Reaction to Hamilton’s Report was a wall of silence. The House tabled it offering no notice of when debate might begin. Behind the scenes Jefferson and Madison were preparing for a fight. Jefferson was a member of Washington’s cabinet. Madison was a representative in the House. They believed that bounties, government fees paid to investors to encourage manufacturing , were unconstitutional, bound to set harmful precedents. They also objected to the term “general welfare.”
“What do you think of the commentary on the terms ‘general welfare?…If not only the means, but the objects are unlimited, the parchment [of the Constitution] had better be thrown into the fire…”
James Madison[1]
“Bounties have in some instances been a successful instrument for the introd[uction]. Of new and useful manufactures. But the use of them has been found almost inseparable from abuse. The power of dispensing them has not been delegated by the Const[itutio]n. To the Gen[era]l. Gov[ern]m[e]nt. It remains with the state gov[ern]m[en]ts. Whose local information renders them competent judges of the particular arts and manufactures for which circumstances have matured them.”
Thomas Jefferson[2]
Jefferson met with Washington, arguing that if Hamilton’s interpretation of the Constitution meant that collecting taxes for general welfare allowed Congress to offer bounties for encouragement of manufactures it set a dangerous precedent. Congress could use a broad-based interpretation of general welfare to allocate funds for anything they saw fit. Jefferson’s notes following the meeting do not record Washington’s reaction, but the President expressed doubts about bounties in a letter to Hamilton claiming they would be ineffectual for the encouragement of manufactures.[3]
The Report never came to the House floor as a single package. Instead, the House dealt with aspects of the Report as issues arose. During a debate on compensation for cod fisheries, when Fisher Ames defined the bounty as a subsidy, and Elbridge Gerry re-cast it as a rebate, substituting “allowance made” for “bounty allowed,” the motion to appropriate funds passed. Hamilton fumed. Madison opposed bounties as unconstitutional. When others used the term “allowance” he quickly voted for the funds.[4]
Hamilton had better success with the Report’s recommendations on tariffs. In November 1791, following the defeat of American troops by Indians in the West, Congress needed funding for added protection on the frontier. Hamilton seized the opportunity suggesting that a tax increase on imports, a tariff, would not only raise the required funds but also promote manufacturing. The House passed the measure, but the voting exposed an ominous portent of sectional differences that would plague the country until the end of the Civil War. New England and Mid-Atlantic voted in favor of the bill, while the South voted against it. It only passed because Hamilton linked it to frontier protection.[5]
While Coxe and Carey favored tariffs for protection, Hamilton disliked tariffs arguing that they abetted both efficient and inefficient manufacturers, caused higher prices on imported goods, and encouraged smuggling. To Hamilton, tariffs were a means of producing revenue. While Coxe and Carey advocated tariffs to protect industries, Hamilton promoted bounties to encourage them.[6] In the following years Carey disagreed with Hamilton concerning negotiations with Britain, favoring Jefferson’s approach.[7]
TRANSITION TO PUBLISHER | Thomas Jefferson’s New Party
[1] American State Papers, Finance, V 1, 136 quoted in Douglas A. Irwin “Aftermath of the ‘Report on Manufactures,’” The Journal of Economic History, V. 64 N. 3 (September, 2004) 805.
[2] Papers of Thomas Jefferson, V. 23 (29 February 1792) 172-3, quoted in Irwin “Aftermath of Report” 805.
[3] Douglas A. Irwin, “The Aftermath of Hamilton’s ‘Report on Manufactures,’” The Journal of Economic History, V. 64, N. 3 (September, 2004) 806.
[4] Irwin, “Aftermath of Report” 806-8.
[5] Irwin, “Aftermath of Report,” 808-11. See also, Stephen Meardon, “A Reciprocity of Advantages” 450-4.
[6] Irwin, “The Aftermath of Hamilton’s Report,” 814.
[7] Meardon, “A Reciprocity of Advantages,” 454.