One of the biggest problems when facing a new government is the economic problems. Because of the revolution, the federal government had acquired a huge debt of $54 million, including interest, not to mention that the states owed another $25 million. The United States was in need of a new financial program to get them back on sound economic footing.
Alexander Hamilton was assigned the task of coming up with a plan to some how resolve these huge debts. As Treasury Secretary, Hamilton designed a financial system that made the United States the best credit risk in the western world. Other countries were more then willing to let the United States borrow money. Hamilton proposed that the government assume the entire debt of the federal government and the states. Many people were very skeptical of this plan, but he went through with it. His plan was to retire the old depreciated obligations by borrowing new money at a lower interest rate.
Some States such as Maryland, Pennsylvania, North Carolina, and Virginia, which had already paid off all their debts, saw no reason why they should be taxed by the federal government to pay off the debts of other states like Massachusetts and South Carolina. For six months, a bitter debate raged in Congress, until James Madison and Thomas Jefferson engineered a compromise. In exchange for southern votes, Hamilton promised to support locating the national capital on the banks of the Potomac River, the border between two southern states, Virginia and Maryland.
Hamilton’s debt program was a huge success. By demonstrating Americans’ willingness to repay their debts, he made the United States attractive to foreign investors. European investment capital poured into the United States in large amounts. The next problem that Hamilton had to face was making a National Bank. He wanted to model it after the bank of England. The national bank would collect taxes, hold government funds, and make loans to the gove…

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