Summary
Alexander Hamilton did not stop with the creation of the Bank of the United
States. His next initiative was to encourage industrialization and a higher
degree of national self-sufficiency. In his December 1791 Report on
Manufacturers, Hamilton proposed the passage of protective tariffs to spur
domestic production. Further, he called for the reduction of duties on goods
carried by American ships.
Thomas Jefferson, and his newest political ally, James Madison, opposed
efforts to encourage protectionist economic policy. They feared the policies
would weaken competition and create industries that were dependent on
government aid. Tariffs would lead to higher prices and decrease innovation.
Congress refused to approve high new tariffs. However, Hamilton did push
legislature through Congress to set higher import duties on goods not imported
on American ships. At Hamilton's behest, Congress also approved subsidies for a
number of floundering
New England fisheries.
Along with building political opposition to Federalist policy, there was
some degree of public outcry. One element of Hamilton's policy had been the
establishment of an excise tax on domestically produced whiskey. Americans, who
consumed an average of six gallons of hard liquor per person each year, did not
take kindly to this tax, which amounted to 25 percent of the retail value of
Whiskey. Nowhere was the effect of this tax felt more than in western
Pennsylvania, where whiskey was distilled and transported east. The excise tax
was enforced most stringently and cruelly in western Pennsylvania, as opposed to
most other areas of the country where it was more or less ignored.
Additionally, anyone charged with tax evasion was sent to trial in federal
court, which meant small family farmers had to travel hundreds of miles to
Philadelphia, to be tried by men who knew little of their situation.
Popular opposition to the Whiskey tax mounted, and episodes of violence against
tax collectors broke out in many areas of western Pennsylvania. Large-scale
resistance began in late July 1794 in what became known as the Whiskey
Rebellion. During a short period of time, over a hundred men attacked a US
Marshall, the chief revenue officer for Allegheny County saw his house and
stables burned to the ground, and organized, militant farmers threatened to form
a separate country. President George Washington responded swiftly, calling
13,000 militiamen from Mid-Atlantic States to march with him to western
Pennsylvania. Washington led the march into Pennsylvania himself, crushing the
rebellion convincingly and returning order to the land. However, Washington was
shaken by the experience of the rebellion. The whiskey tax was reduced and
trials for tax evasion became the jurisdiction of federal courts as a result of
the public outcry, even before full-fledged rebellion began.
Hamilton's efforts to pass protectionist policies magnified the already growing
gap between his supporters and opponents. The proposal was yet another attempt
to gain the loyalty of wealthy and powerful industrial merchants and traders, at
the expense of the population at large. Hamilton proved widely successful in
his effort to amass political support by appealing to economic self-interest,
establishing strongholds of Federalists in New England, New Jersey, and
South Carolina, all of which benefited from his economic policies.
Manufacturers and merchants in these areas were able to raise prices and better
compete with European goods in a protected market. However, not all Americans
welcomed price increases.
However, significant opposition to the Federalists rose throughout most of the
South and West. Most southern and western inhabitants benefited little from
Hamilton's economic initiatives, and if anything, were hurt by the rise in
prices that resulted from efforts at protectionism. They saw Hamilton's
policies as catering to the wealthy businessmen of the northeast (which they
did), and felt that they were neglected and abused by national financial policy.
This coalition of southern and western opponents to the economic policy of the
national government, which increasingly included citizens of Mid-Atlantic
states, presented an increasing obstacle to Federalist control of the
government.
