The First Parties, Part I
Another basic disagreement, growing out of the disagreement over the nature of mankind, was their disagreement over the nature of the country. Federalists believed that the new nation should have an economy based on industry and trade with other nations. The Democratic-Republicans believed that the new nation should have an economy based on agriculture, which with 98% of men earning their living in agriculture, was more favorable to the common man.
Another issue on which the two parties differed was the tariff. A tariff is a tax on imports, and was the main source of revenue for the government until the ratification of the 16th Amendment, authorizing an income tax, in 1913. Federalist favored a protective tariff, a high tariff that would make foreign goods cost more and therefore discourage Americans from buying imported products. This would protect home industries by making their products less expensive and therefore more expensive. This favored the Federalist support of an industry-based economy.
Democratic-Republicans favored a revenue tariff, a much lower tariff designed only to provide revenue for the government but not to affect market prices or purchasing choices. This favored the Democratic-Republican support of an industrial economy, where farmers would be able to purchase both domestic and foreign goods for less money.
The tariff issue became the main difference between the Federalist North (where industry flourished because of the mountains, minerals, waterfalls for power, and plenty of wood to build the factories) and the Democratic-Republican South (where agriculture was the main economic activity). Federalists favored a protective, or high, tariff. This protected their industries. Democratic-Republicans favored a revenue, or low, tariff. This favored farmers who often had to buy foreign goods since they had little industry of their own.
Since an industrial economy required a more centralized economy, Federalists favored a strong federal government, hence the name of their party. A centrally controlled economy favored industry and trade by creating more standardized regulations and policies. Democratic-Republicans favored a much more limited central government, fearing a strong central government would place too much power in the hands of the few, the elite, in the central government. Democratic-Republicans wanted the state governments to have more power, which would prevent a concentration of power in the hands of a few, and place it more in the hands of the common man at a more local level.
Both parties were convinced that their philosophy was the only one that would allow the country to
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