With the start of the new government under the Constitution, President George Washington nominated his former chief of staff, Alexander Hamilton, to the office of Secretary of the Treasury. Hamilton wanted a strong national government with financial credibility. Hamilton proposed the ambitious Hamiltonian economic program that involved assumption of the state debts incurred during the Revolutionary War, creating a national debt and the means to pay it off, and setting up a national bank. James Madison, Hamilton's ally in the fight to ratify the United States Constitution, dropped his nationalism in response to demands in his Virginia district and joined with Jefferson in opposing Hamilton's program.
By 1790 Hamilton started building a nationwide coalition. Realizing the need for vocal political support in the states, he formed connections with like-minded nationalists and used his network of treasury agents to link together friends of the government, especially merchants and bankers, in the new nation's dozen major cities. His attempts to manage politics in the national capital to get his plans through Congress, then, "brought strong responses across the country. In the process, what began as a capital faction soon assumed status as a national faction and then, finally, as the new Federalist party.
By 1792 or 1794 newspapers started call Hamilton supporters "Federalists" and their opponents "Democrats", "Republicans", Jeffersonians (people who supported Thomas Jefferson, the 3rd president), or Democratic-Republicans. The Federalist party became popular with businessmen, mostly people from New England, and Democratic-Republicans were mostly farmers who opposed a strong central government. The Congregationalists and the Episcopalians approved the Federalist mingling of church and state; the Presbyterians, Baptists, and other minority denominations tended to oppose them. These are generalizations; there are special cases: the Presbyterians of upland North Carolina, who had immigrated just before the Revolution, and often been Tories, became Federalists.
The state networks of both parties began to operate in 1794 or 1795. Patronage now became a factor. The winner-take-all election system opened a wide gap between winners, who got all the patronage, and losers, who got none. Hamilton had over 2000 Treasury jobs to dispense, while Jefferson had one part-time job in the State Department, which he gave to journalist Philip Freneau. In New York, however, George Clinton won the election for governor and used the vast state patronage fund to help the Republican cause.
Washington tried and failed to moderate the feud between his two top cabinet members. He was re-elected without opposition in 1792. The Democratic-Republicans nominated New York's Governor Clinton to replace Federalist John Adams as vice president, but Adams won. The balance of power in Congress was close, with some members still undecided between the parties. In early 1793, Jefferson secretly prepared resolutions for William Branch Giles, Congressman from Virginia, to introduce what would have repudiated the Treasury Secretary and destroyed the Washington Administration. Hamilton brilliantly defended his administration of the nation's complicated financial affairs, which none of his critics could decipher until the arrival in Congress of the brilliant Albert Gallatin in 1793.
Federalists immediately claimed the Hamiltonian program had restored national prosperity, as shown in one 1792 anonymous newspaper essay:
"To what physical, moral, or political energy shall this flourishing state of things be ascribed? There is but one answer to these inquiries: Public credit is restored and ESTABLISHED. The general government, by uniting and calling into action the pecuniary resources of the states, has created a new capital stock of several millions of dollars, which, with that before existing, is directed into every branch of business, giving life and vigor to industry in its infinitely diversified operations. The enemies of the general government, the funding act and the National Bank may bellow tyranny, aristocracy, and speculators through the Union and repeat the clamorous din as long as they please; but the actual state of agriculture and commerce, the peace, the contentment and satisfaction of the great mass of people, give the lie to their assertions."
The affiliation of many Congressmen in the earliest years is an assignment by later historians. The parties were slowly coalescing groups; at first there were many independents. Cunningham noted that only about a quarter of the House of Representatives, up until 1794, voted with Madison as much as two-thirds of the time, and another quarter against him two-thirds of the time, leaving almost half as fairly independent.
Paris in 1793 sent a new minister, Edmond-Charles Genêt (known as Citizen Genêt), who systematically mobilized pro-French sentiment and encouraged Americans to support France's war against Britain and Spain. Genet funded local Democratic-Republican Societies that attacked Federalists. He hoped for a favorable new treaty and for repayment of the debts owed to France. Acting aggressively, Genêt outfitted privateers that sailed with American crews under a French flag and attacked British shipping. He tried to organize expeditions of Americans to invade Spanish Louisiana and Spanish Florida. When Secretary of State Jefferson told Genêt he was pushing American friendship past the limit, Genêt threatened to go over Washington's head and rouse public opinion on behalf of France. Even Jefferson agreed this was blatant foreign interference in domestic politics. Genêt's extremism seriously embarrassed the Jeffersonians and cooled popular support for promoting the French Revolution and getting involved in its wars. Recalled to Paris for execution, Genêt kept his head and instead went to New York, where he became a citizen and married the daughter of Governor Clinton. Jefferson left office, ending the coalition cabinet and allowing the Federalists to dominate.
The Jay Treaty in 1794–95 was the effort by Washington and Hamilton to resolve numerous difficulties with Britain. Some of these issues dated to the Revolution; such as boundaries, debts owed in each direction, and the continued presence of British forts in the Northwest Territory. In addition America hoped to open markets in the British Caribbean and end disputes stemming from the naval war between Britain and France. Most of all the goal was to avert a war with Britain — a war opposed by the Federalists, that some historians claim the Jeffersonians wanted.
As a neutral party, the United States argued, it had the right to carry goods anywhere it wanted. The British nevertheless seized American ships carrying goods from the French West Indies. The Federalists favored Britain in the war, and by far most of America's foreign trade was with Britain; hence a new treaty was called for. The British agreed to evacuate the western forts, open their West Indies ports to American ships, allow small vessels to trade with the French West Indies, and set up a commission that would adjudicate American claims against Britain for seized ships, and British claims against Americans for debts incurred before 1775. One possible alternative was war with Britain, a war that America was ill-prepared to fight.
The Republicans wanted to pressure Britain to the brink of war (and assumed that America could defeat a weak Britain). Therefore they denounced the Jay Treaty as an insult to American prestige, a repudiation of the French alliance of 1777, and a severe shock to Southern planters who owed those old debts, and who were never to collect for the lost slaves the British captured. Republicans protested against the treaty, but the Federalists controlled the United States Senate and they ratified it by exactly the necessary ⅔ vote, 20–10, in 1795. The pendulum of public opinion swung toward the Republicans after the Treaty fight, and in the South the Federalists lost most of the support they had among planters.
Insurgents shut the courts and hounded federal officials, but Jeffersonian leader Albert Gallatin mobilized the western moderates, and thus forestalled a serious outbreak. Washington, seeing the need to assert federal supremacy, called out 13,000 state militia, and marched toward Pittsburgh to suppress this Whiskey Rebellion. The rebellion evaporated in late 1794 as Washington approached, personally leading the army (the first and only example of a President ever doing so). The rebels dispersed and there was no fighting. Federalists were relieved that the new government proved capable of overcoming rebellion, while Republicans, with Gallatin their new hero, argued there never was a real rebellion and the whole episode was manipulated in order to accustom Americans to a standing army.
Angry petitions flowed in from three dozen Democratic-Republican Societies created by Citizen Genêt. Washington attacked the societies as illegitimate; many disbanded. Federalists now ridiculed Republicans as "democrats" (meaning in favor of mob rule) or "Jacobins" (a reference to The Terror in France).
Washington refused to run for a third term, establishing a two-term precedent that was to stand until 1940 and eventually to be enshrined in the Constitution as the 22nd Amendment. Washington warned in his Farewell Address against involvement in European wars, and lamented the rising North-South sectionalism and party spirit in politics that threatened national unity. The party spirit, he lamented:
Hamilton distrusted Vice President Adams (and Adams felt the same way about Hamilton), but was unable to block his claims to the succession. The election of 1796 was the first partisan affair in the nation's history, and one of the more scurrilous in terms of newspaper attacks. Adams swept New England and Jefferson the South, with the middle states leaning to Adams. Thus Adams was the winner by a margin of three electoral votes, and Jefferson, as the runner-up, became Vice President under the system set out in the Constitution prior to the ratification of the 12th Amendment.
Foreign affairs continued to be the central concern of American politics, for the war raging in Europe threatened to drag in the United States. The new President was a loner, who made decisions without consulting Hamilton or other High Federalists. Benjamin Franklin once quipped that Adams was a man always honest, often brilliant, and sometimes mad. Adams was popular among the Federalist rank and file, but had neglected to build state or local political bases of his own, and neglected to take control of his own cabinet. As a result his cabinet answered more to Hamilton than to himself.
To silence Administration critics, the Federalists passed the Alien and Sedition Acts in 1798. The Alien Act empowered the President to deport such aliens as he declared to be dangerous. The Sedition Act made it a crime to print false, scandalous, and malicious criticisms of the federal government, but it conspicuously failed to criminalize criticism of Vice President Thomas Jefferson. Several Republican newspaper editors were convicted under the Act and fined or jailed, and three Republican newspapers were shut down. During this period, Jefferson and Madison secretly wrote the Kentucky and Virginia Resolutions passed by the two states' legislatures, that declared the Alien and Sedition Acts unconstitutional, and insisted the states had the power to nullify federal laws.
Undaunted, the Federalists created a navy, with new frigates, and a large new army, with Washington in nominal command and Hamilton in actual command. To pay for it all they raised taxes on land, houses and slaves, leading to serious unrest. In one part of Pennsylvania the Fries' Rebellion broke out, with people refusing to pay the new taxes. John Fries was sentenced to death for treason, but received a pardon from Adams. In the elections of 1798 the Federalists did very well, but the tax issue started hurting the Federalists in 1799.
Early in 1799, Adams decided to free himself from Hamilton's overbearing influence, stunning the country and throwing his party into disarray by announcing a new peace mission to France. The mission eventually succeeded, the "Quasi-War" ended, and the new army was largely disbanded. Hamiltonians called Adams a failure, and in turn Adams fired Hamilton's supporters still in the cabinet.
Hamilton and Adams intensely disliked one another, and the Federalists split between supporters of Hamilton ("High Federalists") and supporters of Adams. Hamilton became embittered over his loss of political influence and wrote a scathing criticism of Adams' performance as President of the United States in an effort to throw Federalist support to Charles Cotesworth Pinckney; inadvertently this split the Federalists and helped give the victory to Jefferson.
The election hinged on New York: its electors were selected by the legislature, and given the balance of north and south, they would decide the presidential election. Aaron Burr brilliantly organized his forces in New York City in the spring elections for the state legislature. By a few hundred votes he carried the city—and thus the state legislature—and guaranteed the election of a Democratic-Republican President. As a reward he was selected by the Republican caucus in Congress as their vice presidential candidate. Hamilton, knowing the election was lost anyway, went public with a sharp attack on Adams that further divided and weakened the Federalists.
Because the Republicans failed to plan by instructing at least one of their electors to vote for Jefferson but not Burr in the electoral college, Burr and Jefferson received the same vote, 73 each, so it was up to the House of Representatives to break the tie. There the Federalists were strong enough to deadlock the election, with some talk of their throwing their support to elect Burr. Hamilton considered Burr to be a scoundrel and threw his weight into the contest, allowing Jefferson to take office. (This unintended complication led directly to the proposal and ratification of the 12th Amendment.) "We are all republicans—we are all federalists," proclaimed Jefferson in his inaugural address. His patronage policy was to let the Federalists disappear through attrition. Those Federalists such as John Quincy Adams (John Adams' own son) and Rufus King willing to work with him were rewarded with senior diplomatic posts, but there was no punishment of the opposition.
Jefferson had a very successful first term, typified by the Louisiana Purchase. The thoroughly disorganized Federalists hardly offered an opposition to his reelection (by this point, the Federalists were largely without a leader after the untimely death of Alexander Hamilton). In New England and in some districts in the middle states the Federalists clung to power, but the tendency from 1800 to 1812 was steady slippage almost everywhere, as the Republicans perfected their organization and the Federalists tried to play catch-up. Some younger leaders tried to emulate the Democratic-Republican tactics, but their overall disdain of democracy along with the upper class bias of the party leadership eroded public support. In the South, the Federalists steadily lost ground everywhere.
Massachusetts and Connecticut were the party strongholds. One historian explains how well organized the party was in Connecticut:
It was only necessary to perfect the working methods of the organized body of office-holders who made up the nucleus of the party. There were the state officers, the assistants, and a large majority of the Assembly. In every county there was a sheriff with his deputies. All of the state, county, and town judges were potential and generally active workers. Every town had several justices of the peace, school directors and, in Federalist towns, all the town officers who were ready to carry on the party's work. Every parish had a "standing agent," whose anathemas were said to convince at least ten voting deacons. Militia officers, state's attorneys, lawyers, professors and schoolteachers were in the van of this "conscript army." In all, about a thousand or eleven hundred dependent officer-holders were described as the inner ring which could always be depended upon for their own and enough more votes within their control to decide an election. This was the Federalist machine.
After 1800 the major Federalist role came in the judiciary. Although Jefferson managed to repeal the Judiciary Act of 1801 and thus dismiss many Federalist judges, their effort to impeach Supreme Court Justice Samuel Chase in 1804 failed. Led by the last great Federalist, John Marshall as Chief Justice from 1801 to 1835, the Supreme Court carved out a unique and powerful role as the protector of the Constitution and promoter of nationalism.
President Jefferson imposed an embargo on Britain in 1807; the Embargo Act of 1807 prevented all American ships from sailing to a foreign port. The idea was that the British were so dependent on American supplies that they would come to terms. For 15 months the Embargo wrecked American export businesses, largely based in the Boston-New York region, causing a sharp depression in the Northeast. Evasion was common and Jefferson and Treasury Secretary Gallatin responded with tightened police controls more severe than anything the Federalists had ever proposed. Public opinion was highly negative, and a surge of support breathed fresh life into the Federalist party. The Republicans (slowly assuming the name "Democratic-Republicans") nominated Madison for the presidency in 1808. Federalists, meeting in the first-ever national convention, considered the option of nominating Vice President George Clinton as their own candidate, but balked at working with him and again chose Charles Cotesworth Pinckney, their 1804 candidate. Madison lost New England but swept the rest of the country and carried a (Democratic-)Republican Congress. Madison dropped the Embargo, opened up trade again, and offered a carrot and stick approach. If either France or Britain agreed to stop their violations of American neutrality, the U.S. would cut off trade with the other country. Tricked by Napoleon into believing France had acceded to his demands, Madison turned his wrath on Britain.
Thus the nation was at war during the 1812 presidential election, and war was the burning issue. In their second national convention, the Federalists — now the peace party — nominated DeWitt Clinton, the dissident Democratic-Republican mayor of New York City, and an articulate opponent of the war. Madison ran for reelection promising a relentless war against Britain and an honorable peace. Clinton, denouncing Madison's weak leadership and incompetent preparations for war, could count on New England and New York. To win he needed the middle states and there the campaign was fought out. Those states were competitive and had the best-developed local parties and most elaborate campaign techniques, including nominating conventions and formal party platforms. The Tammany Society in New York City went all out for Madison; the Federalists finally adopted the club idea in 1809. Their Washington Benevolent Societies were semi-secret membership organizations which played a critical role in every northern state in holding meetings and rallies and mobilizing Federalist votes. New Jersey went for Clinton, but Madison carried Pennsylvania and thus was reelected with 59% of the Electoral votes.
The war was especially unpopular in New England: the declaration of war had been driven by Westerners and Southerners looking to grab more land from the Spanish in Florida and the British in Canada and to deny support to hostile British-armed American Indian tribes in the Northwest and Southwest Territories. Moreover, the New England economy was highly dependent on trade, and the British blockade threatened to destroy it entirely. In 1814, the British finally managed to enforce their blockade on the New England coast, so the Federalists of New England sent delegates to the Hartford Convention in December 1814.
During the proceedings of the Hartford Convention, secession from the Union was discussed, though the resulting report listed a set of grievances against the Democratic-Republican federal government and proposed a set of Constitutional amendments to address these grievances. It also indicated that if these proposals were ignored, then another convention should be called and given "such powers and instructions as the exigency of a crisis may require". The Federalist Massachusetts Governor had already secretly sent word to England to broker a separate peace accord. Three Massachusetts "ambassadors" were sent to Washington to negotiate on the basis of this report.
By the time the Federalist "ambassadors" got to Washington, the war was over and news of Andrew Jackson's stunning victory in the Battle of New Orleans had raised American morale immensely. The "ambassadors" slunk back to Massachusetts, but not before they had done fatal damage to the Federalist Party. The Federalists were thereafter associated with the disloyalty and parochialism of the Hartford Convention, and destroyed as a political force. They fielded their last presidential candidate (Rufus King) in 1816. With its passing partisan hatreds and newspaper feuds on the decline, the nation entered the "Era of Good Feelings", marked by the absence of all but one political party. The last traces of Federalist activity came in Delaware localities in the 1820s.
As time went on, the Federalists lost appeal with the average voter and were generally not equal to the tasks of party organization; hence, they grew steadily weaker as the political triumphs of the republican party grew. For economic and philosophical reasons, the Federalists tended to be pro-British – the United States engaged in more trade with Great Britain than with any other country – and vociferously opposed Jefferson's Embargo Act of 1807 and the seemingly deliberate provocation of war with Britain by the Madison Administration. During "Mr. Madison's War", as they called it, the Federalists attempted a comeback but the patriotic euphoria that followed the war undercut their pessimistic appeals.
After 1816 the Federalists had no national influence apart from John Marshall's Supreme Court. They had some local support in New England, New York, eastern Pennsylvania, Maryland and Delaware. After the collapse of the Democratic-Republican Party in the course of the 1824 presidential election, most surviving Federalists (including Daniel Webster) joined former Democratic-Republicans like Henry Clay to form the National Republican Party, which was soon combined with other anti-Jackson groups to form the Whig Party. Some former Federalists like James Buchanan and Roger B. Taney became Jacksonian Democrats. The name "Federalist" came increasingly to be used in political rhetoric as a term of abuse, and was denied by the Whigs, who pointed out that their leader Henry Clay was the Democratic-Republican party leader in Congress during the 1810s.
The "Old Republicans," led by John Randolph of Roanoke, refused to form a coalition with the Federalists and instead set up a separate opposition since Jefferson, Madison, Gallatin, Monroe, John C. Calhoun and Clay had in effect adopted Federalist principles by purchasing the Louisiana Territory, chartering the Second national bank, promoting internal improvements (like roads), raised tariffs to protect factories, and promoting a strong army and navy after the failures of the War of 1812.