Alexander Hamilton

by Ron Chernow

the rift between Hamilton and Madison precipitated the start of the two-party system in America.

For the next five years, the political spectrum in America was defined by whether people endorsed or opposed Alexander Hamilton’s programs.

Like Burr, Thomas Jefferson found strength in secrecy, in silence. Shy and aloof, he seldom made eye contact with listeners yet could be a warmly engaging presence among small groups of like-minded intimates.

Ensconced at Monticello with his books, inventions, and experiments, Jefferson became an unfathomable loner.

For Jefferson, the Revolution was an unwelcome distraction from a treasured private life, while for Hamilton it was a fantastic opportunity for escape and advancement.

Sitting in New York, slaving over his Report on Public Credit, the new secretary of the treasury peered deeper into French affairs than did Jefferson after five years in residence.

Twelve years Jefferson’s junior, Hamilton had never met him before. Hamilton had been a lowly artillery captain at the time Jefferson was composing the Declaration of Independence, and Hamilton’s incandescent rise had coincided with Jefferson’s years abroad.

Madison’s physical appearance—his pale, unsmiling visage, his detached air and short stature—transmitted a superficial impression of timidity.

“He never determines to act until he is absolutely forced by the pressure of affairs and then regrets that he has neglected some better opportunity.”

Madison “slow in taking his ground, but firm when the storm rises.”

His funding system was premised upon a simple concept: that the debt had been generated by the Revolution, that all Americans had benefited equally from that revolution, and that they should assume collective responsibility for its debt. If state debts were unequal, so were the sacrifices made during the fighting.

Madison and Henry Lee speculated in land on the Potomac, hoping to earn a windfall profit if the area was chosen for the capital.

Of the two policies that Hamilton wished to promote—the federal assumption of state debt and the selection of New York as the capital—assumption was incomparably more important to him. It was the most effective and irrevocable way to yoke the states together into a permanent union. So when he saw that Madison possessed the votes to block assumption, Hamilton considered bargaining away New York as the capital in exchange for southern support for assumption.

“Hamilton has a very boyish, giddy manner and Scotch-Irish people could well call him a ‘skite.’”86 The Oxford English Dictionary defines the Scottish word skite as meaning a vain, frivolous, or wanton girl. The choice of words hints at something feminine about Hamilton beneath the military bearing, an androgynous quality noted by others.

Jefferson would have to defend to posterity his complicity in a deal that weakened the states. He could have cited the peril to the union and left it at that. Instead, he decided to scapegoat Hamilton. Of his own part in passing the assumption bill, he later told Washington, “I was duped into it by the Secretary of the Treasury and made a tool for forwarding his schemes, not then sufficiently understood by me, and of all the errors of my political life this has occasioned me the deepest regret.”

Jefferson traced the formation of the two main parties—to be known as Republicans and Federalists—to Hamilton’s victory over assumption. For Jefferson, this event split Congress into pure, virtuous republicans and a “mercenary phalanx,” “monarchists in principle,” who “adhered to Hamilton of course as their leader in that principle.”

he had been outsmarted by Hamilton, who had embedded an enduring political system in the details of the funding scheme.

It will be far more difficult to undo than to do.”

The dinner deal to pass assumption and establish the capital on the Potomac was the last time that Hamilton, Jefferson, and Madison ever cooperated to advance a common agenda.

his grandiose plans left scant space for commonplace thoughts.

probably nothing devoured more of his time during his first year than creating the Customs Service.

This preoccupation seems peculiar until it is recalled that import duties accounted for 90 percent of government revenues: no customs revenue, no government programs—hence Hamilton’s unceasing vigilance about everything pertaining to trade.

Equally important was the comprehensive view of economic activity that he gained in a large country hobbled by primitive communications. Seven of every eight Treasury Department employees worked outside the capital, supplying Hamilton with an unending stream of valuable intelligence.

Three quarters of the revenues gathered by the Treasury Department came from commerce with Great Britain.

America had decided to rely on customs duties, which meant reliance on British trade. This central economic truth caused Hamilton repeatedly to poach on Jefferson’s turf at the State Department. The overlapping concerns of Treasury and State were to foster no end of mischief between the two men.

Hamilton confessed to Washington an ulterior political motive for this liquor tax: he wanted to lay “hold of so valuable a resource of revenue before it was generally preoccupied by the state governments.” As with assumption, he wanted to starve the states of revenue and shore up the federal government. Jefferson did not exaggerate Hamilton’s canny capacity to clothe political objectives in technical garb. There were hidden agendas buried inside Hamilton’s economic program,

The country, still reeling from programs the treasury secretary had churned out in a mere fifteen months, was learning just how fertile Hamilton’s brain was. He was setting in place the building blocks for a powerful state: public credit, an efficient tax system, a customs service, and now a strong central bank.

Over the past two centuries, Hamilton’s reputation has waxed and waned as the country has glorified or debunked businessmen.

In a nation of self-made people, Hamilton became an emblematic figure because he believed that government ought to promote self-fulfillment, self-improvement, and self-reliance.

Hamilton did not create America’s market economy so much as foster the cultural and legal setting in which it flourished. A capitalist society requires certain preconditions. Among other things, it must establish a rule of law through enforceable contracts; respect private property; create a trustworthy bureaucracy to arbitrate legal disputes; and offer patents and other protections to promote invention.

He converted the new Constitution into a flexible instrument for creating the legal framework necessary for economic growth. He did this by activating three still amorphous clauses—the necessary-and-proper clause, the general-welfare clause, and the commerce clause—making them the basis for government activism in economics.

Woodrow Wilson justly observed that “we think of Mr. Hamilton rather than of President Washington when we look back to the policy of the first administration.”

Jefferson, Madison, and Adams. These founders adhered to a static, archaic worldview that scorned banks, credit, and stock markets.

“No axiom is more clearly established in law or in reason than wherever the end is required, the means are authorized; wherever a general power to do a thing is given, every particular power for doing it is included.”

In his Life of Washington, Chief Justice John Marshall traced the genesis of American political parties to the rancorous dispute over the Bank of the United States.

In other words, the principal author of the Declaration of Independence was recommending to the chief architect of the U.S. Constitution that any Virginia bank functionary who cooperated with Hamilton’s bank should be found guilty of treason and executed.

government must possess the means to attain ends for which it was established or the bonds of society would dissolve.

“Now it appears to the Secretary of the Treasury that this general principle is inherent in the very definition of government and essential to every step of the progress to be made by that of the United States: namely that every power vested in a government is in its nature sovereign and includes by force of the term a right to employ all the means requisite and fairly applicable to the attainment of the ends of such power.”

Repeatedly in American history, Hamilton’s flexible definition of the word necessary was to free government to handle unforeseen emergencies.

Henry Cabot Lodge later referred to the doctrine of implied powers enunciated by Hamilton as “the most formidable weapon in the armory of the Constitution . . . capable of conferring on the federal government powers of almost any extent.”

For Jefferson, Alexander Hamilton was more than just dead wrong in his prescriptions. He was becoming a menace to the American experiment, one who had to be stopped at all costs.

Hamilton seemed to need two distinct types of love: love of the faithful, domestic kind and love of the more forbidden, exotic variety.

On March 24, 1791, the U.S. government granted patents for Parkinson’s flax mill, even though he had admitted that they were “improvements upon the mill or machinery . . . in Great Britain.”32 Clearly, the U.S. government condoned something that, in modern phraseology, could be termed industrial espionage.

Since manufacturing and agriculture obeyed different economic cycles, a downturn in one could be offset by an upturn in another.

William Duer’s downfall exposed the magnitude of the securities market that Hamilton had opened up. It also showed how easily the market for government bonds could be rigged by swindlers planting false rumors and exploiting the auction system for stock trades. To provide more orderly markets, two dozen brokers gathered on May 17 under the shade of a buttonwood tree at 68 Wall Street and drew up rules to govern securities trading. This historic Buttonwood Agreement set a minimum for brokers’ commissions and laid the foundations for what became the New York Stock Exchange.

By capitalizing the term used for supporters of the Constitution, the Federalists tacitly implied that their foes opposed it. The Federalists were allied with powerful banking and merchant interests in New England and on the Atlantic seaboard and were disproportionately Congregationalists and Episcopalians.

Republican. Alluding to the ancient Roman republic, this was also a clever label, insinuating that Federalists were not real republicans and hence must be monarchists. Often Baptists and Methodists, Republicans drew their strength from rich southern planters and small farmers.

The Federalists saw themselves as saving America from anarchy, while Republicans believed they were rescuing America from counterrevolution.

As the party spirit grew more acrimonious, Hamilton and Washington regarded much of the criticism fired at their administration as disloyal, even treasonous, in nature.

The problem with the “Anas” isn’t that Jefferson fabricated things. Sometimes he accepted secondhand gossip at face value. Sometimes he took a casual comment and blew it up into a monstrous portrait. Sometimes he missed nuances that would have cast matters in a different light.