Chapter 4: Doubts and Disunity
In retrospect, knowing that the Republicans triumphed over the Federalists in the end, it might seem ludicrously unrealistic for the Federalists to have embarked on the Hamiltonian project in the first place. Should they not have known that what they were proposing would be unacceptable to large sections of the public, and would cause some political leaders who had been Federalists to form an opposition party? Was there not something inevitable about the eclipse of Federalism by Republicanism?
There may well have been, perhaps even without the Hamiltonian version of the Federalist project. The Federalists’ honest and often repeated statements that they expected the American people to be enterprising and industrious, when combined with letting capable politicians have a relatively free rein to manage national politics, were not well calculated to endear themselves to public opinion in a country becoming ever more democratically minded, let alone in which the political press was also enterprising and industrious. But most Federalists thought Americans had learned useful lessons during the political and economic crises that had led to the new Constitution, and that they were therefore now able to accept sage advice about their limited political capacities. And to some extent, they were right about that, so this element of Federalist politics on its own might have endured, even though it would probably have prevented Federalism from ever becoming as deeply rooted in America as the more purely democratic Jeffersonian persuasion would become. If Federalism had offended only with its political elitism rather than also with its moral, social and economic project, the partisan conflict of the 1790s might well not have occurred, or at least might not have been so deep and bitter that it produced the beginnings of party government.
However, when this confident but perhaps imprudent honesty of Federalist political science about the limits of popular virtue was coupled with Hamilton’s specific financial and industrial plans, it raised the possibility—which the Republicans vigorously pursued—of grave doubts about the Federalists’ fundamental commitment to republican government. The “Republicans” chose their name because they thought that Hamilton’s program amounted to an attempt to transform the peaceful and quietly prospering, basically agrarian American republic into a society and even eventually a government on the English models. Republicans believed that this was a social, economic and political model that most Americans had always rightly distrusted, and from which they had recently cut their ties, freeing them to continue on their own more republican and less corrupting path of political development. It seemed to Republicans that under Hamilton’s influence, Federalists, if not trying to reverse the American Revolution, were certainly trying to reproduce in America a courtly English style of economics and politics.
This was the constant major theme of Republican objections to Federalism, from the electoral campaigns of 1792 right through to those of 1800. Other issues—mainly those connected with foreign policy—were introduced, but this theme persisted throughout the symphony, and the foreign policy disputes related to it. To see the persistence of this theme, we can glance ahead to January 1799, when Thomas Jefferson, in a letter to Elbridge Gerry of Massachusetts, stated “a profession of my political faith.” Copies of this letter were so widely circulated among Republicans that—in an age when gentlemen did not publicly campaign for election—it served as the Republican platform in the campaign for the presidency in 1799-1800. Jefferson’s brief “profession of faith” naturally touched on more recently introduced themes (foreign alliances, the military establishment, and freedom of the press), but most of the issues that he took positions on were present at the creation of the party conflict in 1791 and 1792. And these primary issues all related to the charge that the Federalists were treating the public debt as a “public blessing” and were therefore using every excuse to increase it. Not only were Federalists intent on “monarchizing” the way the Constitution worked, with a view to transforming the presidency and Senate first into offices for life and then into hereditary offices. They were also using Hamilton’s overcomplicated financial schemes to turn elected legislators into pro-government “partisans.” This kind of executive patronage was a device that the British government had long used in order to maintain and to control (technically, to “corrupt”) its majority in Parliament. It was un-republican, and Republicans, led by Jefferson, thought it should remain un-American.
Once this accusation that the government was committing itself to anti-republican policies had been made not just by the defeated Anti-federalists (they would say that, wouldn’t they?) but by several leading politicians who had been and remained friends of the Constitution, were not the Federalists’ days in power clearly numbered?
But if we are to have the advantages of hindsight, we must beware of its distortions. To the participants at the time, there was no certainty about the Revolution of 1800. No one knew that the Republicans would defeat the Federalists, and no one knew that the transition from Federalist to Republican control would be peaceful.
Moreover, even if retrospectively we judge that Americans’ rejection of Federalist economics and politics was in some sense inevitable or at least very likely, we have to ask why the Federalist demise took so long. Why did it take eight years for the Federalists to be defeated? Why were they able to hang on so long? Mentioning the name “George Washington” is one good answer to this question, but it is an answer that raises another question: why were the Republicans unable to persuade Washington that he was harboring in his administration such un-republican intentions and policies? And that question should then be extended: why did it take the Republicans so long to persuade large sections of the public that something was amiss? They were sincere in their accusations, but it took a long time for them to persuade other Federalists that they (however unknowingly) had abandoned republicanism by countenancing the Hamiltonian project.
The eventual victory of the Republicans owed much to the superior appeal of their principles. There were other reasons for the eventual Republican triumph. Powerful interests supported the Republican party, and benefited from its progress. But powerful principles were also at work, and the superior rhetorical appeal of the Republicans has to be an important part of any adequate explanation of their electoral success. However, we shall see that the political events of the 1790s often hindered the Republican persuasion. Principled partisan revolutions do not make themselves. They require opportunities, and exploitation of these opportunities by skillful party leaders. And in the first place, they require that making partisan appeals to voters be a publicly respectable activity. As in many later instances in other new democracies, this respectability had to be established before the electoral revolution could occur.
In 1789 and 1790, there was a dog that failed to bark: principled partisanship failed to be initiated by leading politicians, even though the circumstances seemed to be calling out for it. There were several questions on which members of the first congress sharply disagreed. There was a lack of political unity on some important questions of foreign and domestic policy, and a decline of congressional comity. The intensity and the persistence of these disagreements disappointed some participants and observers, who had confidently believed that serious disagreements among federal legislators would be less frequent and more easily settled, and who deplored the signs that these legislators were sometimes acting too exclusively in the interests of their own constituents, to the neglect of the common good of the whole country. However, these disagreements did not yet lead to grand partisan divisions either within congress or in the country at large. They did not yet lead to the establishment of parties of principle. There were some principles involved in the disagreements, but Federalists in congress were not accusing anyone of pursuing an un-republican policy with regard to these issues. The disagreements did reflect the activity of various petty “parties” (or “factions”) based on local economic interests, the kind of parties that Federalists had hoped would be kept at a greater distance from national politics. This was what some found so disappointing. But elected officials’ loyalty to the principle of republican government was not yet a serious issue.
Foreign commercial policy. The first serious policy conflict arose in the new congress in April 1789, when in the House of Representatives James Madison proposed that duties on imports, one of the regular sources of revenue for the United States government, should now include a tonnage tax on ships, with low rates for American ships, higher rates for ships from countries with which America had commercial treaties, and very high rates for all other ships. This discrimination was designed by Madison as a means of striking against Britain, in favor of France. Britain had no commercial treaty but much trade with America. France had a treaty but very little trade. Madison’s proposal was intended as a way of breaking the British monopoly on trade with America, by encouraging America to be less commercially dependent on Britain. It was approved by the House of Representatives, but not by the Senate. In 1790 he made a similar proposal, which failed even to get through the House.
Since the end of the war between America and Britain, Britain’s policy had been to avoid agreeing to mutual commercial concessions with America. Such an agreement was not necessary since trade with America would flourish anyway, and letting American shipping trade with the British West Indies would hurt Britain’s commercial and military interests. Madison and others, including Secretary of State Thomas Jefferson, bristled at the fact that political independence from Britain was in danger of being undermined by renewed economic dependence—and, adding injury to insult, a dependence in which Americans were no longer even to enjoy the trade advantages that had come with being part of the British Empire. They were convinced that America should and could develop trade with France and thereby wean itself from commercial dependence on Britain, though in fact there was little evidence for the possibility of much growth in Franco-American trade. They argued—again probably mistakenly—that the British government would not dare to retaliate against Madison’s proposed tonnage tax discrimination, and that in any case if there were a trade war between the two countries the United States would be in a better position to survive it, because of the possibility of a growing trade with France.
Madison’s proposals failed to be approved because American merchants and ship owners, who in the mid-1780s had shared Madison’s resentment against Britain’s highhanded commercial treatment, were by 1789 prospering again even without a formal commercial agreement with Britain, and because very few if any of them thought trade with France could ever be a viable alternative to the very large trade with Britain. Much as Americans wanted to reassert their national dignity and their independence from Britain, their material interests remained stubbornly bound up with that nation. Like other post-colonial new nations, Americans faced the problem of conflict between their new political and moral independence and their continuing economic dependence on (or, at best, interdependence with) their “mother country.”
Although Hamilton had previously expressed support for commercial retaliation against British restrictions on American trade, he now viewed Madison’s proposals with alarm. He saw any deterioration of relations between Britain and America as a threat to the government’s revenues, which depended very much on the tariff on imports, most of which came from Britain. His financial and industrial project presupposed stability and then growth in government revenues, to fund the national debt. British capital investments in America would also be threatened by any further disruption in relations between the two countries. So while Madison and Jefferson were intent on initiating a commercial confrontation with Britain, Hamiltonian Federalists were becoming increasingly anxious to maintain existing relations with Britain and to try to settle various outstanding political and commercial conflicts by negotiation. During the years between 1783 and 1788, not only Hamilton but the bulk of the American mercantile community had been on Madison’s side, in favor of a confrontation with Britain. But their support for commercial retaliation was never based on the deep Anglophobia that motivated many southerners (including Madison and Jefferson), and by 1789 American merchants and shipbuilders were becoming much less interested in a trade war with Britain. They knew that, in spite of British legal restrictions, profitable trade had revived, even with the West Indies, where local interests bent and broke the British commercial laws whenever that was necessary for this trading to flourish.
Attitudes and policies towards Britain and France were to play a very large role in American party politics later in the 1790s (and beyond), but these disagreements in 1789 and 1790 were not yet connected by Madison and Jefferson to any great party conflict. However, they demonstrated the existence of a deep well of potentially very passionate antagonism between Hamilton on the one hand and Madison and Jefferson on the other, on the relationship between the United States and Britain. When the party conflict broke out in 1792, it would soon add this passionate disagreement to the more purely domestic issues that were the primary cause of partisanship. For Hamilton, domestic (financial and industrial) policy was already of a piece with foreign policy (non-confrontation and non-disruption with Britain, and no unrealistic hopes about the French alliance left over from the Revolution). Madison, Jefferson and other future Republican leaders did not yet see foreign and domestic policy as quite so interwoven. They did not realize how interdependent Hamilton thought his domestic policy was with foreign policy, so they did not yet connect their doubts about his domestic policy with his new tilt towards Britain.
Funding the national debt. No democracy is ever entirely new. Even if the old order, and the “mother country” (if any), are vigorously opposed by everyone, this very opposition will have an impact on the new order. More commonly, there will be some traditions of the old order that continue to appeal very strongly even to the most enthusiastic proponents of the new. There will be cultural debts to the old order. There will also be financial debts carried over from the previous government. Every new political order has to decide whether and how to honour its financial as well as its cultural inheritance.
The new American government of 1789 inherited many cultural and economic ties from its British past. It also inherited the debts that the government under the first constitution (the Articles of Confederation) had incurred during the war against Britain. There was widespread agreement in the first sessions of congress that adequate provision must be made to repay these war debts, both for reasons of justice to existing creditors, and to underwrite the country’s future creditworthiness. There was some disagreement on the amount that the government should now undertake to repay (the nominal value of the certificates, or the significantly lower current market values?), and on what rate of interest the debt holders should be paid, but it was generally agreed that these issues should be settled in a way that ensured that the government was trusted both nationally and internationally.
But the more unsettling question then arose, who should benefit? Everyone agreed that the foreign lenders must be paid fully. But in the case of domestic creditors there was more room for dispute. Some Federalists, including James Madison, proposed that, out of fairness, the government should undertake to repay not just current holders of the certificates—who in many cases had bought them at large discounts from the original holders, as speculative investments—but also, in some proportion, these original holders. After all, these original holders were the ones who had given money or military service or supplies to the revolutionary war effort, and therefore should not be overlooked now that the nation was at last going to honor its financial obligations. Were war veterans or widows not more deserving than rich speculators? Madison put this case at its strongest in a letter to a fellow Virginian who had questioned his position: “ there must be something wrong, radically and morally and politically wrong, in a system which transfers the reward from those who paid the most valuable of all considerations, to those who scarcely paid any consideration at all.” To the House of Representatives he proposed that the current holders be owed the highest market price, but that the balance between that and the nominal value be owed to the original holders.
Madison’s proposal was defeated by a large margin. Opponents argued that Madison’s scheme was too complicated and expensive; and that it risked actually undermining the government’s credit by creating further delay, confusion, and uncertainty. True, speculators would benefit, but that was a matter of honoring contracts. And Hamilton’s funding proposal, in anticipating and arguing against any scheme like Madison’s, had pointed out that this breach of contract would also impair the capacity of the debt certificates to serve as money, and therefore as investment capital.
In proposing the discrimination between original and subsequent holders of the debt, as in his proposal for commercial retaliation against Britain, Madison was again opposing his previous collaborator, Alexander Hamilton. First it had been for the sake of America’s dignity in its dealings with Britain, now it was for the sake of an equitable treatment of its domestic creditors. In both cases Madison’s position was based on firm moral convictions. In the second case Madison’s distaste for financial speculation and speculators was one of his motives. However, in neither case did Madison yet connect these moral views to the accusation that Hamilton’s project was anti-republican. Nevertheless, Madison’s disagreements with Hamilton were clearly beginning to amount to more than a friendly debate between two politicians who had their differences but were still singing from the same hymn sheet.
Federalizing the states’ debts. Hamilton’s and Madison’s disagreement was intensified by Hamilton’s proposal that all of the outstanding war debts of the individual states should be taken over (“assumed”) by the federal government. This was a way of reinforcing the Federalist shift of American political activity and loyalty towards the federal level. Madison was not opposing that shift, but he was deeply concerned that the interests of Virginia (the state he was now representing in congress) would be adversely affected by the federal assumption of all the states’ war debts. By the summer of 1790 this complicated dispute (see Appendix I for a more detailed discussion of it) had reached a stage where Madison and other opponents of assumption had narrowly defeated Hamilton’s proposal, but not even Madison was happy about this outcome, because he appreciated the proponents’ position and interests.
What got Hamilton’s desired assumption program through congress in the end was a political deal—the compromise of 1790, as it came to be called. This was famously described by Thomas Jefferson as having been arranged one balmy evening over his dinner table, where doubtless he plied the temporarily disappointed and desperate Hamilton and the temporarily triumphant but uneasy and always very pro-union Madison with some of his excellent French wine, and (as he recorded) “encouraged them to consider the thing together.” The result was an agreement that Madison, for the sake of “concord among the states,” would allow assumption to be approved, and that, in return, southerners would be soothed at this bitter pill by a firm commitment that the country’s capital city would by 1800 be permanently located on a site near Georgetown on the Potomac, and by a calculation of Virginia’s debits and credits in such a way that the state did not risk any loss by the federal assumption of the states’ debts. Jefferson was then well able to soothe Virginian correspondents unhappy about assumption by saying: “I think it is necessary to give as well as to take in a government like ours.”
These questions of the location of the capital and the assumption of the states’ debts had disturbed congressional waters for some months. However, these disturbances came not from differences of principle, but from complex estimates of the conflicting but compromisable interests of the various parties to the debates. Fisher Ames, a congressman from Massachusetts, described the debates about the location of the capital as a “despicable grog-shop contest, whether the taverns of New York or Philadelphia shall get the custom of Congress.” He deplored this low politicking: “the world ought to despise our public conduct, when it hears intrigue openly avowed, and sees that great measures are made to depend, not on reasons, but upon bargains for little ones.”
Anti-federalist concerns. This disappointing preoccupation with managing petty interests was a decline from the high-toned deliberations that Federalists had expected to take place. Federalists had counted on congress being more insulated from constituents’ selfish interests. Yet this decline, though disappointing, was not extremely disappointing—at least, not among the friends of the Constitution. On the other hand, at various points during 1789 and 1790, Anti-federalists, the defeated enemies of the Constitution, had denounced the federal government’s initiatives, in much more desperate, apocalyptic terms than any Federalist was using. Anti-federalists thought the funding and assumption legislation was modeled on detested and detestable English precedents. In December 1790, Anti-federalist politicians, led by the famous patriot Patrick Henry, pushed through the Virginia legislature a set of resolutions to be sent to congress, expressing strong opposition to the debt legislation, claiming it was unjust, unconstitutional, and contrary to republican policy. In England, a large funded debt had “insinuated into the hands of the Executive an unbounded influence,” threatening the destruction of English liberty. Was not the very same scenario now being set up in the United States? These Anti-federalist diehards were here speaking the language of British “opposition” or “country” ideology, which in England had for some decades been voicing apocalyptic doubts about the direction of English politics, in the rather impotent way of a marginalized opposition with no chance of getting power. This language had served its purposes in the American Revolution. Then even Alexander Hamilton had deployed it (as a brilliant nineteenyear old student at King’s College, now Columbia University) in a pamphleteering defense of the colonists’ resistance to Britain, where he talked of the colonists’ being taxed to support British “ministerial tools and court sycophants.” But country ideology was of course inappropriate in a country where there was no court to oppose, was it not?
Just as politicians from states desperate for federal assumption of the war debts had talked of disunion back in the spring and early summer of 1790, when it seemed they had been defeated, these Virginia Anti-federalists implied recourse to disunion in their resolutions of December 1790. This led Hamilton to react to their resolutions as “the first symptom of a spirit which must either be killed or will kill the Constitution of the United States.”
Madison and Jefferson shared some of the Virginia Antifederalists’ concerns. And they did not share Hamilton’s assessment of these Anti-federalists’ continuing danger to the union. (And of course, they would soon be trying not to “kill” their spirit, but to co-opt it.) But at this point, in 1790, they were not nearly as displeased with or as uncompromisingly hostile to the Hamiltonian project as the Anti-federalists were. They saw in it much to dislike—particularly its encouragement of speculative bubbles—but they did not yet raise constitutional objections, nor did they see in it a deep current of anti-republicanism and a return to a worse-thancolonial status with Britain. (Neither were they yet retreating to the state legislatures to say what they had to say, as they would be obliged to do in 1798.) In December 1790, the same month that the Virginia resolutions were being drafted and sent to congress, Jefferson reported to a French correspondent: “Our second experiment is going on happily; and so far we have no reason to wish for changes .”
The elections of 1790 brought many changes of personnel but none of political persuasion. The Republican persuasion had not yet been created. It was not until statesmen who had supported Federalism began to elaborate the same suspicions and accusations that a few discontented Anti-federalists were uttering that the moderate political disunity of 1789 and 1790 would be transformed into the extreme political party conflict that first appeared in federal elections in 1792. The rise of principled partisanship requires a decision by political leaders to dramatize and to simplify the complex issues of conflicting interests.