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Creation of national debt and the role of government

Why did Hamilton move so quickly to create large financial commitments by the federal government? Since we normally think of the federal debt as something bad, why did Hamilton think of it as something good and necessary for the national welfare?

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The most pressing problems facing the new government were economic. As a result of the revolution, the federal government had acquired a huge debt: $54 million including interest. The states owed another $25 million. Paper money issued under the Continental Congresses and Articles of Confederation was worthless. Foreign credit was unavailable.

The person assigned the task of resolving these problems was 32-year-old Alexander Hamilton. Born out-of-wedlock in the West Indies in 1757, he was sent to New York at the age of 15 for schooling. One of New York's most influential attorneys, he played a leading role in the Constitutional Convention and wrote 51 of the 85 Federalist Papers, urging support for the new Constitution. As Treasury Secretary, Hamilton designed a financial system that made the United States the best credit risk in the western world. The paramount problem facing Hamilton was a huge national debt. He proposed that the government assume the entire debt of the federal government and the states. His plan was to retire the old depreciated obligations by borrowing new money at a lower interest rate.

States like Maryland, Pennsylvania, North Carolina, and Virginia, which had already paid off their debts, saw no reason why they should be taxed by the federal government to pay off the debts of other states like Massachusetts and South Carolina. ...

Solution Summary

When, how, and why the American national debt began.

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