Alexander Hamilton's Economic Plan for America — Reading Comprehension

The United States faced serious financial problems after the Revolutionary War. By 1789, the country owed millions of dollars to foreign nations and private citizens. Alexander Hamilton, the first Secretary of the Treasury, believed America needed a strong financial system to survive and grow. He developed an economic plan that aimed to solve these problems and build a stable government.

One major issue was the large national debt. The government and the states had borrowed money during the war, and creditors wanted repayment. Hamilton argued that the new federal government should assume, or take responsibility for, all state debts. He believed this would unite the country and show the world that America honored its obligations. As he wrote in his 1790 Report on Public Credit, "States, like individuals, who observe their engagements...inspire confidence and attract resources." This quote showed Hamilton’s belief that trust and credit were essential for national strength.

However, not everyone agreed with Hamilton’s plan. Many Southern states, such as Virginia, had already paid off most of their war debts. They felt it was unfair to help pay the debts of Northern states. Thomas Jefferson and other critics feared that a strong central government would threaten individual freedoms and state authority. This debate revealed a core American conflict: how much power should the national government have?

Hamilton’s plan also called for the creation of a national bank, known as the Bank of the United States. He believed a national bank would provide a safe place to store government money, make loans to businesses, and issue a stable national currency. Supporters argued this would encourage economic development. Opponents, including Jefferson, claimed the Constitution did not give Congress the power to create a bank. They worried it would favor wealthy merchants and Northern interests over farmers and the South.

Another part of Hamilton’s plan was a system of tariffs—taxes on imported goods. Tariffs would raise money for the government and protect American manufacturers from foreign competition. This idea led to further conflict. Southern states relied on imported goods and feared tariffs would make products more expensive. The debate over tariffs highlighted the different economic interests between regions.

Despite the opposition, Hamilton’s economic plan was mostly adopted. Congress agreed to assume state debts and create a national bank in 1791. Tariffs were implemented, though not as high as Hamilton wanted. These actions helped create a strong federal government and stabilized the nation’s finances. At the same time, they increased tensions between Federalists, who supported Hamilton’s vision, and Democratic-Republicans, who favored states’ rights.

The controversy over Hamilton’s plan showed the complexity of building a new nation. While the plan laid the foundation for American economic growth, it also deepened political divisions. The use of compromise—such as moving the nation’s capital to the South in exchange for debt assumption—demonstrates how leaders balanced competing interests. Hamilton’s vision shaped the country’s financial future, but it also sparked debates about government power that continue today.

Interesting Fact: In exchange for Southern support of his debt plan, Hamilton agreed to move the U.S. capital to a site along the Potomac River, which later became Washington, D.C.

Who created the economic plan?

What did the government owe after the war?

Where was the new capital located?

Why did Hamilton want to assume state debts?

What was one main goal of tariffs?

What did Jefferson fear about the bank?

Hamilton's plan was fully adopted. True or false?

What does 'tariffs' mean?