Alexander Hamilton was the United States’ first secretary of the Treasury, serving during George Washington’s administration. Hamilton was never president, but he made significant contributions to the financial system of this country. These contributions gave Hamilton a prominent position in history. He also has the distinction of being featured on United States currency even though he was not a president. Many of the business solutions that exist today, including modern credit card processing, are in place as a result of the contributions of Hamilton.
Hamilton had inventive financial ideas. After the end of the Revolutionary War, many states carried debts that they were not repaying. The value of these public securities was nil, but Hamilton had a solution. He proposed that the federal government repay all of the state debts at their full value. This repayment would be an effective way to legitimize the federal government. The means of financing the repayment involved issuing new security bonds to investors. These investors were excited about making significant profits. Hamilton was also instrumental in the creation of a national bank and a centralized currency.
Hamilton’s plan for the new country’s financial system had three major parts. Assuming the states’ debts by issuing interest-bearing bonds was the first part of the plan. Hamilton also instituted tariffs for imported goods as a way of raising federal revenue and helping domestic businesses. With the establishment of a new national bank, Hamilton created a way for the United States to hold funds and use securities as capital to encourage future growth.
The Hamiltonian Economic Program consisted of Hamilton’s proposals set forth during his time serving as secretary of the Treasury. Hamilton created three different reports that outlined his program and proposals. The reports were the First Report on Public Credit, the Second Report on Public Credit, and the Report on Manufactures. Congress implemented Hamilton’s economic program.
The First Report on Public Credit included analysis of the financial standing of the United States. This report made recommendations about reorganizing the national debt and establishing public credit. The report contained 40,000 words, with a focus on assumption of state debt from the war and redemption of government securities. Congress debated the proposal, eventually reaching a compromise in 1790.
The Second Report on Public Credit is sometimes called the Report on a National Bank. In this report, Hamilton proposed the creation of a central bank for the United States. By issuing federal bank notes, the country could increase the money supply. Hamilton’s vision of the bank involved creating a stable financial system for the new country.
The third report was the Report on Manufactures. This report focused on encouraging manufacturing with subsidies to various industries and by regulating trade with tariffs. The purpose of the tariffs was to raise revenue for the new government. These tariffs would also help encourage domestic manufacturing, which would help the country’s economy grow internally. The subsidies would also support manufacturing without affecting supplies or causing prices to increase.
