George Washington denounced political parties in his "Farewell Address" and warned that they would divide the nation. The early beginnings of political parties actually started in Washington's cabinet with Alexander Hamilton and Thomas Jefferson. They took opposing sides on many issues, particularly: economic policy, foreign relations, power of the federal government, and how to interpret the Constitution.
The largest arguing point and the one that led to the formation of the first political parties was the basis of government power. Hamilton viewed that the federal government had implied powers, any powers that were not forbidden by the Constitution, but Jefferson and Madison believed in a much more strict interpretation of the Constitution.
Although this word originally applied to someone who supported the Constitution, by the 1790s it referred to a group of people who backed the policies of Washington's administration. Federalists stood for a strong central government. They admired England for its long-term stability. Hamilton, as a Federalist, also wanted to create a national bank. He felt this would give the nation greater economic security.
Led by Thomas Jefferson and James Madison, this political party sought to limit government's power. If a federal government became too powerful, it could threaten its citizens' individual rights. The Democrat Republicans supported the French and emphasized agriculture and free trade.