The federal administrations faced several economic challenges between 1789 and 1800. Three of the most significant of these challenges were raising revenue, establishing public credit, and the national bank. The early representatives of the United States had to deal with these important issues and apparently did a good job considering our government is still one of the greatest in the world and our economy is still strong today.
Revenue was the new government's most critical need. Given its importance, the congress made a revenue measure one of its first items of business. At first Madison proposed a tariff on all imports that would be used for revenue. However, disappointment from northern manufacturers, who wanted more protection from foreign competition, forced a compromise. Instead of taxing all imports, the compromise imposed higher tariffs on certain listed items only. Madison had hoped to wage war with Great Britain because of the fact that they had more foreign trade with the United States than any other country, yet had no treaty with the new nation. The businessmen of the north weren't in the mood to bring back economic pressures of the past because they didn't want to disrupt the economy. Hamilton, the Secretary of the Treasury, agreed with them.
The second of these important issues was establishing public credit. In 1790 Hamilton submitted the first and most important report to the House of Representatives. The First Report of the Public Credit made two recommendations to the House of Representatives. The first of these was that citizens holding government bonds could exchange them for new interest bearing bonds in order to fund the federal debt at face value. The second suggestion was the federal government's assumption of the state debts from the revolution, which added up to the amount of $21 million. There was a great controversy over the funding scheme because many farmers and soldiers who needed money immediately had sold their securities for a fraction of their value to speculators, who after reading Hamilton's first report were eager to buy them.
