The second session of the first Congress began January 8,1790. Agreeably to a plan submitted by Mr. Hamilton, secretary of the treasury, Congress proceeded to make provision for discharging in full the foreign and domestic debt, and assumed also the debts incurred by the several States in carrying on the war. To this object the proceeds of the public lands lying in the western territory, the surplus revenue from the duties on imports, and a loan of two millions, were appropriated. This measure immediately restored public credit; certificates of public debt rose to par; and those who had purchased low, realized immense fortunes. Business of all kinds revived, and the country entered upon a career of prosperous activity and enterprise.
At the next session of Congress, after a protracted debate, a bill was passed imposing a tax on domestic spirits, for the purpose of paying the interest on the State debts assumed by the Union. A national bank was al so established, not without opposition, mainly on the ground of its unconstitutionality. The party lines between the federalists and anti-federalists (as they were called), which had begun to appear when the adoption of the new constitution was under discussion, became this session more broad and clear. A regular opposition to the administration began to be organized.
Meantime the hostilities of the Indians northwest of the Ohio made it necessary to send an expedition against them. Gen. Harmar was put in command, but he was defeated with considerable loss in a battle near Chillicothe. Gen. St. Clair, who succeeded in command, was also totally defeated. A bill then passed Congress for raising an additional force to the army. The measure was bitterly resisted by the opposition, chiefly on the ground that standing armies were dangerous, and that the proposed in crease showed the existence of monarchical designs on the part of the administration. An unsuccessful attempt was made the next session to reduce the military establishment; and the opposition introduced various resolutions, evincing their hostility to the administration. The public press became also the vehicle of vehement attacks, particularly upon the secretary of the treasury, Mr. Hamilton; and party spirit, from day to day, grew stronger throughout the country.
On the expiration of his term of office, however, Washington was unanimously reelected president, March, 1793; Mr. Adams again vice-president. Beside the still unsettled condition of Indian affairs, this term of Washington's administration was embarrassed by new difficulties, growing out of the French revolution. The French republic had just declared war against England and Holland; and so strong in the United States was the hatred of the people to the British, and so lively their sympathy with the French, that the opinion was entertained in many quarters that America was bound by every consideration, both of gratitude to an old ally, and sympathy with the cause of republicanism, to make common cause with France.
Immediately on receiving intelligence of the declaration of war, Washington convened a cabinet council, and by their unanimous advice, issued a proclamation, enjoining strict neutrality to be observed on the part of the United States toward the belligerent powers, April 22, 1793. The opposition (anti-federalist) party, through the press, bitterly inveighed against this proclamation, denouncing it as a high-handed assumption of power on the part of the president, a royal edict,' evincing his monarchical disposition, and also as dishonorable and ungrateful towards France.
In this state of things, Mr. Genet, the new minister appointed by the French republic, arrived in the country, with the object of engaging the cooperation of the United States against England. Misled by the flattering reception he met with at Charleston, where he landed, he immediately began, even before he had been recognized as minister, to excite the people against the government, and carried his audacity so far as to set at defiance the proclamation of neutrality, fitting out expeditions, and giving commissions to American vessels to cruise against the enemies of France and assuming the power to hold admiralty courts, for the trial and sale of prizes thus made. In these measures he was supported by the opposition, or as it began to be called, the DEMOCRATIC party, which now began, under the influence of the French minister, and in imitation of the affiliated clubs in France, to form democratic societies throughout the country.
Washington demanded the recall of Mr. Genet. The French government complied, and instructed his successor to express its entire disapproval of Genet's conduct. When Congress assembled in December following, the proclamation of neutrality, and the conduct of Washington towards Genet, were approved by that body, as they were finally by the great body of the nation.
In 1794 Congress passed a bill providing for a naval force to protect American commerce against the Algerines. The slave-trade was like wise prohibited.
There seemed now reason to apprehend the necessity of another war with England. In addition to severe and unjust commercial restrictions imposed by that government, she had proceeded to capture and condemn neutral vessels having on board French goods, or carrying corn and other supplies to France. In anticipation of a war, Congress passed several bills - for imposing an embargo; for organizing the militia; and for increasing the standing army. Meanwhile information was received that the British government was disposed to redress the grievances complained of, and amicably adjust all differences. John Jay was accordingly nominated and approved as envoy to Great Britain.