The Impact of The Articles of Confederation on American Politics

The creation of The Articles of Confederation was a result of a new central government formation after the American Revolution. The Articles were considered to be weak, especially in the areas of financing. Alexander Hamilton, the first Secretary of Treasury appointed by President George Washington, proposed a plan that he believed would help put U.S. finances on a track for stability. His plan to lower national debt and strengthen the national credit was due to the belief that 'a national debt was a national blessing'. Believing in states' rights and a strict interpretation of the constitution, Thomas Jefferson and other Anti-Federalists opposed his plans. These conflicting ideas are what led to the split of two very different political parties. Unpaid war debts and worthless paper money, issued by individual states and Congress, caused more financial problems in America. Hamilton created the Assumption Plan, which would first pay off the national debt and then assume the debt of the states. By creating a national bank for depositing government funds and printing bank notes, there would be a result of a stable circulation of money that had actual value and worth. For Hamilton's plan to be effective, he had to tie the wealthy to the government so that they would believe in his system.

The upper class would become more likely to support the program if they thought they would benefit from it. His plan to shape fiscal policies in favor wealthier groups resulted in most of the support for the program coming from northern merchants, who would gain directly from it. As a result of lending the government monetary and political support, it was believed that the upper classes would grow, and prosperity would trickle-down to the lower social classes. But this plan would be believed to give the federal government too much power, causing Jefferson and his supporters to oppose.

As a result, Hamilton agreed to establish the nation's capital in the South along the Potomac River. Jefferson, along with his supporters, agreed knowing a small victory had been won. By having the capital established in the South, it would benefit the South more than the North. Alexander Hamilton believed debt was an asset and a national debt would tie the states together. He urged Congress to fund the entire national debt and assume all state debts. The idea was that after the federal government assumed all state debts, they would feel indebted to the federal government, which would strengthen the central government. And being the Federalist that he was, he wanted a strong central government. States in lots of debt, favored this idea, while the states with little debt, did not. The national assumption of state debts program was carried through in 1790.

Despite the fact that the national debt had risen to 75 million dollars, the 'Father of National Debt,' was not worried. In an attempt to pay off this debt, while still protecting infant industries, Hamilton established an 8% tariff on imports. The establishment of a national bank was one of the most significant turning points in Hamilton's economic program. The First Bank of the United States was created in 1791. The bank was chartered for a term of twenty years and was to have a capital of 10 million dollars, one-fifth of such would be owned by the federal government. Additionally, the stock would be available for public sale. Even though Jefferson originally opposed the bank, he kept it when he became president, showing how necessary the bank actually was.

Although the conflicting problems of the Articles of Confederation had separated the two political parties, the issues of the national bank and tariffs further split them apart. Alexander Hamilton proved to have, for the time being, a successful economical program. He established the first financial system in America. It gave the federal government much needed power and set a precedent for the future, however, it would be greatly changed in the years to follow.