*This Law Created the Federal Court System

WASHINGTON

1789-1796

POLITICAL

Cabinet:

*The cabinet, the President’s advisors, were mentioned only briefly in the Constitution; it only mentions that the President must receive Senate approval for appointments and that they were liable to impeachment

*The first cabinet, established by Congress, consisted of four departments: state (Thomas Jefferson), treasury (Alexander Hamilton), war (Henry Knox), and an attorney general (Edmund Randolph)

*Vice President John Adams’s tie-breaking vote defeated a proposal that would have forbidden the president from dismissing cabinet officers without Senate approval (In the future this becomes an issue with the Tenure of Office Act during the Andrew Johnson administration

Judiciary Act of 1789:

*This law created the federal court system

*It established in each state a federal district court that operated according to local procedures

*A district-court ruling could ruling could be appealed to a federal circuit court

*Each circuit court consisted of one district-court judge and two Supreme Court justices (who would travel among certain states between Supreme Court sessions), and the three would decide cases according to state laws

*As the Constitution stipulated, the Supreme Court exercised final jurisdiction

*This law was a reasonable compromise that respected state traditions while offering wide access to federal justice

Bill of Rights:
*The first Congress sifted through 210 proposals for constitutional amendments prior to creating the Bill of Rights

*James Madison, who had been elected to the House of Representatives, battled fiercely to keep the Constitution’s opponents from undermining the powers essential for a firm national government (Many Antifederalists wanted to use the Bill of Rights to return the power to the states)

*It was Madison who played the leading role in drafting the ten amendments that became known as the Bill of Rights when ratified by the states in December 1791

*The first eight amendments focused on protecting personal liberties (without reducing national authority or increasing state powers)

*The Ninth and Tenth amendments reserved (reserved powers) to the people or to the states powers not allocated to the federal government under the Constitution

*The Second Amendment was the most important concession to states’ rights--It ensured the collective right of each state’s populace to maintain a militia free of federal interference--Many historians view this amendment as a questionable move by the federal government since it invited a civil war

Farewell Address:

*This address was printed in the “American Daily Advertiser” on September 17, 1796

*It was Washington’s statement that he would not run for a third term

*Washington had been working on this statement since the end of his first term--During that period, he consulted with Madison, Hamilton and Jay

*In his Address, Washington warned Americans against the formation of political parties and to avoid “permanent alliances” with “any portion of the foreign world”

ECONOMIC

Tariff of 1789:

*The tariff, passed on the 4th of July, has been called Alexander Hamilton’s 10 percent tariff

*Duties on about 90 items ranged from 5 to 10 percent ad valorem (according to their invoiced value)--Most of the rates were below 10 percent

*Hamilton, as Secretary of the Treasury, was anxious to establish the tariff as a regular source of revenue, and he was just as anxious to establish the principle of protection of domestic manufacture by tariffs

*The revenue was an immediate necessity; the protection was of minor immediate importance but was destined to develop into a persistent political issue throughout U.S. history

Hamiltonian Reports:

*Seeking guidance on how to restore the nation’s credit worthiness, in 1789 Congress directed the Treasury Department to evaluate the status of the Revolutionary debt

*Hamilton seized the opportunity to devise policies that would not only rebuild the country’s credit but also entice a key sector of the upper class to place their prestige and capital at its service

*Congress received the report on Public Credit in January 1790--The report called for funding at par and assumption.

*In December 1790 the secretary of the treasury presented Congress with a second message, the Report on the National Bank

*His third report, the Report on Manufacturers, was delivered December of 1791--This advocated protective tariffs on foreign imports to foster domestic manufacturing, which in turn would both attract immigrants and create national wealth--This was the only report by Hamilton that was denied

First Bank of the U.S.:

*1791-1811

*Hamilton proposed a bank in his Report on Banks and Manufacturers

*Washington received written statements from Hamilton and Jefferson on the constitutionality of such a bank

*Hamilton developed the theory of “loose” construction of the Constitution in support of the bank, while Jefferson expounded the theory of “strict” construction in opposition to it

*Washington accepted Hamilton’s reasoning, and Congress passed the law establishing the Bank

*Jeffersonian Argument: (a) Does the implied (elastic) clause give Congress the right to create a bank? Jefferson’s answer was no! (b) “Congress shall have power to make all laws which shall be necessary and proper for carrying into execution for foregoing powers . . .” If necessary means something less than absolutely necessary, it begins to mean highly convenient, or merely convenient, or perhaps just a bit helpful (c) If the word necessary is to have its strict meaning modified at all, how can there be any particular point beyond which no further modification is permissible? Any such loose interpretation clears the way for the U.S. government to accumulate power and eventually overwhelm the states (d) Loose construction would destroy the protection the states believed that they had in the Tenth Amendment-- “The powers not delegated to the United States by the Constitution, or prohibited by it to the States, are reserved to the States respectively, or to the people”

*Hamiltonian Argument: (a) Hamilton insisted that a sovereign government must have ample authority to carry out any specified grant of power in the Constitution (b) Hamilton pointed out that navigation aids, such as lighthouses, has been authorized by laws of Congress under the right to regulate commerce-Nowhere did the Constitution state, or need to, that Congress could erect lighthouses (c) If the end by clearly comprehended within any of the specified powers, and if the measure have an obvious relation to that end, and is not forbidden by any particular provision of the Constitution, it may safely be deemed to come within the compass of the national authority (d) From this view it became apparent that the creation of a United States Bank would be a measure with an obvious relation to the following powers granted in the Constitution: to collect taxes, to borrow money, to pay the public debt and to regulate commerce

*Some of the following facts explain why the Secretary of the Treasury considered the establishment of the Bank of the United States the key point of his financial program: (a) The bank was a private institution--80 percent of its stock was owned by private individuals with the remaining 20 percent owned by the United States (b) Total capitalization was $10 million (c) The bank could issue paper money, that is, bank notes, so long as it was redeemable in gold (d) Branches of the bank in major cities could transfer credit easily from city to city by bank drafts and thus greatly aid business (e) Taxes could be paid to the Bank (f) The sale of United States bonds could be handled by the Bank (g) Short-term loans could be made by the Bank to the United States

*As it turned out, the Bank of the United States aided the Treasury Department in several of its functions--It had a stabilizing effect on the currency system, and it tended to make other banks adopt sound banking practices--It was an asset to the economy--It was a very prosperous private business

Funding at Par:

*The people of the U.S. held government bonds totaling, with accumulated interest, almost $45 million

*The foreign debt was almost $12 million

*Hamilton advocated issuing new bonds in exchange for the original bonds, which were greatly depreciated--This would form one new debt that had every prospect of being paid at the face value of the bonds, plus the interest

*There was no organized opposition to paying the foreign debt, which was owed chiefly to France and Holland--But there was strong opposition to handling the domestic debt in this manner

*This combining of the domestic and foreign debts and refinancing them by a new issue of bonds is often called funding the debt

*The opposition stemmed from the fact that those who originally bought the bonds were not longer the owners--This was more true of small bondholders than of others

*Almost all of the thousands of people of modest means who had bought government bonds during the Revolution had long since sold them at a small fraction of their face value--The depression in the middle 1780s had forced them to sell

*By the time Hamilton proposed funding the debts, the owners of the bonds were wealthy people in the larger cities (mainly in New England)

*Republicans charged that this was another attempt by Hamilton to enrich the wealthy at the expense of the poor

*Hamilton got his way by insisting that the credit of the United States must be established--The infant nation could never get respect or make favorable trade agreements with other countries until it had earned the reputation that it paid its bills and that its currency was sound

*Hamilton also stated that a government bond was a contract with the bondholder, that part of the value of a bond was the fact that it could be sold whenever the owner could find a purchaser at a price acceptable to both parties

*Establishing credit and the integrity of a government contract were of fundamental importance, not be set aside because some people gained and others lost

*A key feature of the plan was the establishment of a “sinking fund”--This is a sum of money reserved solely for guaranteeing future interest payments, into which revenues would be “sunk”--This precaution would establish public confidence by assuring bond holders that their investments would be safe because the government would always have funds to pay them their interest promptly

*Hamilton proposed that money owed to American citizens should be made a permanent debt--That is, he urged that the government not attempt to repay the $42 million principal but instead keep paying interest to persons wishing to hold bonds as an investment

Assumption:

*The total debt of all the states was about $25 million--Of this, over $21 million had been spent by the states in conducting the Revolutionary War

*Left to themselves, some of the states would certainly have failed to pay off their bonds at face value

*Again, Hamilton emphasized the necessity of establishing the credit of the governments, state as well as federal

*Congress passed the bill by which the U.S. assumed the debts contracted as part of their war effort, the $21 million (This money had been spent in a common cause)
*The Southern states had already paid off a much larger share of their bonds than had the New England states--So again, Hamilton’s plan brought financial advantage to commercial interests at the expense of agrarian interests (The Assumption Bill meant that all the states would pay off the total debt)

*The Federalists needed some Republican support to get the Assumption Bill passed

*Jefferson agreed to persuade a few Republicans to vote for the bill if Hamilton would persuade a few New Englanders to vote to have the permanent capital of the U.S. located on the Potomac River (It had previously been in Philly and New York City at Federal Hall)--Thus, the Assumption Bill was passed and the capital was located on the Potomac

*Logrolling: Political deal whereby one bloc or party gives support for one measure in return for support for another

Eli Whitney:

*Whitney invented the cotton gin in 1793.

*Recent evidence suggests that Whitney did not invent the cotton gin without a good deal of help from Catherine Littlefield Greene, widow of General Nathanael Greene. Whitney probably had not seen a raw cotton ball, since he was from Massachusetts, until he was a guest for six months in the Greene home in Georgia.

*Whitney developed a machine in which rollers were implanted with wire teeth. As a handle turned the rollers, the teeth pulled the cotton seeds from the fibers.

*A worker using a gin could clean fifty pounds of cotton in one day, as compared to one pound by hand.

*The increased production of cotton created an enormous demand for slave labor. No slaves had been imported since the Revolution. In 1803 South Carolina legalized importation, and for the next five years African flooded into Charleston in unprecedented numbers. In 1808 the twenty-year period of protection of the slave trade, which had been written into the Constitution, expired.

*After inventing the cotton gin, Whitney applied for a patent from the federal government and opened a factory to manufacture the new device. His machine was so easy to copy, though, that people simply made their own. Whitney’s enterprise failed.

*Whitney’s inventive mind than turned to another mechanical problem. At the time, every rifle was a unique unit. If one part broke, the entire gun had to go back to the manufacturer because only he could fix it. Whitney looked at a gun as a combination of parts. He developed machines to produce each part. To make a gun, these parts could be assembled quickly. If one part broke, it could be replaced. A gun manufacturer could now turn out a great many guns in a short time. In addition, the guns could now be repaired by unskilled workers instead of master mechanics.

*Whitney’s system of interchangeable parts was applied to dozens of other products. Soon factories throughout the North were turning out goods on a mass basis, beginning the process now called mass production.

Industrial Revolution:

*As in England, America’s Industrial Revolution started with the machinery for making textiles, specifically cotton goods. The textile industry soon became the largest in the nation.

*In the U.S. the industry began in 1789, when a twenty-one-year-old Englishman named Samuel Slater stepped onto a New York dock.

*When Slater left England, he had declared himself to be a farmer. Actually, he was a skilled mechanic. Because the British wanted to guard the secrets of their industrial development, they had banned the export of machine designs and even the emigration of mechanics.

*Slater, however, memorized the plans for a complete textile mill and then came to the U.S.

*With the financial backing from Quaker merchant Moses Brown, he opened a cotton-spinning plant at Pawtucket, Rhode Island. Samuel Slater & Company became the first successful full-time factory in America and was soon widely imitated.

SOCIAL

Whiskey Rebellion:

*An excise tax is levied on something produced, sold, and used in the U.S.

*Excise taxes were viewed by many as a violation of the liberty for which the Rev. War was fought

*Hamilton recommended and Congress passed an excise tax on whiskey

*The tax on whiskey was unpopular with corn farmers west of the Alleghenies because they had to change their corn into whiskey in order to transport it for miles without roads if they wanted to get it to market

*Pennsylvania farmers refused to pay it--On Hamilton’s advice, Washington ordered almost 15,000 militia to this area (from Pennsylvania, Maryland Virginia and New Jersey) and personally inspected troops in the field

*Hamilton seized 150 suspects and two men received death sentences (Washington pardoned them both)

*This show of strength crushed this first challenge to federal authority (In the early 1790s, many Americans still assumed that it was legitimate to protest unpopular laws using the same tactics with which they had blocked parliamentary measures like the Stamp Act)

Creek:

*Washington wanted to weaken Spanish influence in the West by neutralizing Spain’s most important ally, the Creek Indians (There had been attempts by the British and Spanish to detach the West from the United States)

*The Creeks numbered 20,000, including perhaps 5,000 warriors, and they bore a strong dislike of the Georgians

*In 1790 Creek leader Alexander McGillivray signed a peace treaty with the United States (a secret provision of which promised him a large annual bribe) that permitted whites to occupy lands in the Georgia piedmont fought over since 1786, but which in other respects preserved Creek territory against white expansion

*Washington insisted that Georgia restore to the Creeks’ allies, the Chickasaws and Choctaws, the vast area along the Mississippi River known as the Yazoo Tract, which Georgia claimed and had begun selling off to white land speculators