A School History of the United States

by John Bach McMaster

CHAPTER XV

THE RISE OF PARTIES

%209. Organizing the New Government.%—he President having been inaugurated, and the new government fairly established, it became the duty of Congress to enact such laws as were needed immediately. The first act passed by Congress in 1789 was therefore a tariff act laying duties on goods, wares, and merchandise imported into the United States. Customhouses were then established and customs districts marked out, and ports of entry and ports of delivery designated; provision was made for the support of lighthouses and beacons; the Ordinance of 1787 for the government of the territories was slightly changed and reenacted; the departments of State, War, and Treasury were established; and a call was made on the Secretary of the Treasury to report a plan for payment of the old Continental debt.

%210. The United States Courts.%—The Constitution declares that the judicial power of the United States shall be vested in one Supreme Court and such inferior courts as the Congress may from time to time ordain and establish. Acting under this power, Congress made provision for a Supreme Court, consisting of a Chief Justice and five Associate Justices, and marked out the United States into circuits and districts. The circuits were three in number. In the first were the Eastern States; in the second, the Middle States; and in the third, the Southern States. To each were assigned two Justices of the Supreme Court, whose business it was to go to some city in each state in the circuit, and there, with the district judge of that state, hold a circuit court. The district courts were thirteen in number, one being established in each state.[1] Washington appointed John Jay the first Chief Justice of the Supreme Court.

[Footnote 1: For later changes, see Andrews's Manual of the
Constitution, p. 183.]

%211. The Secretaries.%—During the management of affairs by the Continental Congress three great executive departments had gradually grown up and been placed in charge of three men, called the "Superintendent of Finance," the "Secretary of the United States for the Department of Foreign Affairs," and the "Secretary of War." These the Constitution recognized in the expression "principal officer in each of the executive departments." Congress by law now continued the departments and placed them in charge of a Secretary of the Treasury, a Secretary of State, and a Secretary of War. Washington filled the offices promptly, making Alexander Hamilton Secretary of the Treasury, Thomas Jefferson Secretary of State, and General Henry Knox Secretary of War.

%212. The "Cabinet."%—It has long been the custom for the President to gather his secretaries about him on certain days in each week for the purpose of discussing public measures. To these gatherings has been given the name "Cabinet meetings," while the secretaries have come to be called "Cabinet officers." The Constitution, however, never intended to give the President a body of advisers. Indeed, a proposition to provide him with a council was voted down in the constitutional convention. But Washington at once began to consult the Chief Justice, the Vice President, his three secretaries, and the Attorney-general on matters of importance. At first he asked their opinions individually and in writing, but toward the end of his first term he convened a general meeting of the heads of departments, and by so doing set a custom out of which, in time, the "Cabinet" has grown.

%213. The Origin of the National Debt.%—As soon as Hamilton was made Secretary of the Treasury, it became his duty, in accordance with an order from Congress, to prepare a plan for the payment of the debts contracted by the Continental Congress. When that body was unexpectedly called on, in May, 1775, to conduct the war, it had nothing with which to pay expenses, and was forced to use all sorts of means to raise money.

[Illustrations: Continental money]

%214. Paper Money.%—The first resort was the issue, during 1775 and 1776, of six batches of Continental "bills of credit," amounting in all to $36,000,000. These "bills" were rudely engraved bits of paper, stating on their face that "This bill entitles the bearer to receive —— Spanish milled dollars, or the value thereof in gold or silver." They were issued in sums of various denominations, from one sixth of a dollar up, and were to be redeemed by the states. The amount assigned each state for redemption was in proportion to the supposed number of its inhabitants.

%215. Loan-office Certificates.%—In 1776 Congress tried another means. It opened a loan office in each state and called on patriotic people to come forward and loan it money, receiving in return pieces of paper called "loan-office certificates." Interest was to be paid on these; but after a while Congress, having no money with which to pay interest, was forced to resort to another form of paper, called "interest indents."

%216. The Congress Lottery.%—The loan office having failed to bring in as much money as was needed, Congress, toward the close of 1776, was driven to seek some other way, and resorted to a lottery. A certain number of tickets were sold, after which a drawing took place, and all who drew prizes were given certificates payable at the end of five years.

%217. More Bills of Credit.%—But the sale of tickets went off so slowly that Congress had to go back to the issue of bills of credit. In 1777, therefore, the printing press was again put to work, and issues were made in rapid succession, till more than $200,000,000 in Continental paper were in circulation.

%218. The "New Tenor".%—Then the Continental bills ceased to circulate, and in March, 1780, Congress called in the old money and offered to exchange it for a new issue, giving one dollar of the new paper money, or "new tenor," for forty dollars of the old. But the attempt to restore credit by such means was a failure, and by the end of the year 1781 all paper money ceased to circulate.

%219. Certificates.%—Long before this time officials had been forced to pay debts contracted in the name of Congress with other kinds of paper, called certificates, and known as treasury, commissary, quartermaster, marine, and hospital certificates, according to the department issuing them. To these must be added the "final settlements," or certificates given to the soldiers at the end of the war in payment of their services.

%220. Foreign Debt.%—Besides the debt thus contracted at home, Congress had borrowed a great sum in Europe.

%221. The National Debt in 1790.%—Thus the debt contracted by the Continental Congress consisted of two parts. 1. The foreign debt, due to France, Holland, and Spain, and amounting, Hamilton found, to $11,700,000. 2. The domestic or home debt, of $42,000,000. But the states had also fallen into debt because of their exertions in the war. Just how great the state debts were could not be determined, but they were estimated to be $21,500,000.

%222. Assumption and Funding.%—For the redemption of this debt Hamilton prepared two measures,—the funding, or, as we should say, the bonding, of the foreign and Continental debt, and the assuming and funding of the state debts. This was done, and Congress ordered stock bearing interest to be issued in exchange for the old debts, and so established our national debt, which in 1790 amounted to $75,000,000.

%223. The National Capital.%—Funding the state debts was strongly opposed by many congressmen, and was not carried till a bargain was made by which it was agreed that if enough members from Virginia and Pennsylvania would support the measure to secure its passage through the House of Representatives, the national government should be removed from New York to Philadelphia for ten years, and after that to a city to be built on the Potomac. This was faithfully carried out, and in the summer of 1790 the government offices were removed to Philadelphia, where they remained till the summer of 1800, when they were removed to Washington in the District of Columbia.

%224. The Bank of the United States.%—The troublesome questions of funding and assumption thus disposed of, Congress called on Hamilton for a report on the further support of public credit, and when it met in the session of 1790-91, received a plan for a great National Bank, with a capital of $10,000,000. The United States was to raise $2,000,000; the rest was to be subscribed for by the people. The bank was to keep the public revenues, was to aid the government in making payments all over the country. To do this, power was given to the parent bank (which must be at Philadelphia) to establish branches in the chief cities and towns, and to issue bank bills which should be received all over the United States for public lands, taxes, duties, postage, and in payment of any debt due the government. Great opposition was made; but the charter was granted for twenty years, and in 1791 the Bank of the United States began business.

The effect of these two measures, funding the debt and establishing a bank, was immediate. Confidence and credit were restored. Money that the people had long been hiding away was brought out and invested in all sorts of new enterprises, such as banks, canal companies, manufacturing companies, and turnpike companies.

[Illustration: The first Bank of the United States]

%225. "Federalists" and "Republicans."%—When the Constitution was before the people for acceptance or rejection in 1788, they were divided into two bodies. Those who wanted a strong and vigorous federal government, who wanted Congress to have plenty of power to regulate trade, pay the debts of the country, and raise revenue, supported the Constitution just as it was and were called "Federalists."

Others, who wanted the old Articles of Confederation preserved and amended so as to give Congress a revenue and only a little more power, opposed the Constitution and wanted it altered. To please these "Anti-Federalists," as they were a large part of the people, Congress, in 1789, drew up twelve amendments to the Constitution and sent them to the states.

With the ratification of ten of these amendments, opposition to the Constitution ceased. But as soon as Congress began to pass laws, difference of opinion as to the expediency of them, and even as to the right of Congress to pass them, divided the people again into two parties, and sent a good many Federalists into the Anti-Federalist party.

A very large number of men, for instance, opposed the funding of the Continental Congress debt at its face value, because the people never had taken a bill at the value expressed on its face, but at a very much less value; some opposed the assumption of the state debts, because Congress, they said, had power to pay the debt of the United States, but not state debts; others opposed the National Bank because the Constitution did not give Congress express power in so many words to charter a bank. Others complained that the interest on the national debt and the great salary of the President ($25,000 a year) and the pay of Congressmen ($6 a day) and the hundreds of tax collectors made taxes too heavy. They complained again that men in office showed an undemocratic fondness for aristocratic customs. The President, they said, was too exclusive, and owned too fine a coach. The Justices of the Supreme Court must have black silk gowns, with red, white, and blue scarfs. The Senate for some years to come held its daily session in secret; not even a newspaper reporter was allowed to be present.

As early as 1792 there were thus a very great number of men in all parts of the country who were much opposed to the measures of Congress and the President, and who accused the Federalists of wishing to set up a monarchy. A great national debt, they said, a funding system, a national bank, and heavy internal taxes are all monarchical institutions, and if you have the institutions, it will not be long before you have the monarchy. They began therefore in 1792 to organize for election purposes, and as they were opposed to a monarchy, they called themselves "Republicans." [1] Their great leaders were Jefferson, Madison, Monroe, John Randolph, and Albert Gallatin.

[Footnote 1: This party was the forerunner of the present Democratic party.]

%226. The Whisky Rebellion, 1794.%—One of the taxes to which the Republicans objected, that on whisky, led to the first rebellion against the government of the United States. In those days, 1791, the farmers living in the region around Pittsburg could not send grain or flour down the Ohio and the Mississippi, because Spain had shut the Mississippi to navigation by Americans. They could not send their flour over the mountains to Philadelphia or Baltimore, because it cost more to haul it there than it would sell for. Instead, therefore, of making flour, they grew rye and made whisky on their own farms. This found a ready sale. Now, when the United States collectors attempted to collect the whisky tax, the farmers of western Pennsylvania drove them away. An appeal was then made to the courts; but when the marshal came to make arrests he, too, was driven away. Under the Articles of Confederation this would have been submitted to. But the Constitution and the acts of Congress were now "the supreme law of the land," and Washington in his oath of office had sworn to see them executed. To accomplish this, he used the power given him by an act of Congress, and called out 12,900 militia from the neighboring states and marched them to Pittsburg. Then the people yielded. Two of the leaders were tried and convicted of treason; but Washington pardoned them.

The insurrection or rebellion was a small affair. But the principles at stake were great. It was now shown that the Constitution and the laws must be obeyed; that it was treason to resist them by force, and that if necessary the people would, at the call of the President, turn out and put down rebellion by force of arms.[1]

[Footnote 1: Read McMaster's History of the People of the United States, Vol. II., pp. 189-204; Findley's History of the Insurrection in Pennsylvania.]