U.S. Political Economy

1. Executive Summary     2. The Economics    3. Presidential Politics    4. Supreme Court

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1. Executive Summary


Traditional view that the Revolution was fought for liberties Americans felt  as English citizens they already possessed. This should be merged with the political and economic view that the war was fought to transfer power from a British elite to a homegrown American power class.  

Needing money to pay for the Seven Years War with France, Parliament passed what it thought a entirely reasonable 1764 Sugar Act. It put a tariff  on sugar, coffee, wine and other imports into America. The colonies, were in recession which is usually the case after high wartime spending. They responded negatively with the resulting political slogan "No Taxation Without Representation."

British bungling, economic realities, the Age of Enlightenment and historic inevitability also played a role in why the war was fought.


The Economics

Needing money to pay for the Seven Years War with France, Parliament passed what it thought a entirely reasonable 1764 Sugar Act. It put a tariff  on sugar, coffee, wine and other imports into America. The colonies, were in recession which is usually the case after high wartime spending. They responded negatively with the resulting political slogan "No Taxation Without Representation."

Politicians were looking for more than a few seats in Parliament Wanted to drive a wedge between Mother England and the Colonies, they were seeking a larger prize.

Resistance to the sugar tax was negligible until a second 1765 Stamp Act put a stiff  tariff on all printed matter from newspapers and legal documents to playing cards. This was not a tax on trade but a direct tax and America protests grew louder and more violent. In Boston the house of British Governor Thomas Henderson was destroyed by an angry mob. In New York the home of the officer in charge of the Stamp Act was ransacked. This time boycotts were successful and the act was repealed.

The Politics

Elections 1788-1824 England's Political Influence Finally Ends and the South Has Some Success in Controlling Northern Business Interests.\
The causes of the American Revolution began as a disagreement over the way in which Great Britain treated the colonies versus the way the colonies felt they should be treated. Americans felt they deserved all the rights of Englishmen.

Federalists favored unity through  a strong central government, close ties to Britain, a centralized banking system, and close links between the government and the men of wealth who should run government.

Republicans under Jefferson Madison and Monroe  strongly opposed Alexander Hamilton's Federalist agenda. They stressed being more of a Republic where the individual is sovereign as opposed to democracy where the sovereign is the group, the majority.

Elections 1856-1896 Civil War Ends, Northeast Takes Control, The Gilded Age is Built on the Backs of the Poor, Especially Women, Immigrants, and Blacks  The civil War was followed by massive industrialization centered on rail roads, canals and steamships. Massive wealth was created. Farm mechanism lowered the cost of food and this coupled with science made for a somewhat more prosperous middle class. Immigrants suffered.

Supreme Court

1) Sovereignty of Federal Government Over Sates Governments begins with 1809 U.S v. Peters  Supreme Court (SC) voided a State Law.

2) Protection Individual Rights From Arbitrary Governmental Actions begins with 1810 Fletcher v. Peck affirmed inevitability of contracts between individual and between governments and individuals.

3) Supreme Court as "Supreme Constitutional Authority" begins with 1803 Marbury v. Madison granted Judicial Review  power to the Supreme Court

4) Protecting Business

Not Yet!



2. The Economics

The Democratic-Republican Party of Jefferson became factionalized in the 1820's so Jackson supporters began to form the modern Democratic Party.  It hoped to pass political power from an established elites to ordinary voters by ending the spoils system.


They continued the Bank War against eastern business interests by opposing the renewal of the Second Bank of the United States. Democrats also opposed Whig would build up industry with protectionism at the expense of taxpayers
These battles continue today! 

1789-93 Copper Panic occurred when copper coins were debased
by counterfeiting led to commercial freeze up in several northern States.
Hamilton's National Finance System helped for awhile
Panic of 1796-99 caused by a bursting land bubble
and a
lack of good money.  A Major northern financial panic resulted when
the central bank of England withheld species to minimize their insolvency due to war debts.
Many business failed
but prosperity continued in the south.
President Adams
kept US out of a European War. It cost the very old sickly man reelection.
1819 Panic occurred when the Embargo Act and the War of 1812
caused foreclosures, bank failures, unemployment, and slumps in agriculture and manufacturing.
1825 European Panic affected the US.
See The Most Fantastic Financial Swindle-of-All-Time from the St. Louis Federal Reserve Bank.
1837 Panic  was the first speculative fever Financial crisis.
It started in NY City when banks would only accept specie (gold and silver coinage)
because they questioned the value of state currencies.
1857 Panic was caused by over-consumption of Europe goods.
 This drained Specie during a period of overbuilding by competing railroads and rampant Western land speculation.

3. Presidential Politics

Election Summaries

Federalist Party

Republican Party

"And Now the Rest of the Story"

Election 1788 and 1792
General George Washington, unopposed,
was the Electoral College choice. His Farewell Address warned that a union of states would come under frequent attacks by foreign and domestic enemies, the importance of separation of powers and checks and balances, and political factions who obstruct the execution of laws.
George Washington 1788 to early 1793

Bill of Rights added to the Constitution but didn't apply to state law until 1929.

Executive privilege was used to keep Jay Treaty documents from Congress.Think Pentagon Papers.

The Whiskey Rebellion of 1791against federal taxes failed. Think It was the first of many fights against taxes.

Election 1796 had first political parties with the Jeffersonian-Republicans accusing the ruling Federalists of favoring an Oligarchy of the wealthy. Most favored Federalists Treasury secretary Alexander Hamilton who was not nominated as he had created many enemies and would not beat Jefferson. John Adams 1793 to early 2001
Alien and Sedition Acts limited citizen rights and sent news people to jail as paranoia swept America because a liberal democratic revolutions was ravaging Europe. War would cause most future Presidents to limit freedoms in the name of national security. 
Marbury v. Madison resulted in the process of
Judicial Review  Was the Court creating law? Did SC go from 3rd to 1st in the power battle?

Eection of 1800 an Electoral College tie was decided by an outgoing House of Reprehensive elected. Jefferson won over Federalist Adams. The three-fifths compromise and increased slave numbers meant more southern victories and much future consternation. Political philosophy attributed to of Jefferson influenced many for over 200 years.

T. Jefferson 18011808

Jefferson's political inconsistency was verified by Louisiana Purchase as he ignored his strict constructionist.

Embargo Act of 1807 was another example of his ignoring strict constitutional interpretation.  It halted trade with Europe because warring countries were not respecting freedom of the seas. It really hurt New England merchants and was perceived as favoring France over Brittan.

Election of 1808 had opposition to Jefferson's export ban but friend Madison easily won over Charles Pinckney.

Election of 1812
was fought in the shadow of the War of 1812. It was intriguing as Democratic-Republican candidate President  Madison was opposed by fellow party member D. Clinton the nephew of Madison's late VP G. Clinton. Candidate Clinton was anti-war in the North and for war in the South. Federalist R. King received no electoral votes.
J. Madison 18091816 Founding the Democratic-Republican Party

Father of the Bill of Rights Editor's Note: Jefferson and Madison both wanted a limited federal government, strict interpretation of the constitution, and no debt. But they wanted to buy Louisiana and West Florida so they temporarily stopped being Strict Constructionists.

Bank of United States charter was not renewed in an attempt to limit business influence but paying for the War of 1812 required such an institution and Madison agreed.

The Infant industry argument along with revenue collection resulted in the Tariff of 1816.

Election, 1816 began the Era of Good Feelings (18161824) and ended the First Party System. It was run by Eastern money interests who wanted protective tariffs with resulting revenue to help industry. Rural interests wanted low tariffs with resulting cheaper goods. The  Federalist's elitism had diminished their influence and their anti-war stance proved devastating when the war ended well. Plus some of Federalist beliefs were adopted by easy winner Monroe. J. Monroe 18171824
Implied powers were derived from the Necessary and Proper Clause during the 1819 McCulloch v. Maryland U.S. bank case . Congress won power battle.

Monroe Doctrine of 1823 keeps U.S out of European politics until WWI. It was also done to keep Europe out of the Caribbean and far western territories. These were to be US spheres of influence. European monarch, especially after the anarchy of the French Revolution, were very anti-democratic. Editor's Note: The Northeast business interest vs. South/West rural interest battles continues today.

Election of 1824 had the Democratic-Republican Party splintered with four presidential candidates. A Second Party System was coming. Later the Andrew Jackson faction evolved into the modern Democratic Party while factions led by John Quincy Adams and Henry Clay would become the National Republican Party. Then the Whig Party. The corrupt bargain elected J. Q. Adams for one term. J. Q. Adams 18251828 The "American System" of internal improvements of road-building, a national bank to help productive Eastern business and a national currency all initiated by Alexander Hamilton were financed by the 1828 "Tariff of Abominations. It later caused the Nullification Crisis as states questioned federal authority over states.  Editor's Note: This was beginning of the two continuing fights, 1) the use of tariff to finance government 2) states versus federal power.
J. Calhoun and H. Clay controlled the National Republican Party w
ith a less restrictive Federalists agenda than  A. Hamilton.

4. Supreme Court
The Power Grab Begins

Nine Supreme Court Rulings Allocated Political Power
John Marshall Chief Justice Who Saved the Nation by H.G. Unger

Rulings Established Power Centers

1) Sovereignty of Federal Government Over Sates Governments

1809 U.S v. Peters  Supreme Court (SC) voided a State Law.
1816 Martin v. Hunter Lessee
SC was Law of Land and could void state court decisions.
McCulloch v. Maryland limited state power giving implied power to the federal government.
1834 Gibbons v. Ogden state sponsored monopolies involving interstate commerce illegal

2) Protection Individual Rights From Arbitrary Governmental Actions

1810 Fletcher v. Peck affirmed inevitability of contracts between individual and
     between governments and individuals.

1819 Dartmouth College v. Woodward protected contractual property rights from
     arbitrary governmental seizure
Cohens v. Virginia extends SC protection to every citizen in every court of the land

3) Supreme Court as "Supreme Constitutional Authority"  

1803 Marbury v. Madison granted Judicial Review  power to the Supreme Court
1832 Worcester v. Georgia President uses federal troops to back S.C. decision.
     concerning Georgia's Cherokee laws.


4) Protecting Business

Some Just Took Power
Presidential Power Grab
1789 Washington let Treasury Hamilton borrow without the required Congressional authority.
1991 Washington
used Federal troops to fight Indians without Congressional declaration of war.
1791 Washington's
unauthorized proclamation,  troops to stop Pennsylvania Whiskey Rebellion.
1803 Jefferson
ignored Constitution when buying Louisiana.
1828- Jackson
made massive use of the presidential veto, expanded executive power at the expense of Congress and refused to enforce a Supreme ruling. See Reforms rotation and a spoils system

Congressional Power Grab   
1798 Alien and Seditions Act attacked anti-federal government activist by eliminating their Bill of Rights.
1801 Judiciary Act ignored the Constitution and removed Federal judges. Reversed by 1802 Judiciary Act.