A Balancing of Interests

This article is excerpted from the book Outline of the U.S. Economy, published by the Bureau of International Information Programs.

The U.S. Constitution, ratified in 1788, sought to ground the new nation’s experiment in democracy in hard-won compromises of conflicting economic and regional interests.

“The framers of the Constitution wanted a republican government that would represent the people, but represent them in a way that protected against mob rule and maximized opportunities for careful deliberation in the best interests of the country as a whole,” says professor Anne-Marie Slaughter of Princeton University. “They insisted on a pluralist party system, a bill of rights limiting the power of the government, guarantees for free speech and a free press, checks and balances to promote transparent and accountable government, and a strong rule of law enforced by an independent judiciary.”

The lawmaking power was divided between two legislative houses. The Senate, whose membership was fixed at two senators from each state (and until 1914, who were chosen by the state legislatures rather than by direct election), was assumed to reflect business and landholder interests. The Founders created the House of Representatives, with membership apportioned among the states by population and elected directly by the people, to adhere more closely to the views of the broader public.

Another essential constitutional feature was the separation of powers into three governmental branches: legislative, executive, and judicial. James Madison, a primary author of the Constitution and, beginning in 1809, the nation’s fourth president, said that “the spirit of liberty … demands checks” on government’s power. “If men were angels, no government would be necessary,” he wrote, in defense of the separation principle. But Madison also believed that the separations could not be absolute and that each branch ought properly to possess some influence over the others.

The president thus appoints senior government leaders, chief federal prosecutors, and the top generals and admirals who direct the armed forces. But the Senate may accept or reject these candidates. Congress may pass bills, but a president’s veto can prevent their becoming law unless two-thirds of each congressional house votes to override the veto. The Supreme Court successfully claimed the right to strike down a law as unconstitutional, but the president retains the ability to nominate new Supreme Court justices. The Senate possesses an effective veto over those choices, and the Constitution assigns to Congress the power to fix the size of the Supreme Court and to restrict the court’s appellate jurisdiction.

The Constitution outlined the government’s role in the new republic’s economy. At Hamilton’s insistence, the federal government was granted the sole power to issue money; states could not do so. Hamilton saw this as the key to creating and maintaining a strong national currency and a creditworthy nation that could borrow to expand and grow.

There would be no internal taxes on goods moving between the states. The federal government could regulate interstate commerce and would have sole power to impose import taxes on foreign goods entering the country. The federal government was also empowered to grant patents and copyrights to protect the work of inventors and writers.

The initial U.S. protective tariff was enacted by the first Congress in 1789 to raise money for the federal government and to provide protection for U.S. manufacturers of glass, pottery, and other products by effectively raising the price of competing goods from overseas. Tariffs immediately became one of the young nation’s most divisive regional issues.

Hamilton championed the tariff as a necessary defensive barrier against stronger European manufacturers. Hamilton also promoted a decisive federal hand in the nation’s finances, successfully advocating the controversial federal assumption and full payment of the states’ Revolutionary War debts, much of which had been acquired at low prices by speculators during the war. These measures were popular among American manufacturers and financiers in New York, Boston, and Philadelphia, whose bonds paid for the country’s industrial expansion.

But the protective tariff infuriated the predominantly agricultural South. It raised the price of manufactured goods that southerners purchased from Europe, and it encouraged European nations to retaliate by reducing purchases of the South’s agricultural exports. As historian Roger L. Ransom observes, western states came down in the middle, objecting to high tariffs that raised the prices of manufactured goods but enjoying the federal tariff revenues that funded the new roads, railroads, canals and other public works projects that their communities needed. The high 1828 barriers, dubbed the “Tariff of Abominations” by southern opponents, escalated regional anger and contributed to sectional tensions that would culminate in the U.S. Civil War decades later.

By 1800, the huge tracts of land granted by British kings to colonial governors had been dispersed. While many large landholdings remained, particularly the plantations of the South, by 1796 the federal government had begun direct land sales to settlers at $2 per acre ($5 per hectare), commencing a policy that would be critical to America’s westward expansion throughout the 19th century. The rising tide of settlers pushed the continent’s depleted Native American inhabitants steadily westward as well. President Jackson made the displacement of Indian tribes government policy with the Indian Removal Act of 1830, the forced relocation of the Choctaw tribe to the future state of Oklahoma over what came to be called “the trail of tears.”

The first regional demarcations followed roughly the settlement patterns of various ethnic immigrant groups. Settlers from England followed the path of the first Puritans to occupy New England in the northeastern part of the country. Pennsylvania and other Middle Colonies attracted Dutch, German, and Scotch-Irish immigrants. There were French farmers in some of the South’s tidewater settlements while Spain provided settlers for California and the Southwest. But the sharpest line was drawn by the importation of African slaves, which began in America in 1619.

In the South, slave labor underpinned a class of wealthy planters whose crops — first tobacco, then cotton, sugar, wool, and hemp — were the nation’s principal exports. Small farm holders were the backbone of many new settlements and towns and were elevated by Jefferson and many others as symbols of an “American character” embodying independence, hard work and frugality.

Some of the Founding Fathers feared the direction in which the unschooled majority of Americans, a “rabble in arms” in one author’s famous description, might take their new country. But the image that prevailed was that of the farmer-patriot, once captured by the 19th-century philosopher Ralph Waldo Emerson’s depiction of the “embattled farmers” who had defied British soldiers, fired “the shot heard round the world,” and sparked the American Revolution.

President Jefferson’s purchase of the Louisiana territory in 1803 doubled the nation’s size and opened a vast new frontier that called out to settlers and adventurers.

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