Why did Thomas Jefferson oppose Hamilton's financial plan?Hamilton's thoughts and Jefferson's thoughts.

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hi1954 | Teacher | (Level 1) Associate Educator

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Jefferson, who was Secretary of State at the time, was oppossed to Hamilton's plans for a number of reasons.  Hamilton's plan called Assumption was opposed because his friends stood to make fortunes off the new government by speculation.  The plan was for the federal government to assume the $25 million debts of the states from the Revolution, and to pay them off at face value.  The new government already owed nearly $12 million to France and Spain, and over $40 million in domestic debts, much of it for food and clothing for the army during the war.  The problem with paying the states' debts at face value was that the vast majority of the war bonds had been bought for pennies on the dollar by speculators, who would of course make a great deal of money off Assumption.  Many of these speculators were friends of Hamilton, hence the opposition of Jefferson and many others.

Jefferson also oppossed the National Bank, disliking the idea of the federal government having centralized control of the economies of all the states.  Jefferson claimed the plans were inspired by "principles adverse to liberty."  The Bank was, in fact, unconstitutional, the federal government being denied any powers not specifically given it by the Constitution.  Hamilton invented the concept of "implied powers" to counteract that.

In addition, Jefferson distrusted Hamilton and the others involved in the emergence of America's first political party, the Federalists.  Jefferson, like Washington, believed "party politics" would be the downfall of America if once allowed a foothold.  Jefferson believed the Federalists were attempting to inject monarchist institutions into America, to create a new nobility based on money and influence.  He considered this as the opposite of everything the Revolution had been fought for.  Washington, in fact, only accepted a second term as president to try to prevent political parties from coming into being.

Jefferson, Madison and others finally agreed to Hamilton's Assumption for the proto-Federalists accepting the new capitol being built on the Potomac.  Jefferson regretted this bitterly.  The payment of the debts certainly did increase the credibility of the new government, but the Bank was an idea so far ahead of its time that it was not that workable, and was later done away with.  Still, it did institute the concept of governmental control of the banking industry, although bizarrely enough the creation of a national bank became a central part of Karl Marx's theories of government.

The Federalist Party later became the Whigs, who much later morphed into the Republican Party, which was called the "Grand Old Party" in honor of its descent from the first party.