Hamilton and Madison worked to describe the anarchic state of the confederation in numbers 15—22, and have been described as not being entirely different in thought during this time period in contrast to their stark opposition later in life.
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New York then refused to recognize claims to property derived from grants by New Hampshire governor Benning Wentworth during the preceding 15 years when the territory had been governed as a de facto part of New Hampshire. Consequently, the people of the disputed territory, called the New Hampshire Grants , resisted the enforcement of New York's laws within the Grants.
Ethan Allen 's militia called the Green Mountain Boys , noted for successes in the war against the British in , was originally formed for the purpose of resisting the colonial government of New York. In , the statesmen of the Grants declared it a separate state to be called Vermont , and by early , had erected a state government. During —, Vermont was repeatedly denied representation in the Continental Congress, largely because New York insisted that Vermont was legally a part of New York.
Vermont took the position that because its petitions for admission to the Union were denied, it was not a part of the United States, not subject to Congress, and at liberty to negotiate separately with the British.
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The latter Haldimand negotiations led to some exchanges of prisoners of war. The peace treaty of that ended the war included Vermont within the boundaries of the United States.
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On March 2, , Governor George Clinton of New York asked Congress to declare war for the purpose of overthrowing the government of Vermont, but Congress made no decision. By , the government of New York had almost entirely given up plans to subjugate Vermont, but still claimed jurisdiction. Consideration of the bill was deferred to a later date. In through , Hamilton exchanged letters with Nathaniel Chipman , a lawyer representing Vermont. In , the new Constitution of the United States went into effect, with its plan to replace the unicameral Continental Congress with a new Congress consisting of a Senate and a House of Representatives.
Hamilton wrote:. One of the first subjects of deliberation with the new Congress will be the independence of Kentucky [at that time still a part of Virginia], for which the southern states will be anxious.
The northern will be glad to find a counterpoise in Vermont. In , the New York legislature decided to give up New York's claim to Vermont if Congress decided to admit Vermont to the Union and if negotiations between New York and Vermont on the boundary between the two states were successfully concluded. In , negotiators discussed not only boundary, but also financial compensation of New York land-grantees whose grants Vermont refused to recognize because they conflicted with earlier grants from New Hampshire.
Compensation in the amount of 30, Spanish dollars was agreed to, and Vermont was admitted to the Union in He left office on the last day of January Much of the structure of the government of the United States was worked out in those five years, beginning with the structure and function of the cabinet itself.
Hamilton oversaw his colleagues under the elective reign of George Washington. Washington requested Hamilton's advice and assistance on matters outside the purview of the Treasury Department. Before the adjournment of the House in September , they requested Hamilton to make a report on suggestions to improve the public credit by January Although they agreed on additional taxes such as distilleries and duties on imported liquors and land taxes, Madison feared that the securities from the government debt would fall in foreign hands.
In the report, Hamilton felt that the securities should be paid at full value to their legitimate owners, including those who took the financial risk of buying government bonds that most experts thought would never be redeemed.
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He argued that liberty and property security were inseparable and that the government should honor the contracts, as they formed the basis of public and private morality. To Hamilton, the proper handling of the government debt would also allow America to borrow at affordable interest rates and would also be a stimulant to the economy. Hamilton divided the debt into national and state, and further divided the national debt into foreign and domestic debt. While there was agreement on how to handle the foreign debt especially with France , there was not with regards to the national debt held by domestic creditors.
During the Revolutionary War, affluent citizens had invested in bonds, and war veterans had been paid with promissory notes and IOUs that plummeted in price during the Confederation. In response, the war veterans sold the securities to speculators for as little as fifteen to twenty cents on the dollar.
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Hamilton felt the money from the bonds should not go to the soldiers, but the speculators that had bought the bonds from the soldiers, who had shown little faith in the country's future. The process of attempting to track down the original bond holders along with the government showing discrimination among the classes of holders if the war veterans were to be compensated also weighed in as factors for Hamilton.
As for the state debts, Hamilton suggested to consolidate it with the national debt and label it as federal debt, for the sake of efficiency on a national scale. The last portion of the report dealt with eliminating the debt by utilizing a sinking fund that would retire five percent of the debt annually until it was paid off. Due to the bonds being traded well below their face value, the purchases would benefit the government as the securities rose in price. Some of the negative views expressed in the House were that the notion of programs that resembled British practice were wicked, and that the balance of power would be shifted away from the Representatives to the executive branch.
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William Maclay suspected that several congressmen were involved in government securities, seeing Congress in an unholy league with New York speculators. The involvement of those in Hamilton's circle such as Schuyler, William Duer , James Duane , Gouverneur Morris, and Rufus King as speculators was not favorable to those against the report, either, though Hamilton personally did not own or deal a share in the debt. Although he was not against current holders of government debt to profit, he wanted the windfall to go to the original holders.
Madison did not feel that the original holders had lost faith in the government, but sold their securities out of desperation.
The fight for the national government to assume state debt was a longer issue, and lasted over four months. During the period, the resources that Hamilton was to apply to the payment of state debts was requested by Alexander White , and was rejected due to Hamilton's not being able to prepare information by March 3, and was even postponed by his own supporters in spite of configuring a report the next day which consisted of a series of additional duties to meet the interest on the state debts.
During this period, Hamilton bypassed the rising issue of slavery in Congress, after Quakers petitioned for its abolition, returning to the issue the following year. Another issue in which Hamilton played a role was the temporary location of the capital from New York City. Tench Coxe was sent to speak to Maclay to bargain about the capital being temporarily located to Philadelphia, as a single vote in the Senate was needed and five in the House for the bill to pass. Although Hamilton had been forming ideas of a national bank as early as ,  : he had gathered ideas in various ways over the past eleven years.
These included theories from Adam Smith,  extensive studies on the Bank of England , the blunders of the Bank of North America and his experience in establishing the Bank of New York. Since the Government did not have the money, it would borrow the money from the bank itself, and repay the loan in ten even annual installments.
The bill passed through the Senate practically without a problem, but objections to the proposal increased by the time it reached the House of Representatives. It was generally held by critics that Hamilton was serving the interests of the Northeast by means of the bank,  and those of the agrarian lifestyle would not benefit from it. The potential of the capital not being moved to the Potomac if the bank was to have a firm establishment in Philadelphia the current capital of the United States was a more significant reason, and actions that Pennsylvania members of Congress took to keep the capital there made both men anxious.
Madison warned the Pennsylvania congress members that he would attack the bill as unconstitutional in the House, and followed up on his threat. Washington hesitated to sign the bill, as he received suggestions from Attorney-General Edmund Randolph and Thomas Jefferson. Jefferson dismissed the 'necessary and proper' clause as reasoning for the creation of a national bank, stating that the enumerated powers "can all be carried into execution without a bank.
Many of Hamilton's ideas for this report were from European economists, resolutions from Continental Congress meetings from and , and from people such as Robert Morris, Gouverneur Morris and Thomas Jefferson. Because the most circulated coins in the United States at the time were Spanish currency , Hamilton proposed that minting a United States dollar weighing almost as much as the Spanish peso would be the simplest way to introduce a national currency. Hamilton proposed that the U.
By , Hamilton's principles were adopted by Congress, resulting in the Coinage Act of , and the creation of the United States Mint.
There was to be a ten-dollar Gold Eagle coin, a silver dollar, and fractional money ranging from one-half to fifty cents. Smuggling off American coasts was an issue before the Revolutionary War, and after the Revolution it was more problematic. Along with smuggling, lack of shipping control, pirating, and a revenue unbalance were also major problems. Concerning some of the details of the "System of Cutters",  [note 1] Hamilton wanted the first ten cutters in different areas in the United States, from New England to Georgia.
The fabric of the sails was to be domestically manufactured;  and provisions were made for the employees' food supply and etiquette when boarding ships. One of the principal sources of revenue Hamilton prevailed upon Congress to approve was an excise tax on whiskey. In his first Tariff Bill in January , Hamilton proposed to raise the three million dollars needed to pay for government operating expenses and interest on domestic and foreign debts by means of an increase on duties on imported wines, distilled spirits, tea, coffee, and domestic spirits.
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It failed, with Congress complying with most recommendations excluding the excise tax on whiskey Madison's tariff of the same year was a modification of Hamilton's that involved only imported duties and was passed in September. In response of diversifying revenues, as three-fourths of revenue gathered was from commerce with Great Britain, Hamilton attempted once again during his Report on Public Credit when presenting it in to implement an excise tax on both imported and domestic spirits.
Opposition initially came from Pennsylvania's House of Representatives protesting the tax. William Maclay had noted that not even the Pennsylvanian legislators had been able to enforce excise taxes in the western regions of the state. Hamilton had attempted to appease the opposition with lowered tax rates, but it did not suffice. Strong opposition to the whiskey tax by cottage producers in remote, rural regions erupted into the Whiskey Rebellion in ; in Western Pennsylvania and western Virginia , whiskey was the basic export product and was fundamental to the local economy.
In response to the rebellion, believing compliance with the laws was vital to the establishment of federal authority, Hamilton accompanied to the rebellion's site President Washington, General Henry "Light Horse Harry" Lee , and more federal troops than were ever assembled in one place during the Revolution. This overwhelming display of force intimidated the leaders of the insurrection, ending the rebellion virtually without bloodshed. Hamilton's next report was his Report on Manufactures. Although he was requested by Congress on January 15, , for a report for manufacturing that would expand the United States' independence, the report was not submitted until December 5, Among the ways that the government could assist in manufacturing, Hamilton mentioned levying protective duties on imported foreign goods that were also manufactured in the United States,  to withdraw duties levied on raw materials needed for domestic manufacturing,  :  pecuniary boundaries,  : and encouraging immigration for people to better themselves in similar employment opportunities.
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