Madisonian Economic Model
Encyclopedia
The Madisonian Economic Model was James Madison
's plan for the repayment of domestic debts after the American Revolution
.
It was referred to by Madison as "discrimination" and was proposed in opposition to Hamilton's First Report on the Public Credit
.
Besides placing an unfair burden of taxation on southern states (who had paid off their state debt), Madison feared the assumption plan cheated domestic creditors. After the American Revolution, veterans were granted securities as a promise to repay debt that the nation owed them. The nation was now ready to pay off this debt, and was willing to pay at par. Many original security holders, however, had sold their securities to speculators at a fraction of their worth. Madison thus proposed a plan that would honor the original holders' justice and the speculators' contracts.
The Madisonian model favored this equity, but was rejected in favor of Hamilton's assumption plan.
James Madison
James Madison, Jr. was an American statesman and political theorist. He was the fourth President of the United States and is hailed as the “Father of the Constitution” for being the primary author of the United States Constitution and at first an opponent of, and then a key author of the United...
's plan for the repayment of domestic debts after the American Revolution
American Revolution
The American Revolution was the political upheaval during the last half of the 18th century in which thirteen colonies in North America joined together to break free from the British Empire, combining to become the United States of America...
.
It was referred to by Madison as "discrimination" and was proposed in opposition to Hamilton's First Report on the Public Credit
First Report on the Public Credit
The First Report on Public Credit was the first of three major reports on economic policy issued by American Founding Father and first United States Treasury Secretary Alexander Hamilton on the request of Congress. The report analyzed the financial standing of the United States of America and made...
.
Besides placing an unfair burden of taxation on southern states (who had paid off their state debt), Madison feared the assumption plan cheated domestic creditors. After the American Revolution, veterans were granted securities as a promise to repay debt that the nation owed them. The nation was now ready to pay off this debt, and was willing to pay at par. Many original security holders, however, had sold their securities to speculators at a fraction of their worth. Madison thus proposed a plan that would honor the original holders' justice and the speculators' contracts.
"One of three things must be done; either pay both (the original holders and the speculators), reject wholly one or the other, or make a composition between them on some principle of equity."
The Madisonian model favored this equity, but was rejected in favor of Hamilton's assumption plan.