By Allen C. Guelzo, Ph.D., Gettysburg College
The War of 1812 taught the Republicans some unpleasant lessons. Realizing the issues, President James Madison, in 1816, proposed to the 14th Congress a series of new initiatives. What were they? And, how did they shape America?

The Financial Mess and Madison’s Proposals
The War of 1812 and the terms of the Treaty of Ghent that followed had affected the nation badly. The charter of the Bank of the United States had expired and no renewal had been adopted, forcing the secretary of the treasury to cut an unappealing deal with John Jacob Astor of New York and Stephen Girard of Philadelphia for personal loans to keep the country afloat.
In addition, Republicans were supposed to keep the independent farmer free from the fatal drag of taxation. But, a government that does not tax cannot pay for national roads or other internal improvements, an army or navy.
President James Madison was not the first Republican to realize these issues, but he was the most important. And so, in 1816, in his last year in office, Madison proposed to the 14th Congress a series of new initiatives.
These initiatives fell mainly into three categories. First, a new system of coastal fortifications, an enlarged army, and a naval construction program. Then, a scheme for reviving the Bank of the United States. Thirdly, construction of a national road system.
This is a transcript from the video series A History of the United States, 2nd Edition. Watch it now, on Wondrium.
Second Bank of the United States Gets a Nod

Madison found floor leaders in Congress in Henry Clay and John C. Calhoun. As if to atone for pushing the nation into a war that their own Republican ideology had left utterly unprepared to wage, Clay and Calhoun became the principal spokesmen for what came to be called National Republicanism.
In the House of Representatives, the charter for the second Bank of the United States squeaked past old-guard Republican opposition by a margin of only nine votes: 80 to 71. The new taxes and tariffs got by with a 31-vote margin.
James Monroe succeeded as the president after Madison in 1816. He hardly had a choice but to announce his support for the second bank. He also threw his weight entirely behind Calhoun’s designs for a perfect system of roads and canals.
Learn more about how Republicans and Federalists came into being.
A Road Map for Growth?
Over the next 20 years the railroads grew to cover 30,626 miles of track. Taking canals, turnpikes, steamboats, and railroads together, the cost of transporting goods on land in the United States fell by 95 percent between 1825 and 1855.
As the costs of bringing market-produced imports into the rural hinterlands fell—as it was now cheaper and easier to bring outside goods into the various remote districts of the republic—farm households began to abandon their traditional household manufacture of shoes, cloth, and other goods in order to buy cheaply priced textiles and fancy manufactured goods.
In western Massachusetts, between 1815 and 1830, households stopped spinning wool yarn and flax for their own use, and began buying and wearing inexpensive store-bought clothing. To pay for their increasing dependence on those goods, farmers were forced to tease larger and more productive harvests out of their soils, employ cost-saving machinery, and eventually turn to single-crop agriculture in which they produced exclusive harvests of corn or wheat for distant and invisible markets.
The Big Change in Markets and Banks
The markets also witnessed a change. By the 1840s, the goods in the stores of western Massachusetts merchants were all coming from New York City suppliers. Not only was the market changing the economic world of Thomas Jefferson’s farmers, it was also changing its social spirit—its social ethos. The greater the distance involved in selling agricultural goods to these markets, the more farmers were forced to turn to borrowing on distant credit markets and to the impersonal and abstract form of cash exchange.
Following the lead of the federal government in chartering the second Bank of the United States, new banks sprang up on state-issued charters after 1815 like mushrooms overnight. Over 200 state banks were chartered in 1815 alone, with another 392 bank charters being issued over the next three years.

These banks, in turn, stashed their specie deposits, the gold and silver that was supposed to be the basis of their business, in their vaults and—against those specie deposits—they issued such a flood of paper bank notes that the overall American money supply tripled between 1800 and 1830.
What was more, corporations not only borrowed from the banks or British lenders, but also from the American public in the form of selling stocks and bonds in their corporations.
Learn more about Jefferson’s commitment to keep the American republic an agrarian society.
The Era of Good Feelings?
By 1817, a whole new financial profession, stockbrokering, had appeared in New York City, and New Yorkers had organized the first informal American Stock Exchange on Wall Street. From the viewpoint of someone like President Monroe, the economic anxieties by the penetration of commercial capitalism were more than outweighed by the prosperity that commercial growth lent to the country.
At length, even die-hard Federalists conceded their admiration for Monroe’s determination to make the United States a great—rather than a small—power. He had such applause from both Federalists and his own party that his admirers began to hail the death of party factionalism in America, and to dub Monroe’s presidency as the “Era of Good Feelings”.
Common Questions about James Madison’s Proposals
James Madison proposed three main initiatives: a new system of coastal fortifications, an enlarged army, and a naval construction program; a scheme for reviving the Bank of the United States; and construction of a national road system.
In the House of Representatives, the charter for the second Bank of the United States, proposed by James Madison, squeaked past old-guard Republican opposition by a margin of only nine votes: 80 to 71.
James Madison found floor leaders in Congress in Henry Clay and John C. Calhoun.