The federal government would pay off the parts of the debt that were owed to foreigners, thus establishing the international credit of the new government. But the new government would make the domestic debt permanent, selling government bonds that paid a guaranteed high interest rate. Hamilton also proposed a national bank to hold treasury funds and print and back the federal currency. The bank would be a government-chartered and government-regulated private corporation. The bank and the permanent debt would cement ties between private financiers and the government, and they would require an enlarged government bureaucracy and federal taxation. Hamilton asked for a federal excise tax on coffee, tea, wine, and spirits. The latter included whiskey, and the excise quickly became known as the Whiskey Tax. The tax would provide some of the funds to pay interest on the national debt.
It would also announce to western farmers that they had a national government that could tax them. Hamilton's plan increased the power of the national government. Hamilton's measures promised to stabilize government finances and to establish the government's reputation internationally and its authority in every corner of the republic. They would also dramatically centralize power in the national government. Many citizens and members of Congress distrusted Hamilton's plans. The assumption of state debts, the funding of the national debt, and stock sales for the Bank of the United States would reward commercial interests, nearly all of them from the Northeast, who invested in the bank and the bonds to pay the debt. Also, establishment of the bank required Congress to use the clause in the Constitution that empowers the legislature to make all laws which shall be necessary and proper to carry out its specified powers-a clause that some feared might allow Congress to do anything it wanted. Finally, the government would require a large civil service to administer the debt and collect taxes-a civil service that would be appointed by the executive. To Madison, Jefferson, and many others, Hamilton's plans for the national government too closely duplicated the powerful, debt-driven, patronage-wielding British government against which they had fought the revolution. Jefferson became the leader of a group that called themselves Democratic Republicans. They wanted the United States to remain a republic of the small, property-holding farmers who, they believed, were its most trustworthy citizens.
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