Alexander Hamilton's Financial Plan

Meaning when a tax is placed on a certain item, whiskey, in this demand model the producer, the farmers, would pay most of the tax. At the time the federal government saw whiskey as a luxury and so placed the tax on the distillers, raising the price of production in return decreasing the amount produced. They saw they could pay off their debt, by taxing the whiskey, and the producers of whiskey would pay for the debt for them. Therefore, the National debt incurred during the Revolutionary war and, the supply and the demand of whiskey are related. It was shown that only the distillers who produced less would pay more because of the tradeoff of equity end efficiency, meaning that because of the debt from the war, the government needed a way to pay for the debt and taxed whiskey. Concluding that the supply and demand elasticities of whiskey are completely due to the taxation put on the whiskey to pay for the

Towards the end of the 16th century, the United States government experienced continuous changes in laws(taxes) and several problems(battling and removal of Indians) associated with westward expansion. Conflict was created in response to the rising taxes issued by the government on goods such as whiskey. Most affected by the heavy taxation were the creators and distributors of whiskey - the average poor white farmer. An incident that occurred in 1794 involving enraged farmers in western Pennsylvania, threatened the tax collectors lives as well as the authority of the government. This incident came to be known as the Whiskey Rebellion.

3. What was Hamilton’s plan for debt reconciliation? Hamilton suggested funding the debt by selling government bonds, and further proposed that state debts be assumed by the national government. Why was Madison opposed to it? Madison believed that Hamilton's plan "was betraying the ideas of the American Revolution."

Britain had never directly taxed the colonists before. The rum producers protested that the tax would diminish their profits because the rum industries depended on the imported molasses.

In 1791, under the advisement of Alexander Hamilton, congress passed the whiskey tax. This tax, put a twenty-five percent tax on whiskey. Hamilton created this tax in hopes of the federal government gaining more money to help pay of the nation’s debt. However, in doing so, this angered many people, especially farmers in western Pennsylvania, because they distilled the extra grain they had to make whiskey and sell it to make extra income. These small operations in western Pennsylvania rebelled by erecting liberty poles and taring and feathering tax collectors. George Washington, who was president during this time, saw the outburst and decided to take action against the angered farmers. Washington gathered about 13,000 men from the militia to put an end to this rebellion. In doing so, Washington showed that the government help the power over the citizens. In The Whiskey Rebellion, by Thomas Slaughter, he describes different consequences that arise from the whiskey tax. Slaughter presents three main points, which include conflicts between the east and west, two political systems that begin to develop, and the actual rebellion.

Shortly after Alexander Hamilton created the tax on whiskey which was used to pay off the Revolutionary war debt, some farmers started to cause issue in the wilderness. After the tax was passed a group of farmers went out in the woods they captured a tax collector they , stripped him naked, shaved off his hair, poured hot tar all over his body, covered the tax collector in feathers, and finally strapped him to a tree in the middle of the night which caused the rebellion to start. According to “American History: The Whiskey Rebellion: From the August 2014 Issue”,”A group of armed men accosted whiskey tax collector Robert Johnson in a lonely stretch of forest in western Pennsylvania in 1793. They pulled Johnson off his horse and ordered him to strip, cut off his hair, poured hot tar on his body and dumped chicken feathers over the tar.” Then shortly after the tarring, more farmers were joining the Whiskey Rebellion against the whiskey tax.

After the Revolutionary War the economy was not thriving. Paper money that had issued during the war was basically worthless, and there was a debt. These issues needed to be resolved and James Hamilton was the man whose hands this task fell on. Hamilton's plan was to retire old obligatuons and to borrow money at a lower interest rate. Hamilton proposed that teh government take all of the debt of the federal government and all the states. Many states that had already paid off their debts did not understand

As the Revolutionary War ended, the United States faced a completely new set of challenges. Now the United States had to shift focus from gaining independence from England to gaining their own financial security. The newly formed country had to figure out a way to pay for the war debt incurred by the colonies. In order to do this, the Secretary of the Treasury, Alexander Hamilton, convinced congress and the president that a tax on whiskey would be able to provide the revenue needed to repay the debts. However, the tax on whiskey was met with heavy resistance. To Hamilton, the tax was only “a few dollars a year for the average small distillery” but for the Frontiersmen it was an attack on their way of life. The resistance to the tax, the

Alexander Hamilton was one of the most influential figures to shape American finances. He made his contribution through the The Hamiltonian Economic Program. The goal of his plan is to improve the American economy through three steps. The first is to pay off the nation’s national debt in order for states to focus on business. This way maximum profit can be achieved. The second step is to place tariffs on imported goods to gain money. Lastly is to create a national bank in order to regulate money flow and currency. However, Thomas Jefferson strongly disagreed with Alexander Hamilton’s views which was evidently seen in the political parties, the Democratic Republicans and the Federalists. One of the main differences between the two is regarding the type of government America would have. Hamilton favored a strong federal government while Jefferson favored a small local government.

Hamilton was able to persuade Congress into passing a twenty-five percent tax increase on such products. This did not go over all too well in the west, especially concerning small farmers in Pennsylvania. At the time, farmers processed their corn and grain into whiskey, since it was less complicated to transport their crops in liquid form rather than in bulk. Whiskey was also used as barter at this time. In retaliation to this tariff, farmers took it upon themselves to harass the federal tax collectors, and showed their hostility and disdain by stopping judicial proceedings. In response to this, Congress attempted to lift the most severe proclamations of the levy, but this was to no avail in the farmers' eyes. Since a majority of the farmers' used the barter system, they simply could not come up with the money necessary to pay the tax. Their vexation mostly stemmed from their belief that the "unresponsive government" lacked to "understand the hardships they faced" since the government quite clearly did not grasp the concept of a deficiency of affluence (Encyclopedia of American History: Revolution and New Nation, 1761 to 1812). Throughout 1771 to 1773, the farmers' resistance was noticeable although not yet notable until 1774, where they then decided to handle the complication themselves.

The Whiskey Excise Tax hit rural farmers especially hard, and they started crying foul almost immediately after passage. It was criticized for being an “unreasonable economic hardship and as an ominous intrusion by central authorities into local affairs” (Gould, 1996, 405). These “westerners” felt as if they were being unjustly victimized by this tax. Most farmers during this period in American history worked extremely hard just to make ends meet, so operating a whiskey distillery offered them a source of extra income. In the minds of these western farmers this tax left them at a competitive disadvantage with eastern farmers. Western small-time farmers generally had small whiskey distillers. These frontier distillers could not run as efficiently as the larger distillers in the east, so their tax burden was much greater. For this reason many of the western farmers felt that Secretary Hamilton had set up a system that was giving tax-breaks to the larger eastern-based distillers. This sentiment is often echoed in today’s world- that the federal government promotes “big business” (Holt, 2004, 30). The cause of much of this rile and frustration, however, stems from the age-old

Hamilton believed that the new government needed the help of the aristocracy, and in order to get the support of the elite of society, the elite would have to be given a part in the success. Hamilton’s program was mainly composed of three objectives. It involved having the government take the responsibility of the public debt (born due to the revolution), take the debt of each individual state accumulated also during the revolution, and create a national bank. Hamilton’s goal was not to pay off the national debt, but to maintain a permanent, large national debt. Bonds would be issued by the government that would be paid by new bonds and those bonds would be paid by newer bonds and so on. This would prompt the wealthy gentry to lend money to the government knowing that they would be paid back, and keep them investing because they now needed the new government to survive. The national band would introduce loans and more business. In addition to this, the national bank would introduce two new types of taxes: the distillers of alcoholic liquors tax and tax on imports. This new program caused a lot of controversy. The ideas of having the government take on each individual state’s debt unsettled some citizens. Say for example that New York’s debt was greater than Rhode Island’s; if the government took both their debts and paid them off with taxes,

The government played a huge role in the development of a stronger national market. This influence and interaction with the people from the federal government was not a role Thomas Jefferson wanted them to have. Thomas Jefferson believed that the best federal government was the one that had less power than the state governments. He believed that a small federal government with limited powers was most likely to leave the people alone to enjoy the blessings of liberty. Jefferson recognized the value of a strong central government in foreign relations, but he did not want it strong in other respects. In Jefferson’s view, centralized government was simply tyranny waiting to happen again and believed that the states could best govern the domestic matters within its own state. He insisted on a strict construction of the Constitution. That the constitution should mean exactly what it said and any addition to the powers listed was unconstitutional. He feared that a strong national government, much like the British monarchy, created too much centralized power and would deprived citizens in the various states of the ability to make their own decisions. Hamilton on the other hand believed that the country should be ruled by educated and wealthy men like himself. Hamilton feared political and social disorder due to the absence of governmental control. He wanted to use the

Federalist’s views on economy were based off internal and foreign connections. Internally, Hamilton’s economic plan included three main parts- paying off all war debts, raising government taxes, and creating a national bank. This plan would result in the nation’s debt, which was a result of the Revolution, being paid in full by the wealthier states paying states debts for the poorer states. This was not accepted because the richer southern states disagreed to pay for the poorer northern states. Another plan by Hamilton was to tax farmer who made alcohol, resulting in funds to pay off the nations debt. Most of these farming citizens where part of the opposing Republican Party who strongly disagreed with the new tax causing the Whiskey Rebellion. Internationally, Hamilton wanted a strong economic relationship with Great Britain. He developed the Jay Treaty that insured a diplomatic agreement from peaceful trading with Britain. The Jay Treaty included decisions of debt payments, country boundaries, and Britain occupation of forts in newly independent America. Hamilton believed in a strong central economy that was aided by foreign affairs and national strength.

Hamilton’s Financial Plan largely benefitted the northern states rather than the southern ones. The majority of the southern states completely paid off their war debt. The northern states on the other hand were nowhere close to reaching this goal. Hamilton’s plan put in place that the southern states would help the northern states pay their debts. Obviously, the southern states were completely opposed to this, while the northern states full-heartedly agreed with it. States, such as Virginia, would gain nothing from having a central bank. The groups that would benefit the most from Hamilton’s Plan were merchants, leading financiers, and large cities. These groups were