The Federalist Party:

By the time Alexander Hamilton died on the dueling grounds of Weehawken, New Jersey, the power of the Federalist Party was in terminal decline. Federalism was born in 1787, when Alexander Hamilton, John Jay, and James Madison wrote 85 essays collectively known as the Federalist papers. These eloquent political documents encouraged Americans to adopt the newly-written Constitution and its stronger central government. 

Largely influenced by the ideas of Alexander Hamilton, the Federalists succeeded in convincing the Washington administration to assume national and state debts, pass tax laws, and create a central bank. These moves undoubtedly saved the fledgling democracy from poverty and even destruction. In foreign policy, Federalists generally favored England over France.

Anti-Federalists such as Thomas Jefferson feared that a concentration of central authority might lead to a loss of individual and states rights. They resented Federalist monetary policies, which they believed gave advantages to the upper class. In foreign policy, the Republicans leaned toward France, which had supported the American cause during the Revolution. 

Jefferson and his colleagues formed the Republican Party in the early 1790s. By 1795, the Federalists had become a party in name as well.

After John Adams, their candidate, was elected president in 1796, the Federalists began to decline. The Federalists' suppression of free speech under the Alien and Sedition Acts, and the assumption of closer relations with Britain instead of France, inflamed Jeffersonian Republicans. In 1801 Jefferson, with Vice President Aaron Burr at his side, assumed the presidency. 

The Federalists feared and hated Jefferson, but partly due to infighting, they were never able to organize successful opposition. A last great hope -- that the New England states would secede and form a Federalist nation -- collapsed when Jefferson won a landslide reelection in 1804, thanks to the Louisiana Purchase. Alexander Hamilton was left with little power -- and with no choice but to meet Aaron Burr on the dueling ground in hope of reviving his political career. But Hamilton was doomed, and so was his party. The Federalists would never again rise to power.

The Republican Party:

Known informally as the Jeffersonian Republicans, this group of politicians organized in opposition to the policies of Federalists such as Alexander Hamilton, who favored a strong central government. 

Led by Thomas Jefferson, whom they helped elect to the presidency for two terms (1801-1809), the Republicans believed in individual freedoms and the rights of states. They feared that the concentration of federal power under George Washington and John Adams represented a dangerous threat to liberty. In foreign policy, the Republicans favored France, which had supported the Colonies during the Revolution, over Great Britain.

These ideas represented a departure from the policies of the Federalists under the administrations of Washington and Adams. The Federalists had established monetary policies that gave more power to the federal government and had rejected ties with France in favor of closer links to Britain. 

During the undeclared war with France at the end of the 1790s, the Federalists clamped down on those who spoke in favor of the France under the Alien and Sedition Acts. The Republicans vigorously opposed this action, regarding it as a dangerous intrusion on the rights of free speech. 

Using these issues, as well as the power swung his way by his vice president, Aaron Burr, Republican leader Thomas Jefferson won election to the presidency in 1800. This Republican party, which would hold power until 1825, is the direct ancestor of today's Democratic Party.