The Democratic Party evolved from political factions that opposed Alexander Hamilton's fiscal policies in the early 1790s; these factions are known variously as the Anti-Administration “Party” and the Anti-Federalists. In the mid-1790s, Thomas Jefferson and James Madison organized these factions into the Democratic-Republican Party. It favored yeoman farmers, strict construction of the Constitution, and a weaker federal government. These policies fell under the umbrella term Jeffersonian democracy. The party arose from opposition to the policies of the ruling Federalist Party, which was dominated by Hamilton and advocated a strong central government, a loose interpretation of the Constitution, and a republic governed by a well-educated professional class.
The party was effective in building a network of newspapers in major cities to broadcast its policies and editorialize in its favor. In 1796, the party made its first bid for the Presidency with Jefferson as its presidential candidate and Aaron Burr as its vice presidential candidate. Jefferson came in second in the electoral college and became vice president. He strongly opposed the policies of the John Adams administration. Jefferson and Madison, through the Kentucky and Virginia Resolutions, announced the “Principles of 1798,” which made states' rights a keystone of the party's beliefs. The party saw itself as the true champion of republicanism, and its opponents as aristocrats. Party members idealized the independent ("yeoman") farmer as the exemplar of virtue, and distrusted cities, banks, and other moneyed interests. The party was strongest in the south and west, and weakest in New England. The party won control of the presidency and congress in 1800, and later elected Henry Clay as the Speaker of the House in the 1810s.
Before 1801, the Democratic-Republicans favored France in the wars between Britain and France, and opposed the Jay Treaty (which restored peace with Britain) because, they believed, it might help monarchist elements inside the United States. Until 1816, the party generally opposed such Federalist policies as high tariffs, a navy, military spending, a national debt, and a national bank. After the near defeat of the United States in the War of 1812, however, the party split on these issues. Many younger party leaders, notably Henry Clay, John Quincy Adams, and John C. Calhoun, wanted to build a strong national defense. Meanwhile, the faction led by John Randolph of Roanoke, William H. Crawford, and Nathaniel Macon, fearful that a strong military would oppress the people, continued to oppose policies that centralized the government and empowered the military.
The opposition Federalist Party, suffering from a lack of leadership after the death of Alexander Hamilton and the retirement of John Adams, quickly declined; although it revived briefly in opposition to the War of 1812, the extremism of its Hartford Convention in 1815 utterly destroyed it as a political force. President James Monroe pursued a policy of harmony with their past political opponents; a New England Federalist coined the term Era of Good Feelings to describe the new era. Despite the Panic of 1819 and the sectional intrigue preceding the Missouri Compromise, Monroe was nearly unanimously elected to a second term without serious competition. The political atmosphere became vituperative again as would-be successors to Monroe emerged.