Those two opposites—Jefferson and Hamilton—had ideas that needed balancing. They helpedfound the country’s first political parties. Theyrespected, but didn’t understand, each other.

“Mr. Jefferson,” wrote Hamilton, “is at thehead of a faction decidedly hostile to me and…dangerous to the union, peace, and the happi-ness of the country.”

Jefferson replied that Hamilton’s ideas “flowedfrom principles adverse to liberty, and…calcu-lated to undermine and demolish the Republic.”

Whew! Those are strong words. “Dangerous,” “hostile,” “adverseto liberty”—did they really mean it? These were men who had builtthe country together. What was going on?

To put it simply: they disagreed about power and who ought tohave it. It was that old conflict that had kept everyone arguing whenthe Constitution was being written.

Jefferson and Hamilton were both concerned about liberty andabout power. How do you balance the two? How do you guaranteefreedom? How do you create a government that can keep order andmake sure that government doesn’t oppress people? How strongshould the government be?

Hamilton believed the government should be strong. If the gov-ernment was to work for all the people, instead of just those withthe loudest voices, it needed to be powerful. Hamilton thought thatgovernment should be run by aristocratic leaders, that is, by theprosperous, well-educated citizens who he thought had the timeand talents to best run a country. He feared the masses. He saidthey sometimes acted like sheep, mindlessly following a leader.

A H I S T O R Y O F U S

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3 The PartiesBegin

“Men by their con-stitutions,” saidThomas Jefferson,“are naturally divid-ed into two parties.”

The Sense ofAmerica

Here is an old sayingthe Founders had proba-bly heard: Liberty for thewhale means death forthe minnow. What doesthat mean? How does itrelate to a free nation?

Hamilton published anattack on Jefferson say-ing that he was disloyalto the Constitution. Jef-ferson wrote a letter toPresident Washingtonanswering that charge.

No man in the UnitedStates, I suppose,

approved of every title inthe constitution; no one,I believe, approved moreof it than I did…my ob-jection to the constitu-tion was that it wanted abill of rights, securingfreedom of religion, free-dom of the press, free-dom from standing armies,trial by jury, and a con-stant habeas corpus act.Colonel Hamilton’s wasthat it wanted a King andHouse of Lords. The senseof America has approvedmy objection, and addeda bill of rights, not theKing and Lords.

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But Hamilton was also wary of the rich. He thought they oftenacted out of self-interest—that means they did what was good forthemselves. Hamilton knew the government needed checks and bal-ances so no group could gain control.

“Give all power to the many,” wrote Hamilton, “and they will oppressthe few. Give all power to the few, they will oppress the many. Both there-fore ought to have power, that each may defend itself against the other.”

Thomas Jefferson feared powerful government. It was justice andliberty for the individual that concerned him. He saw a strong, cen-tralized government as an enemy of individual liberty. Jefferson hadbeen in Europe and had seen kings in action: he hated monarchies.He feared a king-like president.

Jefferson had faith in ordinary people. He thought they couldgovern themselves—if they were educated. And so he wrote a planfor public schools and colleges. He wanted an amendment to theConstitution that would provide for free education.

Because of the differences in ideas, it became clear that politicalparties were needed. Hamilton’s followers formed the “FederalistParty.” Jefferson’s followers were called “Democratic-Republicans,”or sometimes just Republicans.

Now this is confusing, so pay attention. The Federalists and Re-publicans were not like our Democrats and Republicans—but theywere the beginnings of today’s partysystem. This is what is confusing:Jefferson’s Republican Party wasnot like today’s Republican Party.Actually, it was the parent of today’sDemocratic Party. (The modern Re-publicans got started later with apresident named Abraham Lincoln.)

Jefferson and Hamilton wereboth good men, and the ideas ofeach have been important in ourcountry. On most issues (but notall), Hamilton was a “conservative”

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What are masses? “Mass”is the scientific term for anyquantity of matter, tiny orhuge. That wasn’t the defin-ition Hamilton had in mind.Another meaning of “mass”is a great many people. Themasses came to mean “theworkers and ordinary folkin a country.” Hamiltondidn’t think himself part ofthe masses. Although hewas a poor boy, he becamerich and well educated.

Jefferson fought for freedom of thepress. That meant papers would befree to criticize him. Here, Wash-ington is the hero with the halo overhis head; Jefferson is the villain witha smoky black candle as his symbol.How do you think T.J. felt about that?

Jefferson didn’tget his free educationamendment. His plan foreducation in Virginia wasturned down in the Vir-ginia General Assembly.

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Jefferson said, “The many!”Hamilton said, “The few!”

Like opposite sides of a pennyWere those exalted two.If Jefferson said, “It’s black, sir!”Hamilton cried, “It’s white!”But, ’twixt the two, our Constitu-tion started working right.

Hamilton liked the courtly, Jef-ferson liked the plain,

They’d bow for a while, but shortlyThe fight would break out again.H. was the stripling ColonelThat Washington loved and knew,A man of mark with a burning sparkBefore he was twenty-two.

Opposite Sides of a Penny

Jefferson is attacked forsympathizing with theFrench Revolution. TheFederal eagle is rescuingthe Constitution before Jef-ferson burns it. Was thisthe true state of affairs?

He came from the warm AntillesWhere the love and the hate last long,

And he thought most people silliesWho should be ruled by the strong.Brilliant, comely and certain,He generally got his way,Till the sillies said, “We’d rather be dead,”And then it was up to J.

He could handle the Nation’s dollarsWith a magic that’s known to few,

He could talk with the wits and scholarsAnd scratch like a wildcat, too.And he yoked the States togetherWith a yoke that is strong and stout.(It was common dust that he did not trustAnd that’s where J. wins out.)

One dictionary’s definitionof conservative is“characterized by cau-tion, moderation, or re-luctance to makechanges; avoiding ex-tremes.” Liberal is de-fined as “having politicalviews that favor civil lib-erties, democratic reforms, and the use ofgovernmental power topromote social progress.”But these words havehad very different mean-ings at different times. —STEPHEN VINCENT BENÉT, “ALEXANDER HAMILTON”

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Alexander Hamilton said thison June 12, 1787 during thedebates at the Federal Con-vention: “All communitiesdivide themselves into thefew and the many. The firstare the rich and wellborn,the other the mass of thepeople. . .The people are tur-bulent and changing; theyseldom judge or determineright. Give therefore to thefirst class a distinct, perma-nent share in the govern-ment. They will check the un-steadiness of the second,and. . .therefore will evermaintain good government.”Do you agree with Hamilton?

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and Jefferson a “liberal.” Have you ever heard people argue aboutconservatism and liberalism? Well, if you haven’t, you will. That ar-gument almost tore the country apart in 1800, and it continues today.Which is better: conservatism or liberalism? I think it is the tension andthe compromises between those two ideas that have helped make thiscountry great. We need Hamiltonians, we need Jeffersonians, and weneed to have them work together.

Which is just what has always happened in America. That is nottrue in many other nations.

In some countries, people who speak out against the governmentare put in jail, or even killed. Members of the losing party arethrown out of the country, or even killed. That doesn’t happen inAmerica. Here, since the time of President George Washington, win-ners and losers have always agreed to work together—as Thomas Jef-ferson and Alexander Hamilton did. What does that mean for you?Do you have to be afraid of being on the side of the losing party?Can you speak out for an unpopular cause? Of course you can,you’re an American.

This portrait of AlexanderHamilton was painted byAmerican artist John Trum-bull, and now hangs in theNational Portrait Gallery inWashington, D.C.

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Lots of people argue aboutmoney, so you may not be

surprised to learn that Ham-ilton and Jefferson did that,too. They had different visionsof the way they wanted theUnited States to grow. Hamiltonwanted to encourage businessand industry. Jefferson hopedto keep America a nation offarmers and landholders.

But the world was changing,and, whether Jefferson liked itor not, cities and factorieswere on their way. So was amoney economy.

In early America, most peoplewere self-sufficient farmers

and had little use for money.They bartered—traded—forwhat they needed. About thetime the United States becamea nation, we were turning into acapitalistic society.

Money, Money, Money, Money

Here are some words tohelp you understand aboutcapitalism: capital is money, orany goods or assets that canbe turned into money. If yourfamily owns a house or car thatcan be sold for cash, that is partof your family’s capital, alongwith any money you have inthe bank and in your pocket.

The grease that lubricates thewheels of a capitalistic econ-

omy is credit. Credit is borrow-ing power. If you want to start abusiness you will probably needto borrow money to do so. (Mostbusinesses are startedthat way.) The bank,or whoever lendsyou the money,needs to beconvinced youwill pay backthe loan. They

need to be sure your credit isgood. Sometimes you have topromise to give them yourhouse or car if you can’t payback the loan. The house (orwhatever the bank believes hasvalue) is called your collateral.

Governments need to bor-row money too. One way

they do that is by issuinggovernment bonds. A bondis a written promise to payback a loan. Usually, it isa promise to pay theamount loaned plus in-

terest. (Interest is a charge forborrowing money. Charging in-terest is how banks make theirmoney.) You can buy a govern-ment bond. You will be lendingmoney to your government andyou will earn interest, too.

Just like people, some gov-ernments pay their debtspromptly and have good credit.Some governments default ontheir bonds. That means theydon’t pay what they owe. Natu-rally, they have difficulties thenext time they want to borrowmoney.

In the time of George Wash-ington, when the United Stateswas just beginning, it owed alot of money. The Congress ofthe Articles of Confederationhad borrowed from citizens and

from other nations in orderto fight the Revolutionary

War. The debt was hugeand it was not beingpaid off properly. Thebondholders werenot getting interestpayments. They could

During theRevolution the colonies issuedtheir own money; the American troops were paid in“Continental dollars.” But the government had little gold or silver to backthe bills; soon any valueless object was said to be “not worth a Continental.”

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not get their moneyback for their bonds.

Some Americansthought that was allright. They thought itwas unfair for the newnation to be stuck with thedebts of the old government.Some people suggested thatthe new United States govern-ment ignore those old debts.

Many former soldiers andfarmers and everyday citi-

zens had lent the governmentmoney. That made them in-vestors. They held governmentbonds. Those citizen-investorsbelieved their bonds wereworthless. There were rumorsthat the government would notpay the debt. Many of those in-vestors sold their bonds formuch less than their face(promised) value. Some peoplewho held $100 governmentbonds sold them for $25. Theythought they were lucky to getanything for them.

The people who bought thebonds were speculators. Theywere taking a chance. Many ofthe speculators were wealthy,so they could afford to take achance.

That was the situation whenAlexander Hamilton becamesecretary of the treasury. Thegovernment debt was $64.12million. It would be very difficultto pay that enormous amountof money. “Couldn’t the UnitedStates start with a clean slate?”many people asked.

Jefferson and Madison be-lieved the new government

should not ber e s p o n s i b l efor the mis-

takes and debtsof the old. They

didn’t want to seespeculators get rich.

Hamilton disagreed. Hesaid, “States, like individuals,who observe their engage-ments, are respected and trust-ed, while the reverse is the fateof those who pursue an oppo-site conduct.” Hamilton decid-ed to pay off the debt. He gotCongress to do it. Jeffersonand Madison were furious.

But when Hamilton left office(when he stopped being

treasury secretary), in 1795,the United States had a finecredit rating. Everyone wantedto buy U.S. government bonds,because they knew they could

trust the new nation. Our coun-try was standing on sound fi-nancial feet.

Some people call capitalisma free enterprise system.

That sounds like a place wherepeople can do business with-out government regulations.But every modern country hasrules and regulations for busi-ness. You wouldn’t want a no-rules-at-all country. A dishonestgrocer could cheat and makehis scales say two pounds whenhe was selling only one pound.If ingredients weren’t listed onfood and cosmetic packages,anything might be inside, andyou’d never know—until you gotsick. But in a free enterprise sys-tem you can choose your ownbusiness; you can usually buyand sell where you wish; youhave a great deal of freedom.

The first American bank, Philadelphia’s Bank of the United States, cost so muchto construct that the builders had to finish the sides in brick instead of marble.

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