First Report on the Public Credit
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The Report on Public Credit was a report that analyzed the financial standing of the United States of America and made recommendations for the retirement of the national debt. Commissioned by the House of Representatives to Treasury Secretary Alexander Hamilton on September 21, 1789 and presented January 14, 1790, the 140,000 word document first proposed federal assumption of state debt.
[edit] Proposals
Alexander Hamilton’s plan implemented ideas of public credit, a national bank, and tariffs and manufactures to promote a fully republican economic system that was directly related to the federal government.
Hamilton’s Report supported ideas of war debt assumption, redemption of Confederate securities at face value, and funding of new national securities as a permanent national debt, in order to enhance the revenue and fiscal system of the national government, creating a large body to which many wealthy citizens would belong and support, bringing about its prosperity. Jeffersonians thought that, because the public credit system was focused on the wealthy class, it would give them power over the agricultural, lower class which made up the majority of the population, thereby denying democratic ideals.
Hamilton believed that a national bank would make loans, handle government funds, issue financial notes, provide national currency, and overall considerably help the national government to accurately and efficiently govern financially. Jeffersonians believed that creating such a power, if not now, then soon enough would cause the elastic clause to be stretched too far, causing all the state divisions to be subsumed under a single, powerful national government.
Additionally, Hamilton supported the manufacturing economy because he believed it to be more efficient and fruitful for the nation itself. Jefferson thought it was improper and cruel to center such industrial activity in factories and such, and encouraged the use of technology in open spaces (such as farming fields) that the agricultural family could make use of, for the addition of such a labor force would be beneficial in his mind.
[edit] Reaction
Hamilton's proposals drew sharp criticism from Secretary of State Thomas Jefferson and Speaker of the House of Representatives James Madison. The disagreements between Jefferson and Hamilton extended to other proposals Hamilton made to Congress, and they grew especially bitter, with Hamilton's followers calling themselves Federalists and Jefferson's calling themselves republicans. These divisions are the first manifestations of political parties in the U.S.
Jefferson and Madison eventually brokered a deal with Hamilton that required him to use his influence to place the permanent capital on the Potomac River, while Jefferson and Madison would encourage their friends to back Hamilton's assumption plan. In the end, Hamilton's assumption, together with his proposals for funding the debt, passed legislative opposition and became law.
[edit] References
- Chernow, Ron. Alexander Hamilton. Penguin Books, 2004. (pp. 288-305)
- Extract from the "Report on Public Credit"
- The original text from George Washington University
