Question

Why did the Federalists support Hamilton's 3 Financial Plan and the Democratic-Republicans oppose to it?

Answer 1

Hamilton's financial plan consisted of three things. The first was the central government's assumption of the state's war debts to increase national unity and the legitimacy of the government. The second was the creation of Bank of the United States to ensure a more stable, common currency for the new nation. The third was to create a protectionist policy that included the central government subsidizing local manufacturers and enacting heavy tariffs on imports in order to stimulate American industry.

For the national government to be effective, Hamilton deemed it essential to have the support of those to whom it owed money: the wealthy, domestic creditor class as well as foreign creditors. Hamilton especially wanted wealthy American creditors who held large amounts of paper money to be invested, literally, in the future and welfare of the new national government. He also understood the importance of making the new United States financially stable for creditors abroad. To pay these debts, Hamilton proposed that the federal government sell bonds—federal interest-bearing notes—to the public. These bonds would have the backing of the government and yield interest payments. Creditors could exchange their old notes for the new government bonds.

Hamilton designed his “Report on Public Credit” (later called “First Report on Public Credit”) to ensure the survival of the new and shaky American republic. He knew the importance of making the United States financially reliable, secure, and strong, and his plan provided a blueprint to achieve that goal. He argued that his plan would satisfy creditors, citing the goal of “doing justice to the creditors of the nation.” At the same time, the plan would work “to promote the increasing respectability of the American name; to answer the calls for justice; to restore landed property to its due value; to furnish new resources both to agriculture and commerce; to cement more closely the union of the states; to add to their security against foreign attack; to establish public order on the basis of upright and liberal policy.”

Hamilton’s program ignited a heated debate in Congress. A great many of both Confederation and state notes had found their way into the hands of speculators, who had bought them from hard-pressed veterans in the 1780s and paid a fraction of their face value in anticipation of redeeming them at full value at a later date. Because these speculators held so many notes, many in Congress objected that Hamilton’s plan would benefit them at the expense of the original note-holders. One of those who opposed Hamilton’s 1790 report was James Madison, who questioned the fairness of a plan that seemed to cheat poor soldiers.

Not surprisingly, states with a large debt, like South Carolina, supported Hamilton’s plan, while states with less debt, like North Carolina, did not.

So thats how and why federalists supported Hamilton'3 Financial Plan.

Democratic - Republicans opposed Hamilton's plan for the federal government to pay the domestic and state debts. They thought it was unfair to Southern farmers who had been forced to sell their bonds to Northern speculators during hard economic times. They also thought it was unfair for states who had paid their war debts to be taxed by the federal government to help states who had not yet paid their debts. Most importantly, They opposed Hamilton's proposal for a national bank because they believed that the national government was allowed to do only those things that were explicitly stated in the Constitution. They believed that going beyond a strict interpretation of the document would allow the national government to expand so that it threatened the liberty of individuals and the states.