Chapter 9: Launching the New Nation – Washington & Hamilton

Welcome to Last Minute Lecture.

This free chapter overview is designed to help students review and understand key concepts.

These summaries supplement not replaced the original textbook and may not be redistributed or resold.

For complete coverage, always consult the official text.

Welcome to the Deep Dive.

Today, our mission is pretty straightforward.

We're giving you the essential breakdown of the U .S.

government's foundational decade, 1789 to 1800.

We're drawing this straight from Chapter 9 of the American Pageant, really focusing on how those constitutional promises met, well, reality.

And reality hit hard fast.

The new government, this ship of state, it launched into some seriously stormy seas.

You have to remember, Americans were deeply suspicious of any central authority, plus the finances.

A disaster, huge public debt, paper money nobody trusted.

Right, and then as if that wasn't enough, boom, the French Revolution kicks off in 1789.

Exactly.

Suddenly Europe's at war, and that directly threatens the fragile new nation's security.

It was a trial by fire from day one.

So you've got this government trying to find its feet, establish its finances, figure out individual rights, all while navigating a world war.

And critically, the key figures inside the government, particularly Hamilton and Jefferson,

start developing fundamentally opposing visions for the country.

That tension really defines this whole period.

We're talking about Washington's two terms, then John Adams' administration.

And right alongside that, the, well, almost accidental creation of the first political parties, Hamilton's Federalists versus the Democratic Republicans, led by Jefferson and Madison.

Okay, let's lay the groundwork.

Washington's election in 1789, unanimous in the Electoral College.

That's never happened since.

Quite a figure.

Tall, imposing, apparently preferred life at Mount Vernon, but knew he had to set the tone, established the precedence.

And precedence were crucial because the Constitution, well, it left a lot unsaid,

like the cabinet.

Not mentioned at all.

Washington just started meeting with his department heads.

It evolved purely out of practice, out of necessity.

And what a team to start with.

Jefferson at state, Hamilton at treasury, Henry Knox at war.

These guys were going to shape everything.

Absolutely.

But before finance came rights, the Constitution was ratified without a specific bill of rights, which was a major sticking point for many.

So James Madison stepped up.

He did.

He guided the first 10 amendments, the bill of rights, through Congress in 1791, safeguarding things like free speech, religion, trial by jury, the basics we think of.

But you pointed out, and the source emphasizes this, the ninth and tenth amendments were where the real long -term political arguments were seeded.

Definitely.

The ninth says, basically, just because we listed these rights doesn't mean you don't have other rights.

It prevents limiting rights to only what's written.

But the tenth, that's the big one for states' rights advocates.

It reserves any powers not specifically given to the federal government nor denied to the states, to the states or the people.

That's the bedrock for so much conflict later on.

It really is.

And rounding out the structure, you had the Judiciary Act of 1789.

Right.

Setting up the Supreme Court, federal district and circuit courts, and the attorney general's office.

John Jay became the first chief justice.

Okay, government structure, check.

Bill of Rights, check.

Now for the elephant in the room.

The economy,

or lack thereof.

Enter Alexander Hamilton, Treasury Secretary.

Genius, ambitious,

and controversial.

His whole plan wasn't just about balancing the books.

It was deeply political.

He believed the government should actively support the wealthy, the merchants, the manufacturers.

The idea of being secure, their loyalty, their money and prosperity would eventually trickle down.

Sort of.

His financial system had key pillars.

First, funding at par.

The federal government would pay off all its debts over $54 million at face value plus interest.

Even though many original bondholders had sold them off cheap to speculators.

Exactly.

So the speculators, the wealthy elite who bought them up, got a windfall.

Hamilton argued it was crucial for establishing public credit.

And the second pillar, assumption.

Yes.

Hamilton insisted the federal government assume the $21 .5 million in debts the states still owed from the revolution.

Now, why was that so important to him?

It seems like doubling down on debt.

Because it shifted loyalty.

If the federal government owed the money, wealthy creditors would look to the nation's success, not just their states.

He literally wanted to chain them to the federal chariot, as the text says.

But states like Virginia, which had paid off a lot of their debt, cried foul.

Understandably.

They saw it as being taxed to pay off the debts of less frugal states.

This led to the first big political bargain.

The Compromise of 1790.

That's it.

Hamilton got his assumption plan passed, but only because Jefferson and Madison agreed to it in exchange for locating the permanent national capital on the Potomac River, a southern location.

Politics in action.

So, how did Hamilton plan to pay for all this assumed debt?

Revenue.

First came tariffs, customs duties on imported goods.

The first tariff law in 1789 was modest, around 8 percent, mostly for revenue.

But it also offered some protection for those infant industries Hamilton wanted to encourage.

Right.

That was part of his broader vision for a manufacturing nation.

Then in 1791 came the really explosive part, the excise tax.

A tax on domestic goods, most famously whiskey.

Yes.

And this hit backcountry farmers the hardest.

Transporting grain over bad roads was tough, so they distilled it into whiskey.

It was easier to transport and often used as currency.

So taxing whiskey felt like taxing their money.

Precisely.

And this friction directly fed into the next huge debate.

The Bank of the United States.

Hamilton's idea again.

A national bank, partly owned by the government, to hold federal funds, issue currency,

stabilize the whole system.

But Jefferson immediately pushed back.

Hard.

He pointed straight to the 10th Amendment.

Strict construction.

If the Constitution doesn't explicitly say Congress can create a bank, then Congress can't create a bank.

Simple as that.

That was Jefferson's view.

He saw it as an overreach of federal power, something reserved for the states.

But Hamilton had a counter argument.

He did.

Loose construction.

He invoked Article 1, Section 8, the necessary and proper clause, also called the elastic clause.

OK, explain that logic.

Hamilton argued.

The Constitution does give Congress the power to tax, to regulate commerce, to pay debts.

A bank isn't explicitly mentioned, sure, but it's a necessary and proper tool to carry out those explicit powers effectively.

So necessary didn't mean absolutely essential, but more like.

Useful.

Convenient.

Exactly.

And Washington sided with Hamilton.

He signed the bank bill in 1791.

This was huge.

It established the principle of implied powers that the federal government could do things not explicitly listed if they helped execute listed powers.

A massive expansion of federal authority based on interpretation.

And the backlash, especially over that whiskey tax, wasn't just theoretical.

It got physical.

The Whiskey Rebellion, 1794 Western Pennsylvania.

Farmers refused to pay the tax.

They tarred and feathered revenue collectors.

They raised cries of liberty and no excise.

Echoes of the revolution.

How did Washington handle this compared to, say, Shays' Rebellion under the old articles?

Night and day.

Washington, urged on by Hamilton, didn't hesitate.

He federalized militias from several states, about 13 ,000 troops.

A huge army for the time.

And he actually rode out with them part of the way.

He did.

The show of force was overwhelming.

The rebellion just melted away.

Only a couple of people were convicted, later pardoned.

But the message was crystal clear.

Absolutely.

This new federal government could and would enforce its laws.

It had power.

The Articles of Confederation never did.

Okay, so Hamilton's financial system is in place.

Federal power is asserted.

But all this controversy, the bank, the taxes, it's dividing people, isn't it?

Deeply.

The founders, you know, they really dislike the idea of permanent political parties.

They hoped for unity.

But Hamilton's policies, especially his push for central power, basically guaranteed opposition, would organize.

And that opposition crystallized around Jefferson and Madison.

Right.

So you get the emergence of these two distinct camps.

Let's break them down.

First, the Federalists, Hamilton's crew.

They believed in government by the best people, the wealthy, educated, established folks.

They distrusted, frankly, full -blown democracy.

So strong, central government.

Definitely.

Loose interpretation of the Constitution to allow for that strength.

They wanted the government to actively foster business, manufacturing, pro tariff, national debt.

Hamilton called it a national blessing, if managed right, as it tied creditors to the government.

And where did you find them mostly?

Foreign policy leanings?

Concentrated on the coasts, in cities, merchants, manufacturers, shippers.

And crucially, they were generally pro -British because Britain was the main trading partner.

Economics drove that.

OK, now the other side.

The Democratic Republicans,

Jefferson and Madison's party.

Total contrast.

They championed the common man, the informed masses,

believed in the wisdom of the people, especially farmers.

So weak central government.

As weak as possible.

That government is best which governs least.

Strict interpretation of the Constitution stick only to explicitly listed powers.

States should hold the bulk of authority.

Economic focus.

Agriculture above all.

Jefferson famously wrote, Those who labor in the earth are the chosen people of God.

No special favors for business or manufacturing.

They viewed national debt as a curse.

Teography, foreign policy.

Strongest in the agricultural south and southwest.

Small farmers, laborers, artisans, and foreign policy.

They were strongly pro -French, sympathetic to the ideals of the French Revolution, at least initially.

That split seems pretty fundamental.

It's not just policy, it's philosophy.

It is.

And foreign policy really threw gasoline on that fire.

You mentioned the French Revolution.

Americans were initially excited, right?

Seeing it as chapter two of their own revolution.

Yeah, there was a lot of enthusiasm early on.

But that changed dramatically, especially for Federalists, around 1793.

What happened?

The Reign of Terror.

King Louis VI executed.

The Guille team working overtime.

It looked like mob rule.

Chaos.

This horrified the more conservative Federalists.

And remember, this is also happening around the same time as the massive slave uprising in Haiti, Saint -Domingue then, that terrified American slaveholders, adding another layer of fear and polarization.

Now, the U .S.

actually had a treaty with France from 1778, the Franco -American alliance.

Weren't we technically obligated to help defend their West Indies?

We were, and France expected help.

But Washington, wisely, saw that the young nation was way too weak, too divided, too fragile to get sucked into a major European war.

So what did he do?

He issued the Neutrality Proclamation in 1793,

declared the U .S.

officially neutral, impartial toward both Britain and France, warned American citizens not to take sides.

A hugely important precedent setting that isolationist course early on.

Absolutely.

By time, stay out of it, build strength.

That was the strategy.

But the French didn't just accept that, did they?

Citizen Jeunet?

Ah, Edmond Jeunet, the French envoy.

He landed in Charleston and, completely ignoring the Neutrality Proclamation, started commissioning privateers and trying to recruit Americans to invade Spanish Florida and Louisiana and even British Canada.

Wow, that's bold.

Incredibly rash.

He thought Americans would flock to the French cause.

Instead, he totally overplayed his hand.

Washington was furious and demanded his recall.

It really underscored the U .S.

commitment to neutrality.

While all this drama with France is unfolding, what's happening out West with Britain and Native Americans?

Still trouble there.

Britain was violating the 1783 peace treaty by holding on to forts on U .S.

soil in the northern frontier.

And they were arming Native American tribes.

Yes, hoping to create a buffer state to check American expansion.

A Miami Confederacy Warchief, Little Turtle, had actually handed the U .S.

Army two stinging defeats in the early 1790s.

But that changed.

It did.

In 1794, General Matt Anthony Wayne led a new army and decisively defeated the Miami Confederacy at the Battle of Fallen Timbers.

The British nearby refused to shelter the fleeing warriors.

Leading to?

The Treaty of Greenville in 1795.

The Miami tribes ceded vast tracts of the Old Northwest most to present -day Ohio and Indiana.

In return, they got some money and an annual payment.

Hoping it meant recognition of their sovereignty is a major land grab for the U .S.

Okay, so dealing with France, dealing with Native Americans.

But the big friction point remained Britain, especially at sea.

Right.

The Royal Navy was seizing American merchant ships trading with the French West Indies.

And worse, impressing American sailors, basically kidnapping them to service on British warships.

War seemed imminent.

So Washington tries diplomacy again.

Sends John Jay to London in 1794.

Yes.

Chief Justice Jay.

His mission was to avert war.

The result was Jay's Treaty.

And let's just say it wasn't popular back home.

Why not?

What were the terms?

Well, Britain did promise to finally evacuate those frontier posts.

They also agreed to pay damages for the recent ship seizures.

But that was about it.

What didn't they agree to?

No promises about stopping future seizures.

No promises about stopping impressment.

And the real kicker.

The U .S.

had to agree to pay off all the old pre -revolutionary war debts owed by American citizens to British merchants.

Oof.

So the South, where many of those debts were owed, would be furious.

While the North, the shippers, got compensated.

Exactly.

It deepened the sectional divide.

Jeffersonians saw it as a complete betrayal, a surrender to Britain.

Jay was burned in effigy.

It barely passed the Senate.

But ironically, Joe's Treaty had an unexpected positive outcome.

It did.

Spain got nervous.

They saw Jay's Treaty, however flawed, as a sign of a potential Anglo -American alliance.

They worried about their holdings in North America.

So they decided to play nice.

Very nice.

In 1795, Spain quickly offered Pinckney's Treaty, granted the U .S.

free navigation of the Mississippi River, the crucial right to deposit goods at New Orleans for transfer to ocean -going ships, and the large disputed territory of Western Florida.

A huge win for the U .S.

basically handed to them because of Spain's fears.

Amazing how interconnected everything was.

Washington's two terms are ending.

He decides not to run again in 1796.

Setting that crucial two -term precedent.

And he leaves with his famous farewell address.

What were the key warnings in that?

Two big ones.

First, steer clear of permanent alliances with foreign powers.

He advocated only temporary alliances for extraordinary emergencies.

Second, he warned strongly against the dangers of political factions or parties.

He saw them as divisive and destructive to national unity.

Advice the country promptly ignored on both counts, pretty much.

Sadly, yes.

The 1796 election was the first openly contested one.

John Adams, the Federalist, narrowly beat Thomas Jefferson, the Democratic Republican.

But here's the weird part due to the system, then.

Jefferson, having come second, became Adams' vice president.

Yeah, talk about an awkward situation.

The president and vice president were political arch rivals.

That flaw was later fixed by the 12th Amendment.

But Adams had Jefferson right there in his administration, opposing him.

And Adams inherited a big mess, didn't he?

Particularly with France.

He did.

The French were furious about Jay's treaty, seeing it as a betrayal of the 1778 alliance.

They started seizing American ships just like the British had.

So Adams tries diplomacy, sends envoys to Paris in 1797.

This leads to?

The infamous XYZ affair.

The American diplomats arrived, hoping to meet with the French foreign minister, Talleyrand.

But instead, they were approached by three French gobetweens, later referred to in reports as XYZ.

And what did XYZ want?

Money.

A lot of it.

They demanded a hefty bribe, about $250 ,000, just for the privilege of talking to Talleyrand, plus a huge loan of millions to France.

Extortion, basically.

How did America react when this news broke?

Outrage.

Absolute fury swept the country.

The slogan became, millions for defense, but not one cent for tribute.

War fever soared.

Federalists were thrilled.

Jeffersonians were embarrassed.

Did it lead to actual war?

An undeclared naval war, yes.

The Quasi War fought mostly in the West Indies between 1798 and 1800.

Congress created the Navy Department, expanded the Navy, reestablished the Marine Corps.

Fighting was real.

Ships were captured.

But Adams, despite the war fever boosting his popularity, sought peace.

He did.

And it was probably his finest moment, though politically costly.

He knew a full -blown war would be disastrous.

He put country above party and sent new envoys to France in 1799.

And by then, things in France had changed.

Yes.

Napoleon Bonaparte had seized power.

He was busy with European ambitions and wanted to end this American squabble.

So they reached an agreement.

The Convention of 1800.

Right.

France agreed to formally annul the 1778 alliance, freeing the U .S.

from that entanglement.

In return, the U .S.

agreed to pay the damaged claims of American shippers against France.

Adams avoided war, kept the nation intact, and importantly, this paved the way for Jefferson to make the Louisiana Purchase just three years later.

A peaceful relationship with France was key for that.

But while Adams was navigating this international crisis, the Federalists at home used the anti -French hysteria for political gain, didn't they?

Oh, absolutely.

They rammed through Congress a series of laws in 1798, designed explicitly to silence their Jeffersonian opponents.

The Alien and Sedition Acts.

Let's break those down.

The Alien Acts.

There were two.

One raised the residency requirement for citizenship from five years to 14, clearly aimed at slowing the growth of the immigrant vote, which tended to favor Jeffersonians.

The other gave the president power to deport foreigners deemed dangerous in peacetime or deport or imprison them in wartime.

These weren't really in force, but they were intimidating.

But the Sedition Act was the real bombshell.

It was a direct assault on the First Amendment's guarantees of free speech and press.

It made it a crime, punishable by heavy fines and imprisonment, to impede government policies or to falsely defame government officials, including the president.

So you couldn't criticize President Adams without risking jail.

Pretty much.

And it wasn't theoretical.

A number of Jeffersonian newspaper editors were indicted, and 10 were convicted and jailed under the act.

It was nakedly partisan.

And the Federalists even put an expiration date on it.

Yes.

They set it to expire in March 1801, conveniently right after the next presidential election.

That way, if they lost, it couldn't be used against them.

Cynical politics at its most extreme.

How did Jefferson and Madison respond to this blatant attack on free speech?

They couldn't challenge it in the Supreme Court easily.

The court wasn't yet the powerful body it would become, and it was packed with Federalists anyway.

So they took their fight to the state level, secretly.

The Virginia and Kentucky Resolution.

Exactly.

Jefferson wrote the Kentucky Resolutions, Madison wrote Virginias.

They argued that the federal government was created by a compact among the states.

The compact theory.

Right.

And therefore, the states were the ultimate judges of whether the federal government had overstepped its constitutional authority.

And in the case of the Alien and Sedition Acts, they argued it clearly had.

Absolutely.

Jefferson's Kentucky Resolutions went even further, introducing the radical concept of nullification, that states had the right to declare federal laws null and void within their borders if they deemed them unconstitutional.

Did other states jump on board with nullification?

No, not at the time.

Most other states, even those sympathetic, thought it went too far.

But the resolutions were incredibly important as campaign documents.

They rallied opposition to the Federalists and powerfully articulated the state's rights argument that would echo through American history.

So this incredibly chaotic decade, 1789 to 1800, it basically sets all the major themes for the next century, doesn't it?

It really does.

You see the foundations being laid, but also the cracks appearing almost immediately.

What really stands out to me, looking back, is how the first political battles weren't about whether to have a constitution, but about how to interpret it.

The fight started the moment it was implemented.

That's a key takeaway.

For you listening, remember these crucial developments from this decade.

Hamilton establishing financial credibility and asserting federal power.

Washington setting the course for foreign policy with neutrality.

And that deep, fundamental, ideological split between Federalists and Democratic Republicans over the balance between liberty and order, federal power, and states' rights.

The sources describe the ship of state as fragile, battered, almost immediately after launching.

It really underscores how precarious this whole experiment was.

It truly was.

So let's leave you with this final thought to chew on.

Considering the financial instability, the constant threat of war from Europe, and the intense internal political warfare culminating in things like the Alien and Sedition Acts,

what single event, policy, or development from this tumultuous 1790s decade do you think pose the single greatest threat to the survival of the young United States?

Something to consider.