1301 Lecture 22 Hamilton Econ Progs Part 1 — Transcript

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1. 0:03hey 1301 gang
2. 0:06okay we got the bill of rights passed
3. 0:09constitution established bill of rights
4. 0:11added to it
5. 0:12now the nation has to face probably its
6. 0:15most pressing
7. 0:16issue the economic situation
8. 0:19in 1790 the united states is 54 million
9. 0:24dollars in debt
10. 0:2554 million dollars i have no idea what
11. 0:27that is in today's money
12. 0:2940 million of that the vast majority 40
13. 0:32million of it
14. 0:33is owed to revolutionary war veterans
15. 0:35remember we talked about
16. 0:36those ious that these revolutionary war
17. 0:38veterans got
18. 0:39well a lot of that they haven't been
19. 0:40paid yet so 40 million revolutionary war
20. 0:43veterans
21. 0:4411 million to foreign governments those
22. 0:46foreign governments that helped the
23. 0:48united states in the revolution like
24. 0:49france spain holland
25. 0:51et cetera and then 3 million
26. 0:53miscellaneous plus
27. 0:54plus the state debts are an additional
28. 0:5830 million dollars the state's owed 30
29. 1:00million dollars
30. 1:01well alexander hamilton is given the job
31. 1:04he's the secretary of the treasury
32. 1:06alexander hamilton secretary of the
33. 1:07treasury is given the job
34. 1:10of doing something about this national
35. 1:12debt
36. 1:13he believed it had to be paid if the
37. 1:15united states is going to have good
38. 1:16credit
39. 1:17you got to pay your debts all right so
40. 1:22as far as the revolutionary war veterans
41. 1:24hamilton believed that these people
42. 1:26must be paid
43. 1:29but there was a question remember
44. 1:33the war ended in 1783 this is 1790
45. 1:38seven years these veterans have not been
46. 1:41paid
47. 1:42they've been holding on to these ious in
48. 1:45the meantime
49. 1:46speculators have gone around to a lot of
50. 1:48these veterans speculators
51. 1:54offering to buy these ious
52. 1:58at less than face value let's say you
53. 2:00have
54. 2:01uh you're a revolutionary war veteran
55. 2:03you are given an
56. 2:04iou for let's say 100 for your con
57. 2:08for your service in the continental
58. 2:09learning you've been hanging on to that
59. 2:11100
60. 2:12iou for a long time now
61. 2:15speculator comes along and says i will
62. 2:17give you 25
63. 2:20cash for that iou that you have not been
64. 2:24paid for
65. 2:2425 cash and you've unloaded this thing
66. 2:27for five six years
67. 2:2825 cash is looking pretty good to you so
68. 2:31a lot of these revolutionary war
69. 2:33veterans
70. 2:34are selling these ious
71. 2:37to these speculators at less than face
72. 2:39value
73. 2:40they figure they're never going to get
74. 2:41paid so now they have their
75. 2:43cash however much it is could be 35 50
76. 2:46whatever
77. 2:47and the speculators of course take a big
78. 2:49chance
79. 2:51that someday these things might get paid
80. 2:53all right so hamilton proposes to pay
81. 2:55off those ious
82. 2:57however little opposition arises
83. 3:00main opposition is led by james madison
84. 3:06madison a member of the house of
85. 3:07representatives from virginia
86. 3:10see hamilton proposes to pay off this 40
87. 3:14million dollars
88. 3:15to whoever currently holds the ious
89. 3:18whoever currently holds the ious whether
90. 3:20it be veteran
91. 3:22or speculator madison says no
92. 3:26no no whoever originally held the ious
93. 3:30the veterans those are the people who
94. 3:32should get paid
95. 3:33so hamilton proposes whoever currently
96. 3:35holds the ious
97. 3:36be it veteran or speculator madison says
98. 3:39no
99. 3:40only the veterans should be paid even
100. 3:42though they may have sold their
101. 3:43their ious they should still be paid
102. 3:46well all right
103. 3:47eventually hamilton oh by the way
104. 3:51hamilton is proposing to pay the value
105. 3:53of the iou
106. 3:54plus four percent interest all right
107. 3:57well on this one hamilton gets his way
108. 4:02hamilton gets his way whoever currently
109. 4:04holds the ious
110. 4:06is going to be paid so if you're one of
111. 4:08those speculators
112. 4:11who bought an iou for a 100 iou for 25
113. 4:16you are not going to get paid 100 face
114. 4:18value
115. 4:19plus 4 interest 104 that's a
116. 4:2279 dollar profit on your 25
117. 4:25investment meanwhile the veteran who
118. 4:28sold their iou for 25 dollars well i
119. 4:30hope he didn't throw that 25
120. 4:31away hopefully put it to good use
121. 4:33because that's all he's getting
122. 4:35all right now another issue
123. 4:38state debts so whoever currently holds
124. 4:42values they're getting paid
125. 4:45state debts hamilton proposes
126. 4:48the national government take over the
127. 4:50state debts of 30 million dollars
128. 4:54and once again madison
129. 4:57has some opposition to this and this
130. 4:59time he's joined by
131. 5:01thomas jefferson secretary of state
132. 5:03[Music]
133. 5:06if you look at your book on page 298
134. 5:08298.
135. 5:12to 98 under sectional differences 298
136. 5:18one yes
137. 5:24under sexual differences hamilton's
138. 5:26far-sighted proposals created a storm of
139. 5:28controversy
140. 5:30and because uh in part because many
141. 5:32people then since did not understand the
142. 5:34complexities
143. 5:35james madison hamilton's close ally in
144. 5:38the fight for the new constitution
145. 5:39broke with him over the federal
146. 5:41government assuming the state debts
147. 5:43taking over the state debts
148. 5:46madison was troubled that northern
149. 5:47states owed far
150. 5:49more than southern states four southern
151. 5:52states virginia north carolina georgia
152. 5:54maryland
153. 5:54had already paid off most of their war
154. 5:56debts the other states had not been so
155. 5:59conscientious
156. 6:00so so four states have paid off the bulk
157. 6:03of their debts
158. 6:05and madison did not think it was fair
159. 6:07that those states would pay nothing off
160. 6:09or
161. 6:09very little should get their whole debt
162. 6:12wiped out
163. 6:13meanwhile those four states that had
164. 6:15paid their debt well they wouldn't get
165. 6:16anything
166. 6:18well if you look at the next if you look
167. 6:20at uh paragraph number four
168. 6:23paragraph number four a thomas jefferson
169. 6:25intervenes he invites hamilton and
170. 6:27madison to a dinner one night
171. 6:29and by the end as it says in paragraph
172. 6:31four there by the end of the evening
173. 6:33they have reached a famous compromise
174. 6:35and first they agreed that the national
175. 6:38capital will be moved from new york city
176. 6:40to philadelphia for the next 10 years
177. 6:42and then move to a new site to be built
178. 6:44in a 10 mile square federal district
179. 6:46district across stride the potomac river
180. 6:49sandwiched between the slave states of
181. 6:50maryland and virginia
182. 6:54and in return hamilton agreed to find
183. 6:56the votes in congress to approve the
184. 6:57move to exchange
185. 6:58in exchange for madison pledging to find
186. 7:00the two votes needed to pass the debt
187. 7:02assumption plan
188. 7:03so this big compromise the constitution
189. 7:06provides that a new national
190. 7:08capital city will be built and so
191. 7:10hamilton agrees
192. 7:12that that national capital city will be
193. 7:13built on a site along the potomac river
194. 7:17kind of the unofficial border between
195. 7:18north and south
196. 7:20it would be taken land would be taken
197. 7:22from the states of maryland and virginia
198. 7:24both slave states
199. 7:25and the national capital would be built
200. 7:27on that land so hamilton is proposing
201. 7:30to move the national capital to
202. 7:31basically the middle of the country
203. 7:33potomac river i said where this city
204. 7:36will be built
205. 7:37unofficial border between north and
206. 7:39south so hamilton's proposing
207. 7:41proposing we will build the national
208. 7:43capital basically in the middle of the
209. 7:44country
210. 7:46in the middle of the original 13 states
211. 7:48and in return
212. 7:50madison will try to deliver the votes
213. 7:55what says yeah
214. 8:02and hamilton will find the votes to pass
215. 8:05the debt
216. 8:05so that does happen congress approves of
217. 8:09the
218. 8:09of the uh national government assuming
219. 8:13the 30 million dollars of the state
220. 8:15debts
221. 8:16and those four states that have paid off
222. 8:19their debt
223. 8:20well they will get paid for doing that
224. 8:22the four states that paid off their debt
225. 8:25they will get paid for doing that
226. 8:29all right
227. 8:37i think that is it for the report on
228. 8:39public credit
229. 8:42yes that's it for the report on public
230. 8:43credit so
231. 8:46whoever currently owes the ius will be
232. 8:47paid be a veteran or speculator
233. 8:50the government the us government will
234. 8:51start paying off the 11 million foreign
235. 8:53governments and the 3 million
236. 8:54miscellaneous
237. 8:55and the national government will take
238. 8:57over the debts of the states and in
239. 8:58return for that
240. 9:00the national capital will be moved
241. 9:04to the potomac river between maryland
242. 9:07and virginia
243. 9:09the unofficial the potomac river being
244. 9:10the unofficial border
245. 9:12between north and south all right now
246. 9:16so that's so that's one of hamilton's
247. 9:18proposals reporting public credit
248. 9:32all of hamilton's proposals are
249. 9:34controversial
250. 9:36this next one is the most controversial
251. 9:39of hamilton's programs
252. 9:50hamilton proposes creating a national
253. 9:53bank a national bank to be called
254. 9:57the bank of the united states
255. 10:11bank of the united states the purposes
256. 10:15of this bank
257. 10:16be a national bank it would be a
258. 10:18depository
259. 10:19of government money depository one a
260. 10:22depository of government money
261. 10:24any money coming into the national
262. 10:25government through taxes
263. 10:27land sales whatever it happens to be it
264. 10:29will be deposited
265. 10:30into the bank of the united states
266. 10:33second
267. 10:34the bank will be the instrument by which
268. 10:36the government pays the national debt
269. 10:40the bank will be the instrument by which
270. 10:41the national government pays the
271. 10:42national debt
272. 10:43you have one of those ious from the
273. 10:45revolution you can go to the bank of the
274. 10:47united states and get your money
275. 10:49back in the united states will pay the
276. 10:50foreign governments all right
277. 10:52and the third purpose finance economic
278. 10:55growth
279. 10:56finance the economic growth of the
280. 10:58country you want to start a business
281. 11:00you want to expand an existing business
282. 11:02you can go to the bank of the united
283. 11:04states and get
284. 11:05a loan for that well all right now
285. 11:08i mentioned this is probably the most
286. 11:10controversial of
287. 11:13hamilton's programs madison
288. 11:16and jefferson both oppose it on
289. 11:18constitutional grounds
290. 11:22madison and jefferson claim that the
291. 11:24constitution does not
292. 11:25authorize the national government to
293. 11:27create such a bank of the united states
294. 11:30they say look at the constitution look
295. 11:33at the constitution
296. 11:35nowhere is the word bank in the
297. 11:38constitution
298. 11:39and they are correct you read the
299. 11:41constitution today
300. 11:42you will not find the word bank in the
301. 11:44constitution so they said no you can't
302. 11:46do it
303. 11:47the the constitution does not give the
304. 11:49national government the authority
305. 11:51to establish such a bank well and
306. 11:54they're right the constitution does not
307. 11:56say that however
308. 11:58hamilton says well yes you won't find
309. 12:00the word bank in the constitution
310. 12:02but the constitution does
311. 12:05does authorize the federal government to
312. 12:07establish such a bank
313. 12:09you grab your book go to the back to the
314. 12:11constitution
315. 12:16let's see page page
316. 12:18[Music]
317. 12:20yes page a85
318. 12:24a85
319. 12:35page 85 and 86
320. 12:39this is article 1 section 8 of the
321. 12:41constitution this is
322. 12:43article 8 section 1 list the powers
323. 12:46of the congress the powers of the
324. 12:48congress article 1 section 8.
325. 12:52and under article 1 section 8 if you
326. 12:53look at the first paragraph
327. 12:56look at the first paragraph there the
328. 12:59congress shall have the power to land
329. 13:01taxes duties imposed and exercises x
330. 13:04type
331. 13:04x sizes or type of tax to pay the debts
332. 13:07so congress should have the power to lay
333. 13:08and collect taxes
334. 13:10various kinds of taxes congress shall
335. 13:12have the power to pay the debt
336. 13:14and provide for the general welfare all
337. 13:16right
338. 13:17so congress collects these taxes
339. 13:21where is that money going to be
340. 13:22deposited
341. 13:25congress is going to pay the debt
342. 13:28which government entity is going to do
343. 13:30that well
344. 13:31hamilton says you have to look at the
345. 13:33very last paragraph
346. 13:34of article 1 section 8 which is here on
347. 13:37page 886
348. 13:39last paragraph of article 1 section 8.
349. 13:42it says congress
350. 13:45congress shall have the power to make
351. 13:47all laws
352. 13:48which shall be necessary and proper
353. 13:51for carrying into execution the
354. 13:53foregoing powers
355. 13:54in other words congress can make laws
356. 13:57that are
357. 13:58necessary and proper to carry out
358. 14:02the functions of congress such as
359. 14:05collecting taxes paying the debt so
360. 14:07hamilton argues a bank of the united
361. 14:09states
362. 14:10is quote necessary and
363. 14:14proper to collect taxes
364. 14:18to deposit the federal money and to pay
365. 14:21the debt
366. 14:22yes the word bank isn't in there but
367. 14:24this this is known as the necessary
368. 14:26and proper clause of the constitution
369. 14:29hamilton says the bank is
370. 14:30necessary and proper to collect taxes
371. 14:35to pay the debt to have a place to
372. 14:38deposit
373. 14:39the government's money okay
374. 14:45hamilton and jefferson they don't like
375. 14:47or excuse me
376. 14:49hamilton sorry madison and jefferson
377. 14:52they're not sold on it now this bank of
378. 14:54the united states
379. 14:55this is the first major argument
380. 15:02this is the first major argument in
381. 15:04strict
382. 15:08versus loose interpretation of the
383. 15:10constitution
384. 15:12how do you interpret the constitution
385. 15:14strictly if you if you interpret the
386. 15:16constitution
387. 15:17strictly that means the constitution
388. 15:20says this
389. 15:20and that's all you can do if the
390. 15:22constitution does not specifically grant
391. 15:24a power to the government then the
392. 15:26government cannot do that power
393. 15:28and that's where madison and jefferson
394. 15:30are coming from
395. 15:31loose interpretation is madison yeah but
396. 15:33we have this necessary and proper clause
397. 15:35which says the government can do
398. 15:36whatever is
399. 15:37necessary and proper to carry out its
400. 15:39functions like collecting taxes and
401. 15:41paying the debts
402. 15:42and putting it into a bank of the united
403. 15:44states this debate strict versus loose
404. 15:46interpretation is still with us today
405. 15:49and and people who believe in strict
406. 15:50interpretation they say oh well we have
407. 15:52to go back
408. 15:53to the what the authors of the
409. 15:56constitution intended
410. 15:57well all right you go back to what the
411. 15:59authors of the constitution intended
412. 16:01madison helped write the constitution
413. 16:04hamilton right
414. 16:04helped write the constitution and they
415. 16:06could not agree on what it said
416. 16:09so i can lead 200 plus years later say
417. 16:12well we know that
418. 16:14no all right okay well eventually the
419. 16:17bank of the united states passes
420. 16:18congress
421. 16:20and it goes to president washington for
422. 16:22his signature you remember under the
423. 16:23constitution the president has to
424. 16:24approve laws
425. 16:27washington is leaning towards vetoing
426. 16:30the bank because right now he's leaning
427. 16:32towards madison and jefferson
428. 16:36unless the constitution specifically
429. 16:37says you can do it then you can't do it
430. 16:40strict interpretation however he has
431. 16:43both sides write an essay
432. 16:47defending their position hamilton writes
433. 16:49his very long
434. 16:50very eloquent essay in defense of his
435. 16:54loose interpretation of his necessary
436. 16:56improper
437. 16:57i've tried to read it i couldn't
438. 17:00you ever get insomnia some night read
439. 17:02hamilton's defense of the bank of the
440. 17:04united states you'll get through like
441. 17:05two sentences and you'll go to sleep
442. 17:08but it was very eloquent washington read
443. 17:10it
444. 17:11he was swayed by hamilton's argument and
445. 17:14the bank
446. 17:15and he signed the law establishing the
447. 17:18bank
448. 17:18of the united states so it became law
449. 17:22in 1791
450. 17:25it had a charter to run for 20 years
451. 17:28this bank is going to continue to be
452. 17:30controversial
453. 17:31in american history all right
454. 17:35okay but it does pass congress and
455. 17:38washington ultimately signs it into law
456. 17:41loose versus strict interpretation of
457. 17:42the constitution
458. 17:44still a controversy voice today
459. 17:47all right hamilton's third report
460. 17:51third program
461. 17:56is his report on manufacturing
462. 18:00report on manufacturing
463. 18:26sorry
464. 18:28now i'm gonna bring this take this one
465. 18:30up next time
466. 18:31so all right i'm gonna take this one up
467. 18:34next time so we'll see you there
468. 18:35all right