CORNELL NOTES on a plantation in North Carolina in the 1790s, You hare Just hear

CORNELL NOTES
on a plantation in North Carolina in the 1790s, You hare Just heard that the federal government plans to pay most of the ustner states debts from the war Now your neighbors are our raged about this idea. It means more taxes and tarfits! New York and Massachusetts are far away, they say. Why should North Carolina farmers have to pay northern debts?
Would you pay other states’ war debts? Why.
BUILDING BACKGROUND Some of the new nation’s biggest problems were economic. The national and state governments had run up huge debts during the war. But the proposed solutions to these problems revealed differences in regional viewpoints. Southern planters and northern businesspeople had very different views of how the national economy should develop.
Settling the Debt
Alexander Hamilton seemed born with a head for economics. While still in his teens, he helped run a shipping company in his native British West Indies. Family friends then sent him to the American colonies for an education. Hamilton eventually married into a wealthy New York family and began practicing law. He served as Washington’s aide and as a delegate to four Continental Congresses.
National Debt
National Debt
As secretary of the treasury, Hamilton’s biggest challenge was pay ing off the national debt -money owed by the United States-from the Revolutionary War. The United States owed about $11.7 million to foreign countries and about $40.4 million 10 U.S. citizens. During the war the government raised money with bonds. Bonds are certificates of debt that carry a promise to buy back the bonds at a higher price. But the government could not afford to keep this promise. Bondholders who needed money sold
their bonds for less than the original value to speculators, or people who buy items at ow prices in the hope that the value will rise and they can sell the items for a profit.
Hamilton wanted to pay the foreign debt immediately and gradually repay the total value of all bonds. The second part of his plan caused disagreements because paying full value would allow speculators to make a profit. Hamilton thought this was fair. He said,
“He the speculator] paid what the commodity bond] was worth.
..and took the risks.”
Thomas Jefferson disagreed. He thought the idea cheated bondholders who had sold their bonds at low prices. Jefferson wrote,
“Immense sums were thus filched [stolen] from the poor and ignorant.” But more politicians agreed with Hamilton. In 1790 the government exchanged old bonds for new, more reliable ones that were guaranteed.
States’ Debts
The states owed $25 million for Revolution-dy War expenses. Hamilton wanted the federal government to pay for $21.5 mil-hon of this debt. Hamilton believed that this ation would help the federal government. He thought that paying the states debts would
help the national economy. Debtor states would not have to spend so much on epay-ment and would have money to develop business and trade. Increased business and trade would put more money back into the national economy.
The South, however, did not want to help the federal government pay the debts of other states. States such as Virginia and North Carolina did not have many war debts. They thought Hamilton’s idea was unfair. Patrick Henry said he did not believe that the Constitution gave Congress the power to pay state debts. Hamilton knew that he needed the help of southern representatives to get his plan approved.
Moving the Capital
Hamilton also knew that he had something to bargain with. Southern officials wanted to change the location of the nation’s capital. Many southerners thought that having the capital in New York gave the northern states too much influence over national policy. Hamilton, Jefferson, and James Madison, a congressman from Virginia,