In 1788, just months after the Constitution was ratified, national elections were held to choose representatives for the House of Representatives and the first U.S. president (senators were not elected directly by the people until 1913). Members of the Electoral College unanimously chose the war hero George Washington because of his popularity and keen leadership skills. Boston lawyer John Adams was chosen to be the first vice president.
Though the Constitution states that the president “may require the opinion, in writing, of the principal officer in each of the executive departments,” nowhere does it specifically mention a cabinet of advisors. Washington initially tried to gather advice as he needed it, but this method of consultation proved to be too confusing.
Eventually, Washington created a few executive officers (originally only the secretaries of state, war, and the treasury, and the attorney general) to meet with regularly. He chose Thomas Jefferson as secretary of state, Alexander Hamilton as secretary of the treasury, Henry Knox as secretary of war, and Edmund Randolph as attorney general. Washington’s decision shaped the way that every one of his successors delegated executive authority.
The fact that Washington was from the South was significant. Virginia had produced top-notch statesmen before the Revolution, and the trend continued well into the 1800s, as six of the first ten presidents were from Virginia. This “Virginia Dynasty” included Presidents Washington, Jefferson, Madison, Monroe, Harrison, and Tyler. More important, a southern president demonstrated to Americans and Europeans that the United States was in fact united. Despite differences between the North and South even at this early date, both regions were committed to maintaining a democratic Union. The 1790 decision to relocate the capital to Washington, D.C., (see The Excise Tax, p. 32 ) reinforced this point.
Congress’s first order of duty, even before ratifying the Bill of Rights, was to create the judiciary branch of government as stipulated by the Constitution. Thus, they passed the Judiciary Act of 1789 , which established a federal court system with thirteen district courts, three circuit courts, and a Supreme Court—to be the highest court in the nation—presided over by six justices.
Congress did not want the federal court system to have too much power over local communities, so it determined that federal courts would serve primarily as appeals courts for cases already tried in state courts. In other words, most cases would first be heard by a judge in a local community, appealed to a state court, and finally appealed to the federal courts only if necessary.
Secretary of the Treasury Alexander Hamilton, meanwhile, set out to establish firm financial policies for the country. In his famous Reports on the Public Credit , he proposed that the federal government should assume and pay off all state debts, as well as federal debt—a then-staggering sum in the tens of millions of dollars. Furthermore, Hamilton believed that the new government should sell bonds to encourage investment by citizens and foreign interests.
Hamilton wanted his measures to establish confidence in the new U.S. government at home and abroad. His proposal stipulated that Congress would have to fund the entire debt at par, which meant that the federal government would pay back all borrowed money with interest. Hamilton believed that funding the debt at par would send a signal that the United States was a responsible new member of the international community and a safe environment for speculators to invest their money. He also believed that a sizeable national debt would prevent states from drifting from the central government and thus bind them together.
However, Hamilton’s ideas seemed ludicrous to many. Secretary of State Jefferson, for instance, believed that a large national debt would be a “national curse” that would depress poor farmers and ruin the economy. To the dismay of the Jeffersonians, assumption and funding at par both worked, as foreign investment began to boost the fledgling U.S. economy.
To raise money to pay off these debts, Hamilton suggested that Congress levy an excise tax on liquor. However, because farmers often converted their grain harvests into liquor before shipping (since liquor was cheaper to ship than grain), many congressmen from southern and western agrarian states believed that the excise tax was a scheme to make northern investors richer.
A compromise was finally reached in 1790: Congress would assume all federal and state debts and levy an excise tax to raise revenue. In exchange, the nation’s capital would be moved from New York City to the new federal District of Columbia in the South.
Hamilton then set out to create a national Bank of the United States, which would serve as a storehouse for federal money but also be funded by private investments. This proposal infuriated Secretary of State Jefferson and sparked even more of a debate than had the Reports on the Public Credit.
Jefferson argued that creating a national bank would be unconstitutional because nowhere was it written in the Constitution that Congress had the authority to do so. He and his supporters were “strict constructionists”—they believed that the Constitution forbade everything it did not expressly permit.
Hamilton and most nationalistic Federalists, on the other hand, believed the opposite. These “loose constructionists” argued that the Constitution allowed everything it did not expressly forbid. President Washington agreed with Hamilton and signed the charter of the Bank of the United States in 1791.
The controversy over the national bank stemmed from differing interpretations of the Constitution’s “elastic clause,” which grants Congress the power “to make all laws which shall be necessary and proper” to carry out its duties. Hamilton believed this clause justified creation of the national bank; Jefferson believed that the bank was unconstitutional and stripped power from the individual states.
Hamilton also believed that the financial future of the United States depended on manufacturing, which at the time was meager and confined primarily to New England. Hamilton argued in his Report on Manufactures that building more factories and producing manufactured goods would make the nation rich and financially stable.
Jefferson again disagreed, believing that agriculture was the key to American success. Moreover, he felt that agrarian interests and farmers should form the foundations of any free republic in order to preserve liberty.
The constant debates between Hamilton and Jefferson—and their own personal animosity for each other—split the cabinet and Congress during Washington’s presidency and eventually led to the maturation of the Federalists and the Democratic-Republicans into distinct political parties. Though Federalist and Anti-Federalist factions had formed during the debate over ratification of the Constitution, neither were full-fledged political parties until Hamilton and Jefferson polarized political opinions in Congress and Washington’s cabinet meetings.
At the time, political parties were looked down upon and viewed as undemocratic and even disloyal in the wake of the Revolution. Many, including Washington, believed that parties would only split the Union and destroy everything that Americans had worked so hard to achieve. Today, in contrast, political parties are regarded as essential components of any thriving democracy.