Although the War of 1812 essentially ended a stalemate, Americans came away from the conflict with a newfound sense of national spirit. They began to see themselves as Americans first and New Yorkers or Virginians second (although state pride didn’t disappear entirely). This American spirit boosted the popularity of the federal government, and the nationalistic War Hawks, who had agitated for the war, emerged as its new leaders.
One of the War Hawks, Speaker of the House Henry Clay, was an ardent proponent of his three-pronged “American System” for improving the United States. First, Clay wanted to improve the financial sector of the economy. Under his leadership, Congress created another Bank of the United States in 1816 to offer easy credit. Second, Clay sought to protect struggling American manufacturers from the postwar influx of cheap British goods. He pushed through the Tariff of 1816 , which placed a 20-percent tax on all foreign goods—the first tariff that Congress passed in order to protect merchants rather than just to raise revenue. Finally, Clay’s American System called for construction of new roads and canals in the West.
Clay’s program of internal improvements in the West was meant to help farmers ship their crops and goods and would be paid for with money raised by the Tariff of 1816. Up to that point, western farmers had a difficult time transporting their crops to eastern cities before they spoiled. The construction of new roads and canals thus helped agriculture immeasurably. Improved transportation also benefited eastern manufacturers, who suddenly had access to new markets in the West. At the same time, the construction of roads and canals accelerated the development of western cities, especially in the Ohio Valley.
The newfound national spirit after the War of 1812 also spilled over into politics. Democratic-Republican candidate James Monroe easily defeated his weak Federalist opponent in the election of 1816, effectively killing the Federalist Party for good. With the Federalists out of the picture, the popular Democratic-Republicans were left to run the show without much opposition. One newspaper dubbed these tranquil years the “Era of Good Feelings,” and the name stuck.
A string of crises toward the end of Monroe’s first term quickly dampened those good feelings, however. The first crisis hit in 1819, when overspeculation in western lands caused a financial panic. The Panic of 1819 quickly cascaded into a full-scale depression. The Bank of the United States was hit hard, and many fly-by-night “wildcat banks” in the West went bankrupt. Although all Americans were hit hard, farmers suffered the most. Hundreds were thrown into debtors’ prisons, and poverty was rampant until the economy finally recovered nearly a decade later.
Another crisis arose in 1819 when Missouri applied for admission to the Union as a slave state. Even though Missouri met all of the qualifications, the northern-dominated House of Representatives denied the territory statehood because they did not want to tip the sectional balance in favor of the South (eleven free states to twelve slave states). The House also passed the Tallmadge Amendment later in 1819, declaring that no new slaves could be taken into Missouri and that slaves already there should gradually be freed.