During his first term, James Madison and his supporters had largely stuck to Thomas Jefferson's domestic agenda of low taxes and a reduction of the national debt. Congress allowed the national bank's charter to expire during Madison's first term. But after being confronted with the challenges of the War of 1812, many Democratic-Republicans reconsider the wisdom or lack thereof in having a smaller central government. When the 14th Congress convened in December 1815, Madison proposed the re-establishment of the national bank, increased spending on the army and the navy, and a tariff designed to protect American goods from foreign competition. Madison's proposals met with opposition from conservatives in his party who were strict constructionists of the Constitution. The most prominent of these was Madison's fellow Virginian John Randolph, who said that Madison's program "out-Hamiltons Alexander Hamilton."
But Randolph proved to be in the minority, and in response to Madison's proposals, the 14th Congress compiled one of the most productive legislative records up to that point in history. They passed the Tariff of 1816 and establishing the Second Bank of the United States. Madison followed the precedent set by George Washington and Jefferson and did not seek a third term in office. At the party's 1816 congressional nominating caucus, Secretary of State James Monroe defeated Secretary of War William H. Crawford in a 65-to-54 vote and became the party's presidential candidate. The Federalists did not offer much opposition in the 1816 presidential election. Their lack of support for the war against Britain cost them support at the polls. Monroe won the election in a landslide election. His presidency ushered in what became known as that "Era of Good Feelings".
Although he was a Jeffersonian, Monroe had served under Washington and like his commanding general, he too believed that the existence of political parties was harmful to the United States. He began his presidency with a strategy that intended to take advantage of the end of the Federalist Party and prevent another opposition party replacing it by avoiding divisive policies and welcoming ex-Federalists into the fold. He did not go so far as to put ant former Federalists in his cabinet, likely because he knew that this would foster resentment among Democratic-Republicans. But he did make two long tours to former Federalist strongholds in an effort to build national unity. At Boston, a newspaper described his 1817 visit as the beginning of an "Era of Good Feelings". Frequent stops on his tours included ceremonies of welcome and expressions of good-will. He would wear his old Revolutionary War military uniform to remind people of their common cause. His visits were well received in locations previously not friendly to Jeffersonians.
The Federalist Party continued to fade during Monroe's administration. It maintained some strength in Delaware and a few other places, but lacked influence in national politics. Lacking serious opposition, the Democratic-Republican Party's Congressional caucus stopped meeting.
Monroe favored infrastructure projects to promote economic development, even though some of his supporters wondered if this was constitutional. Monroe signed bills providing federal funding for the National Road and other projects. The country experienced a prolonged economic recession known as the Panic of 1819, largely due to the mismanagement of national bank president William Jones. The panic once again caused a widespread resentment of the national bank and a distrust of paper money. But this was a time when it was presumed that the President had little control over economic matters and Monroe was not blamed for the nation's woes. Despite the ongoing economic troubles, the Federalists failed to field a serious challenger to Monroe in the 1820 presidential election, and Monroe won re-election essentially unopposed.
An issue arose near the end of Monroe's first term that would bring up one of the most polarizing and divisive issues in the history of the nation, the issue of slavery. During the proceedings over the admission of Missouri Territory as a state, Congressman James Tallmadge, Jr. of New York proposed amendments providing for the eventual exclusion of slavery from Missouri. The amendments led to the first major national slavery debate since the ratification of the Constitution. Polarization developed not along party lines, but along geographical lines. Northern Democratic-Republicans formed a coalition with the few remaining Federalists in support of the amendments, while Southern Democratic-Republicans were almost unanimously against such them. In February 1820, Congressman Jesse B. Thomas of Illinois proposed a compromise, in which Missouri would be admitted as a slave state, but slavery would be excluded in the remaining territories north of the parallel 36°30′ north. A bill based on Thomas's proposal became law in April 1820.
By 1824, the Federalist Party had largely collapsed as a national party. This did not mean an abundance of "good feelings". Monroe followed precedent and did not seek a third term. The 1824 presidential election was waged by competing members of the Democratic-Republican Party. The party's congressional nominating caucus had become irrelevant, and candidates were instead nominated by state legislatures. Secretary of State John Quincy Adams, former Speaker of the House Henry Clay, Secretary of the Treasury William Crawford, and General Andrew Jackson emerged as the major candidates in the election, nominated within their various regions. Adams had strong support in New England, Clay and Jackson were strong in the West, and Jackson and Crawford competed for the South.
When no candidate won a majority of the electoral vote in the 1824 election, the House of Representatives held a contingent election to determine the president. Jackson had won a plurality of the popular and electoral vote and not a majority. Still, he considered himself to be the presumptive winner. Henry Clay personally disliked Adams, but he disliked Jackson even more. Clay supported Adams in the contingent election. He disliked Crawford because Crawford opposed Clay's nationalist policies. Clay considered Jackson to be a potential tyrant. With Clay's backing, Adams won the contingent election. After Clay accepted appointment as Secretary of State, Jackson's supporters claimed that Adams and Clay had reached a "Corrupt Bargain" in which Adams promised Clay the appointment in return for Clay's support in the contingent election. Jackson was deeply angered and resentful over the result of the contingent election. He returned to Tennessee, where the state legislature quickly nominated him for president in the 1828 election.
Adams tried to follow Monroe's example of ending partisan conflict, and his Cabinet included individuals of various ideological and regional backgrounds. In his 1825 annual message to Congress, Adams presented a comprehensive and ambitious agenda, calling for major investments in internal improvements as well as the creation of a national university, a naval academy, and a national astronomical observatory. But the election had left too many wounds within the party. Adams' requests to Congress galvanized the opposition, leading to the creation of an anti-Adams congressional coalition made up of supporters of Jackson, Crawford, and Vice President John C. Calhoun. Following the 1826 elections, Calhoun and Martin Van Buren of New York agreed to throw their support behind Jackson in the 1828 election. Polarization once more existed between factions referred to in the press as "Adams Men" and "Jackson Men".
The Jacksonians formed an effective party apparatus that adopted many modern campaign techniques. Van Buren is considered by many to be the architect of a new party structure, one that emphasized Jackson's popularity and spun a message of corruption of Adams and the federal government. Jackson did spell out a detailed political platform in the same way that Adams did, but his coalition was united in opposition to Adams, who tended to alienate people rather than attract their support. Jackson's call for the opening of Native American lands to white settlement was popular in the south. Jackson won 178 of the 261 electoral votes and just under 56 percent of the popular vote. Jackson even won 50.3 percent of the popular vote in the free states and 72.6 percent of the vote in the slave states. The Era of Good Feelings was over. The Second Party System had begun. The dream of non-partisan politics, shared by Washington and Monroe was gone, replaced with a future of partisan battles between legitimated political parties.