Hamilton's Program Against Jefferson's

Hamilton, as Treasury Secretary, built a four-part program to make the new federal government financially strong and tied to the interests of wealthy creditors and merchants. First, he wanted the federal government to pay off its debts at full value, rewarding bondholders and proving the new nation was creditworthy. Second, he wanted the federal government to assume, or take over, the states' remaining Revolutionary War debts, binding states to the national government through shared financial interest. Third, he proposed a national bank to manage federal money, issue currency, and extend credit. Fourth, he wanted tariffs on imports to protect growing American manufacturing.

Jefferson and his allies saw something different: a government growing too powerful, favoring speculators and cities over the farmers Jefferson believed were the backbone of republican virtue. He wanted a limited federal government, an economy built on independent agriculture, and deep suspicion of concentrated financial power. Assumption of state debts became the first major bargain: southern states, many of which had already paid down their debts, got the new national capital placed on the Potomac River in exchange for supporting assumption.

The bank fight went deeper, into how the Constitution itself should be read. Hamilton argued for loose construction: the necessary and proper clause let Congress use any reasonable means to carry out its named powers, even unstated ones like chartering a bank. Jefferson argued for strict construction: federal power should stay close to the document's explicit words. Both men agreed on what the text said. They disagreed on how far implied power could stretch beyond it, and that disagreement hardened into the Federalist and Democratic-Republican parties.