Lesson 1: Washington's Presidency Flashcards

Question

What was Alexander Hamilton's biggest problem as Secretary of Treasury? How did the system of bonds work?

Answer 1

As Secretary of the Treasury, Alexander Hamilton faced many problems. Among the most pressing was the large national debt. National debt is the total amount of money that a government owes to others. During the Revolution, both the national government and individual states had desperately needed money. They had borrowed heavily from foreign countries and ordinary citizens to pay soldiers and buy supplies. Then, as now, governments borrowed money by issuing bonds. A bond is a certificate that promises to repay the money loaned, plus interest, on a certain date. For example, if a person pays $100 for a bond, the government agrees to pay back $100 plus interest (an additional sum of money) by a certain time.

Answer 2

Hamilton wanted to pay off the government's debts and create a stable economic system for the United States. The plan he proposed showed that Cabinet members could provide strong leadership. Hamilton called for the government to repay both federal and state debts. One of his first acts in government was to ask Congress to pass a tariff, or tax on imports, to pay for the government. Congress passed this tariff in 1789. Hamilton wanted the government to buy up all the bonds issued by both the national and state governments before 1789. He then planned to issue new bonds to pay off the old debts. As the economy improved and income from the tariff increased, the government would then be able to pay off the new bonds. Many people, including bankers and investors, welcomed Hamilton's plan. Others attacked it.

Answer 3

James Madison led the opposition. Madison argued that Hamilton's plan would reward speculators. A speculator is someone who invests in a risky venture in the hope of making a large profit. During the Revolution, the government had issued bonds to soldiers and citizens who supplied goods. Many of these bondholders needed cash to survive. So, they sold their bonds to speculators. Speculators bought bonds worth one dollar for only 10 or 15 cents. If the government paid off the old bonds in full, speculators stood to make fortunes. Madison thought that speculators did not deserve to make such profits. Hamilton replied that the United States must repay its debts in full. Otherwise, he said, it risked losing the trust of investors in the future. The support of investors, he argued, was crucial to building the new nation's economy. After much debate, Congress approved full repayment of the national debt. As a southerner, Madison also led the fight against the other part of Hamilton's plan, the repaying of state debts. By 1789, most southern states had paid off their debts from the Revolution. They thought that other states should do the same. The New England states, for example, still owed a lot. Thus, some northern states stood to gain more than others from the plan. As a result, the southern states bitterly opposed Hamilton's plan.

Answer 4

In the end, Hamilton proposed a compromise. Many southerners wanted the nation's capital to be located in the South. Hamilton offered to support that goal if southerners agreed to his plan to repay state debts. Madison and others accepted the compromise. In July 1790, Congress voted to repay state debts and to build a new capital city. The new capital would not be part of any state. Instead, it would be built on land along the Potomac River on land given up by two southern states, Virginia and Maryland. Congress called the area the District of Columbia. Washington, the new capital, would be located in the District. Today, it is known as Washington, D.C., with D.C. standing for District of Columbia. Plans called for the new capital to be ready by 1800. Meanwhile, the nation's capital was moved from New York to Philadelphia.

Answer 5

Hamilton's next challenge was to strengthen the faltering national economy. His economic plan was designed to help both agriculture and industry. Hamilton called on Congress to set up a national bank. In 1791, Congress created the first Bank of the United States. The government deposited money from taxes in the Bank. In turn, the Bank issued paper money to pay the government's bills and to make loans to farmers and businesses. Through these loans, the Bank encouraged economic growth and the development of a free-enterprise economic system. To help American manufacturers, Hamilton asked Congress to pass a new tariff, or tax, on foreign goods brought into the country. He wanted a high tariff, to make imported goods more expensive than American-made goods. A tariff meant to protect local industry from foreign competition is called a protective tariff.

Answer 6

Hamilton's plan sparked arguments over taxation. In the North, where there were more and more factories, many people supported Hamilton's plan. Southern farmers, however, bought many imported goods. They opposed a protective tariff that would make imports more expensive. In the end, Congress did pass a tariff, but it was much lower than the protective tariff Hamilton wanted. The tariff was also lower than American manufacturers would have liked in order to protect them from foreign competition. However, the tariff did help to pay off government debt, a central point in Hamilton's economic plan. The government needed to find a form of taxation that allowed it to pay off lenders, because attracting lenders is key to financing government in a free market economy.

Answer 7

To help reduce the national debt, Congress approved a tax on all liquor made and sold in the United States. Hamilton wanted this tax to raise money for the Treasury. Instead, the new tax sparked a rebellion that tested the strength of the new government. This tax was the first implemented by Congress under its new constitutional authority. Hamilton believed that reasonable taxes on alcohol would help to moderate consumption. He also hoped to gain a rich source of revenue for the federal government to pay its debts. However, the new law varied the tax rate and often left smaller liquor manufacturers paying more than larger ones. Furthermore, the tax had to be paid in cash. This was often difficult for small distilleries. Large liquor enterprises in the East had less trouble with the tax than those on the frontier or in small towns. Hamilton, though himself a man of humble origins, did not fully appreciate the economic concerns of Americans who lived on farms or in small towns. A large number of them opposed the new tax.

Answer 8

Like many Americans, backcountry farmers grew corn. However, corn was bulky and expensive to haul long distances over rough roads. The cost of transport made western corn too expensive to sell in the East. Instead, farmers converted their corn into whiskey. Barrels of whiskey were worth much more and could be sold for a profit in the East despite the cost of transport. Backcountry farmers hated the tax on whiskey because it sharply reduced their income. Many refused to pay it. They compared it to the taxes Britain had forced on the colonies. In 1794, when officials in western Pennsylvania tried to collect the tax, farmers rebelled. During the Whiskey Rebellion, thousands marched in protest through the streets of Pittsburgh. They sang Revolutionary songs and tarred and feathered the tax collectors.

Answer 9

President Washington responded quickly. He showed his abilities as a military leader once again. He called up the militia and dispatched them to Pennsylvania. When the rebels heard that thousands of troops were marching against them, they fled back to their farms. Hamilton wanted the leaders of the rebellion executed, but Washington disagreed and pardoned them. He believed that the government had shown its strength to all. Now, it was time to show mercy. The Whiskey Rebellion tested the will of the new government. Washington's quick response proved to Americans that their new government would act firmly in times of crisis. The President also showed those who disagreed with the government that violence would not be tolerated.

Answer 10

Late in 1789, French ships arrived in American ports with startling news. On July 14, an angry mob in Paris, France, had destroyed the Bastille (bahs TEEL), an ancient fort that was used as a prison. The attack on the Bastille was an early event in the French Revolution. Before long, the revolution would topple the monarch and lead to the execution of thousands of ordinary French citizens.

Answer 11

The French Revolution broke out a few years after Americans had won their independence. Like Americans, the French fought for liberty and equality. As the French Revolution grew more violent, however, it deepened political divisions within the United States. The French had many reasons to rebel against their king, Louis XVI. The peasants and the middle class paid heavy taxes, while nobles paid none. Reformers wanted a constitution to limit the king's power and protect basic rights, as the American Constitution did.

Answer 12

At first, most Americans supported the French Revolution. Americans knew what it meant to struggle for liberty. Also, during the American Revolution, France had been an important ally. Many Americans admired the Marquis de Lafayette, a leading French reformer who had fought with them in the American Revolution. However, the French Revolution frightened most European rulers and nobles. They wanted to prevent revolutionary ideas from spreading to their lands. When two European countries, Austria and Prussia, appealed to other rulers to help the French king regain his throne in 1792, France declared war. By 1793, the French Revolution was turning more and more violent. Radical reformers gained power. They beheaded the king and later the queen. During the Reign of Terror, tens of thousands of ordinary French citizens were executed.

Answer 13

War and violence in France divided Americans. Some, like Thomas Jefferson, continued to support the French revolutionaries. He felt that the French had the right to use violence to win freedom, although he condemned the executions of the king and queen. Alexander Hamilton, John Adams, and others strongly disagreed about the use of violence. One could no more create democracy through widespread violence, claimed Adams, “than a snowball can exist in the streets of Philadelphia under a burning sun.”

Answer 14

French armies' attack on Austria led Britain to declare war on France. Europe was soon plunged into a string of wars that lasted on and off for more than 20 years. The fight between France and Britain, Europe's two leading powers, threatened the economy of the United States. These countries were America's main trading partners. Faced with war in Europe, President Washington had to decide on a foreign policy. Foreign policy is a nation's plan of action toward other nations. During the American Revolution, the United States and France had signed a treaty that made the two countries allies. Now, France wanted to use American ports to supply its ships and launch attacks on British ships. Allowing France to use American ports would expose the United States, still recovering from the Revolutionary War, to new British attacks. However, Washington worried that the United States could not honor its treaty with France and still remain neutral in the European conflict. Neutral means not taking sides in a conflict. Washington also hoped to protect the American economy from the conflict between Britain and France. Merchants and farmers in the United States depended on American ports to maintain overseas trade with Britain and other countries. The British navy ensured the safety of American trading ships. Still, many Americans favored France. Staying neutral appeared to be Washington's best option.

Answer 15

French armies' attack on Austria led Britain to declare war on France. Europe was soon plunged into a string of wars that lasted on and off for more than 20 years. The fight between France and Britain, Europe's two leading powers, threatened the economy of the United States. These countries were America's main trading partners. Faced with war in Europe, President Washington had to decide on a foreign policy. Foreign policy is a nation's plan of action toward other nations. During the American Revolution, the United States and France had signed a treaty that made the two countries allies. Now, France wanted to use American ports to supply its ships and launch attacks on British ships. Allowing France to use American ports would expose the United States, still recovering from the Revolutionary War, to new British attacks. However, Washington worried that the United States could not honor its treaty with France and still remain neutral in the European conflict. Neutral means not taking sides in a conflict. Washington also hoped to protect the American economy from the conflict between Britain and France. Merchants and farmers in the United States depended on American ports to maintain overseas trade with Britain and other countries. The British navy ensured the safety of American trading ships. Still, many Americans favored France. Staying neutral appeared to be Washington's best option.

Answer 16

The issue of the treaty deepened the divisions within Washington's Cabinet. Hamilton pointed out that the United States had signed the treaty with Louis XVI. With the king dead, he argued, the treaty was no longer valid. Jefferson, a supporter of France, urged strict acceptance of the treaty. After much debate, Washington issued the Neutrality Proclamation in April 1793. It stated that the United States would not support either side in the war. Further, it forbade Americans from aiding either Britain or France. The Neutrality Proclamation was a defeat for Jefferson. This and other defeats eventually led Jefferson to leave the Cabinet.

Answer 17

In 1793, the British captured more than 250 American ships trading in the French West Indies. Some Americans called for war. Washington, however, knew that the United States was too weak to fight. He sent Chief Justice John Jay to Britain for talks. Jay negotiated an agreement that called for Britain to pay damages for the seized American ships. Britain also agreed to give up the forts it still held in the West. Meanwhile, Americans had to pay debts long owed to British merchants.

Answer 18

Jay's Treaty sparked loud protests because it did nothing to protect the rights of neutral American ships. After furious debate, the Senate finally approved the treaty in 1795.

Answer 19

After serving two terms as President, George Washington refused to serve a third. Before retiring in 1796, Washington published his Farewell Address. In it, he advised Americans against becoming involved in European affairs: Tis our true policy to steer clear of permanent Alliances, with any portion of the foreign World…. The great rule of conduct for us, in regard to foreign nations is … to have with them as little political connection as possible. —George Washington, Farewell Address, 1796 Washington did not oppose foreign trade, but he did reject alliances that could drag the country into war. His advice guided American foreign policy for many years.