Jefferson vs Hamilton: The Dispute that Led to the Two-Party System and Nearly Caused Civil War

Jefferson versus Hamilton - Brewminate

A Skeptics Guide to American History (2012)

Episode 4 Confusions About Jefferson and Hamilton

Mark Stoler PhD

Film Review

This presentation traces how the bitter political dispute between Alexander Hamilton and Thomas Jefferson led to the creation of America’s two-party system – and almost caused civil war.

The two men first clashed when they served in George Washington’s cabinet, where  Jefferson served as Secretary of State and Hamilton Secretary of the Treasury. Their political dispute concerned main areas, the creation of an 80% privately owned (20% government owned) national bank, known as the First Bank of the United States, and the ongoing alliance with France following the French Revolution.

In addition to serving as a depository for import taxes, the First Bank of the United States also had the authority to print bank notes to supplement gold and silver in circulation. Hamilton wanted to create a national bank to help repay the country’s war debts. Jefferson opposed it for two main reasons: first because the US Constitution specifically assigns Congress the power to create money and secondly (which Stoler doesn’t mention) because the vast majority of the bank’s investors were foreign (mainly British). The official ownership breakdown would be 70% foreign investors (see https://www.sjsu.edu/faculty/watkins/BofUS.htm), 10% domestic investors and 20% government.

Jefferson supported an interpretation of the Constitution that assigned states (as per the 10th amendment) all powers not specifically mentioned in the Constitution. Hamilton, in contrast, favored a strong federal government operating in close alliance with wealthy commercial interests (via the national bank).

Hamilton and Jefferson also differed on whether to support the French republic following their revolution. Following the execution of Louis XVI in 1793, numerous European countries (Great Britain, the Holy Roman Empire, Prussia, Russia, and several other monarchies) declared war on France.

As secretary of state, Jefferson believed the US should support the French republic (because he favored republicanism over monarchy, because the French had supported the US colonists during the War of Independence, and because the US had a treaty with France). Hamilton wanted the US to support Britain because he felt trade with the UK was essential for US economic development.

Jefferson also opposed the Jay Treaty* (1794) with the UK, which was extremely unpopular with the American people. Like Jefferson, they feared closer ties with Britain would undermine US independence. Hamilton claimed it was essential to prevent another war with Britain.

The political dispute between Hamilton and Jefferson would give rise to America’s two-party system, with Hamilton and his supporters forming the Federalist Party (1789) and Jefferson and his supporters the Democratic-Republican Party (1792). President John Adams, who supported the Federalist Party, signed the Alien and Sedition Acts in 1798. These were four laws directly primarily against the Democratic-Republican Party.

At the time, most immigrants supported Jefferson’s Democratic-Republican Party. As well as allowing the president to imprison or deport aliens considered “dangerous to the peace and safety of the United States,” the Alien and Sedition Acts (which the Supreme Court later declared unconstitutional) prohibited all speech critical of the federal government. The latter resulted in the prosecution and conviction of many Jeffersonian newspaper owners.

Jefferson and his supporters responded by passing resolutions in the Virginia and Kentucky legislatures declaring the Alien and Sedition Acts unconstitutional. A civil war with northern states was narrowly averted when Jefferson was elected the third president of the US on the Democratic-Republican ticket in 1800.


*Instead of being negotiated by Jefferson, who was Secretary of State, the Jay Treaty was negotiated by John Jay (a federalist like Hamilton), who was Chief Justice of the US Supreme Court. Through this treaty, the British agreed to withdraw their remaining army units from Northwest Territory (all the land west of Pennsylvania, north of the Ohio River, east of the Mississippi River and below the Great Lakes). In return, the US agreed to end the confiscation of British loyalist estates and arbitrate the US-Canadian boundary and the settlement of wartime debts owed to British financiers. It also granted Americans limited rights to trade with British colonies in the Caribbean in exchange for some limits on the American export of cotton.

The film can be viewed free on Kanopy.

https://pukeariki.kanopy.com/video/confusions-about-jefferson-and-hamilton

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