Chapter Nine, Section One Outline
Chapter Nine, Section One
Launching the New Government

• The New Government
o George Washington
 Inaugurated in NYC on April 30, 1789
• Ceremony at which the President officially takes the oath of office.
 Americans were looking at him to make their new government.
o Constitution did no explain how the President should govern from day to day.
 George Washington – “There is scarcely any part of my conduct which may not hereafter be drawn into precedent.”
• Precedent – an act or decision that sets an example for others to follow.
o 1796 – Washington decided not to run for a third term.
o The first Cabinet
 President needed talented people to help him carry out his duties.
 1789 – 1st Congress created five executive departments.
• Departments of:
o State
o Treasury
o War
• Offices of:
o The Attorney General
o The Postmaster General
• Heads of these departments made up the President’s Cabinet.
o Gave advice and directed their departments.
 Washington choose well-known leaders to serve in his Cabinet
• Secretary of State – Thomas Jefferson
• Secretary of the Treasury – Alexander Hamilton
o The federal court system
 Congress had to organize the federal court system.
• 1789 – Judiciary Act
o Called for the Supreme Court to have one Chief Justice and five Associate Justices.
 Today there are 8 Associate Judges.
 John Jay – 1st Chief Justice of the United States
o Set up a system of district courts and circuit courts across the nation.
 Decisions made here could be appealed to the Supreme Court.
• Battling the National Debt
o Alexander Hamilton wanted to create a strong economy.
 Large national debt.
• National Debt – Total sum of money a government owes to others.
• During Revolution, money was borrowed from foreign countries to pay for soldiers and supplies.
• Governments borrowed money by issuing bonds.
o Bond – a certificate which promises to repay the money loaned plus interest on a certain date.
• 1789 – Most southern states had paid off their debts, but other states and the federal government had not.
• Who would lend money to the U.S. in the future if the country did not pay its old debt?
• Hamilton’s Plan
o 2 parts:
 Buy up all the bonds issued by the national and state governments before 1789.
• Planned to sell new bonds to pay off those old debts.
o When the economy improved, the government would be able to pay off the new bonds.
 Wanted the national government to pay off debts owed by the states.
o Madison leads the opposition
 Argued the plan was unfair because it would reward speculators.
• Speculator – someone willing to invest in a risky venture in the hope of making a large profit.
• Bondholders sold bonds to speculators, who paid only 10 or 15 cents for bonds that had an original value of one dollar.
• If government paid bonds back at their original values, speculators stood to make a fortune.
• Hamilton argued the U.S. had to repay its bonds in full in order to gain the trust and help of investors.
o Crucial for building the new nation’s economy.
• Hamilton convinced Congress to accept his plan of repaying the national debt.
 Madison also argued that since all southern states had paid their debt in full, the other states should do the same.
o Hamilton’s compromise
 Offered to persuade his northern friends to vote for a capital in the South if southerners supported the repayment of state debts.
 July 1790 – Congress passed bills taking over state debts and providing for a new capital city.
 Capital would not be part of any state.
• Built on land along the Potomac River between Virginia and Maryland
• Known as the District of Columbia (Washington, D.C.)
• Until the new capital was ready, the nation’s capital was moved from NYC to Philadelphia .
• Building Up the Economy
o A national bank
 1791 – Bank of the United States was created by Congress
• Money collected from taxes was deposited here.
• In turn, the Bank issued paper money.
o Used to make loans to farmers and businesses.
• Encouraged the growth of the economy.
• Paper money also used to pay government bills.
o Pay employees, build the new capital, and keep up the army and navy.
o Protecting American industry
 Proposed that Congress pass a tariff, or tax, on all foreign goods brought into the country.
• Hamilton called for a very high tariff.
o Imported goods would be higher than those made in America.
• Protective tariff – meant to protect American industry from foreign competition.
 Many in the North supported the tariff, but Southerners, who bought more imported goods, did not.
 Congress passed the tariff bill, but with the purpose to raise money for operating the government.
• Lower than the protective tariff that Hamilton supported.
• The Whiskey Rebellion
o Bill was passed the taxed all liquor made and sold in the U.S.
 Hamilton wanted the tax to help raise money for the Treasury.
o The hated tax
 Farmers in the backcountry grew corn.
• Bulky to haul over rough backcountry roads, so they converted it into whiskey.
o Could easily ship in barrels to markets in the East.
• Protested the tax and many refused to pay it.
 1794 – Officials in western PA tried to collect the tax.
• Farmers rebelled and soon thousands were marching through Pittsburg.
o A show of strength
 Washington sent the militia to PA.
• Rebels scattered when they heard 15,000 troops were marching against them.
 Whiskey Rebellion – critical test of the strength of the new government.
• Showed violence would not be tolerated.
• Proved to Americans that their new government would act firmly in times of crisis.