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As the first president of the United States following adoption of the Constitution, George Washington was faced with a major financial crisis. Huge national and state debts threatened the newly independent government with economic collapse; the treasury was empty, and government revenues were insufficient to meet annual expenses or even pay the interest on the mounting debt. For a solution, Washington turned to the first secretary of the treasury, Alexander Hamilton, a proponent of a strong central government.

Hamilton's financial plan called for full payment of the national debt to reestablish a firm credit, new taxes, and the creation of a national bank. Immediately, opposition arose, led by James Madison and Thomas Jefferson; they viewed the new federal government as one of limited power, with all other powers not specifically enumerated in the Constitution reserved for the states. Two factions developed over this division of power. The Federalists believed that the Constitution created a strong national government with wide, flexible powers. The Jeffersonian Democratic-Republicans believed that the central government was a confederacy of independent states that voluntarily gave certain specific powers, and only those powers, to the central government while retaining all others for themselves.

The differences between the two factions were magnified by conflicts over foreign policy. The Federalists favored close relations with Great Britain, America's leading trading partner. With the outbreak of the French Revolution, the Jeffersonians tended to favor closer relations with France, an emerging democracy. When the French Revolution turned radical and began widespread executions, Federalists were appalled at the possibility of the Jeffersonians allying the United States with the French radicals. Jeffersonians were equally dismayed that the Federalists supported aristocratic England and appeared to be trying to create a strong central government along British lines. Jeffersonians gained support from many new immigrants, largely those from Ireland and France who had a long-standing antipathy for England.

When President Washington chose not to run for a third term in office, the Federalist John Adams won the contest to succeed him, with Jefferson elected as vice president. This created a unique situation where the leaders of the two divergent factions were the key figures in the national administration. During Adams's term in office, relations with France deteriorated to the point that an undeclared naval war existed. At the same time, Federalists were greatly concerned with the unexpectedly strong showing of the Jeffersonians during the nonpresidential election of 1796 and noted that large numbers of immigrants had voted for Jefferson's Democratic-Republicans.

Adams strongly believed that such an organized opposition group was detrimental to national stability. Consequently, following the election of 1796, the Federalists acted to protect the nation from what they feared would be the introduction of European radicalism to American politics. To accomplish this, in 1798 they enacted four laws that are known collectively as the Alien and Sedition Acts. The first three of these laws centered on the feared immigrants. The Naturalization Act extended the residency required for becoming a citizen from five years to 14. The Alien Friends Act gave the president authority to do the

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