3.10 Shaping a New Republic

Washington knew everything he did would set a precedent, an example for future presidents. He created a cabinet of department heads to advise him, including Thomas Jefferson as Secretary of State and Alexander Hamilton as Secretary of the Treasury. The Judiciary Act of 1789 set up the federal court system. Washington stepped down after two terms, a tradition that lasted until Franklin Roosevelt in 1940 and later became the Twenty-Second Amendment.

As the first Secretary of the Treasury, Hamilton wanted to give the new government strong credit and to tie wealthy Americans to its success. His plan had four parts, listed below.

The second part, the national bank, sparked a constitutional debate. Jefferson argued for strict construction: the Constitution did not list a power to create a bank, so Congress could not. Hamilton argued for loose construction: the necessary and proper clause allowed a bank as a reasonable way to carry out powers like taxing and borrowing. Washington sided with Hamilton.

• Pay the national debt at full value and have the federal government take over (assume) the states' war debts. This would make the government's credit strong and give wealthy creditors a stake in its success. States like Virginia that had already paid most of their debts objected; in the Compromise of 1790, Southerners accepted assumption in exchange for placing the national capital on the Potomac River.
• Create a national bank, the Bank of the United States (chartered 1791), to hold government money, make loans and issue a stable currency.
• Raise money with tariffs (taxes on imports) and excise taxes, including a tax on whiskey (1791), which led to the Whiskey Rebellion in 1794 (3.12).
• Encourage manufacturing with tariffs and subsidies (Report on Manufactures, 1791). Congress mostly ignored this part.

The framers had hoped to avoid parties, which they called factions. But real disagreements about the economy, the Constitution and foreign policy created them within a few years.

When France and Britain went to war in 1793, Washington issued a Proclamation of Neutrality. Jay's Treaty (1794) with Britain got the British to leave their forts in the Northwest but did nothing to stop British seizures of American ships or impressment of sailors; Democratic-Republicans denounced it as pro-British. Pinckney's Treaty (1795) with Spain was popular: it opened the Mississippi River and the port of New Orleans to American trade and settled the Florida border.

In his Farewell Address (1796), Washington warned against permanent alliances with foreign nations, against the 'spirit of party', and against sectional divisions.

Under Adams, French agents demanded bribes from American diplomats in the XYZ Affair (1797–1798), leading to an undeclared naval war with France, the Quasi-War. Federalists in Congress passed the Alien and Sedition Acts (1798). These lengthened the residency requirement for citizenship to 14 years (most immigrants voted Democratic-Republican), let the president deport foreigners considered dangerous, and made it a crime to publish 'false, scandalous and malicious' writing against the government. Several Democratic-Republican newspaper editors were jailed.

Jefferson and Madison answered with the Virginia and Kentucky Resolutions (1798), which argued that states could judge whether federal laws were unconstitutional. Adams made peace with France in 1800, but the crisis helped Jefferson win the election of 1800.

The new government's relationship with Native nations was unclear. It signed treaties with them as if they were foreign nations, yet it also claimed authority over their land, and states and settlers often ignored those treaties. That confusion led to repeated disputes over who owned Western land (3.12).

Far to the west, Spain was expanding too. Starting at San Diego in 1769, Franciscan friars led by Junípero Serra built a chain of missions along the California coast, backed by soldiers in presidios. Native Californians were pressed into labor at the missions, where disease and harsh discipline killed many. For Spanish soldiers and settlers, the frontier offered a chance to rise in status, and Spanish and Native cultures blended.