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The Historic Significance of Alexander Hamilton’s Financial Reforms

Find out why his likeness is still on the $10 bill.

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  • Hamilton authoring the first draft of the U.S. Constitution in 1787.Photo Credit: Wikipedia

One of the Founding Fathers of the United States, Alexander Hamilton is remembered for a lot of things—and thanks to the smash hit Broadway musical by Lin-Manuel Miranda, that is unlikely to change anytime soon. The biography of Alexander Hamilton has it all. War, intrigue, political maneuvering, a sordid affair, friends turned to enemies, betrayal, and a tragic death in a duel with the Vice President of the United States. Something that can easily get lost amid all the melodrama, however, is the very important role that Hamilton played in creating our national economy as it exists today.

When George Washington became the first President of the United States in 1789, he appointed Alexander Hamilton the first secretary of the treasury. In the wake of the Revolutionary War, the fledgling government was in dire financial straits. Both the national and state governments had borrowed heavily to fund the war effort, and the day when they would have to pay back those numerous bonds was fast approaching. At the same time, the nation had raised barely enough money in taxes to keep the government afloat day to day.

Hamilton’s ambitious plan to demonstrate “adequate support of the public credit” involved more than just paying off the debts incurred during the war, however. A federalist—indeed, the first leader of the Federalist Party—Hamilton wanted to strengthen the national government, even at the expense of state power. This and other political ideals were woven into his plans to pay off the national debt by having the federal government assume the debts that had been incurred by individual states during the war.

This proposition did not meet with immediate support, however. Southern states, led by James Madison, opposed the idea. Madison argued that the plot would reward speculators who had purchased government-issued bonds from their holders for pennies on the dollar when the original bondholders were desperate for money following the war. This led to a deadlock in Congress, one that was ultimately broken by the Compromise of 1790.

The compromise did more than ensure that Hamilton’s plan to purchase state debt would be enacted. It also permanently established the location of the nation’s capital in the place where it still stands today. This was a way to win over members of Congress from Southern states, who opposed the funding program on various points.

Ever since the end of the war, the Southern states had been trying to place the nation’s capital in the South, and as part of the Compromise of 1790, Hamilton agreed to throw his support behind establishing the capital on the border of Maryland and Virginia. Historian Jacob Cooke has called the compromise “one of the most important bargains in American history.”

Such a plan, which was designed to repay the fledgling nation’s debts in full, so that the United States could maintain the trust of investors for the future, would have been enough to secure Alexander Hamilton an important place in national economic history if it had been all he ever accomplished, but it was only one of several reforms that he pushed through during his tenure as secretary of the treasury.

Between 1790 and 1791, Hamilton detailed many of his economic goals in four reports to Congress. The first two reports were primarily occupied with the repayment of the nation’s debts. The third, however, had even more far-reaching implications. Titled Report on a National Bank, Hamilton’s third report proposed to establish a national bank, similar to the Bank of England, as a means of regulating currency.

Despite opposition from James Madison and Secretary of State Thomas Jefferson, the “bank bill” passed Congress, and was ultimately signed into law by George Washington. This helped to establish a tradition of a “central bank” that still exists in the United States government today, but its effects were also even more far-reaching.

In arguing for his national bank, Hamilton advanced the idea that the Constitution granted more powers than those it expressly enumerated. Specifically, he argued that these implied powers included the right to create a national bank. This argument, sometimes called a “doctrine of implied powers,” became the basis for many expansions to the Constitution in subsequent years, and is still used as precedent in interpreting the document in Supreme Court cases to this day.

Hamilton saved his longest report for December 5, 1791, when he submitted his Report on Manufactures. This has been called Hamilton’s “most farsighted” economic doctrine, arguing that the government had a duty to support domestic manufacturing in a variety of ways. One of these was the passing of “protective tariffs,” added expenses on imported goods that would help to make American-made products cheaper than those purchased from overseas.

Like many of Hamilton’s ideas, this faced stiff opposition in Congress, especially from Southern states. At the time, Northern states enjoyed considerable manufacturing infrastructure, while Southern states were heavily agricultural, and imported many goods from overseas. Seeing the tariffs as an undue burden on Southern states, many members of Congress opposed them, and though some tariffs were eventually enacted, they were much less draconian than the “protective tariffs” initially suggested by Hamilton.

Over the years, there have not been many people on national currency who were not former presidents. Indeed, when a 1928 presidential commission undertook the task of redesigning the nation’s currency, they recommended that only former presidents should ever appear on money, citing them as “more familiar” to the public than other potential honorees. However, even that committee made three exceptions: Benjamin Franklin, Civil War-era treasury secretary Salmon P. Chase, and Alexander Hamilton.

That’s why Alexander Hamilton’s face continues to stare out from the front of the $10 bill, even to this day. In 2015, then Treasury Secretary Jack Lew announced that a redesigned $10 bill would be in circulation by 2020, featuring the portrait of an as-yet-unchosen woman. However, the outcry against removing Hamilton from the bill was considerable, and the plans were eventually scrapped, though redesigned bills of various denominations including historic figures such as Harriet Tubman may still be on the way. For now, Hamilton’s likeness remains on the $10 bill—a fitting way to pay tribute to someone who helped to create much of our national economic system as we know it today.