buy within the country, he believed that America could produce just about everything that it needed and become economically self-sufficient. He expected that the tariffs would help develop an independent and diverse economy. ("Report on Manufactures"). Hamilton also argued the need for an excise tax, which is a tax on domestic goods or goods produced and sold in America (Kindig). Although Congress did not pass his plan, they did support most of his tariffs in the next year ("Report on Manufactures").

By protecting the young manufacturing of early America, the tariffs had a very positive effect on the growth of the economy. Alexander Hamilton significantly improved the economic position of the United States at perhaps the most crucial time in its history. All of his plans positively affected the American economy and still have an influence on it today. Hamilton's funding the national debt helped establish American's good credit and stimulated economy through trade. His idea for a national bank is still in use in the form of the Federal Reserve System.

Hamilton's influence on the tariffs provided the primary source of revenue for the government for many decades and still provides some revenue today. With well-defined idea and unending self-motivation, Hamilton established a national economy with strong credit and increasing stability. Bran Michael, Brune Champ, and Jennifer Ranson. "Who Is That Guy on the $10 Bill": June 2000. Brookhiser, Richard. Alexander Hamilton, American.

New York: The Free Press, 1999. Finseth, Ian. "The Rise and Fall of Alexander Hamilton". (13 Nov. 2001). Foner, Eric and John A. Garraty, Eds.

The Reader's Companion toAmerican History. Houghton Mifflin Company, 1991. Online: web (13 Nov. 2001). "Bank of the United States". Online: (13 Nov. 2001). Kindig, Thomas E. Heritage: "Alexander Hamilton".

1995-2001. (13 Nov. 2001). Kraus, Michael. The United States to 1865. Toronto, Canada: The University of Michigan Press, 1959. Sylla, Richard.

"National Debt". Online: (13 Nov. 2001). Wise, William. Alexander Hamilton. New York: G.P. Putnam's Sons, 1963.