The Federalists were deemed conservatives and focused on industry building and addressing the needs of rich merchants and landowners. The party also tended to favor Great Britain in foreign affairs ("Columbia Encyclopedia").
On the other hand, the Jeffersonians, which later became known as the Democratic party, led by Jefferson were more concerned with the idea of an agrarian society of yeoman farmers and adamant to expand the powers of the federal government. The party also sympathized with the French. (Wright)
Hamilton’s proposals including the funding of revolutionary war debt, federal assumption of the obligation of the states, creation of a national bank and federal encouragement of native manufactures were intended to emulate Great Britain’s economic model. But then, such proposals leaned towards wealthy men and substantially indebted regions over others. Jefferson along with James Madison viewed these as contrary to republican morality, which promoted harmony among the different regions and closing the income gap between the rich and poor ("Encyclopedia of American History").
As each political leader attracted supporters, the national-level disagreements trickled down onto local issues. With the magnitude of political passion during the period, such issues provided the nucleus of political parties (Wright).
In 1791, Jefferson, Madison and their allies in the Congress reached out for links with local politicians. They established the National Gazette and wrote under pseudonyms lucid condemnation of the perils they viewed and urged the people to support the Republican interest in the fall congressional elections. ("Encyclopedia of American History")
Under the leadership of John Adams, Washington’s second administration, Federalist domestic policies were put to the test and proven effective, sound macroeconomic principles prevailed and the governmental structure was expanded on top of the development of the efficient administrative system. However, trouble with France was brewing and eventually led to virtual warfare in 1798. ("Columbia Encyclopedia")
In response to the hostile actions of the French revolution, the Congress that was Federalist-controlled passed the Alien and Sedition Acts. However, the objective of such law was actually to destroy the Jeffersonians. Meanwhile, Jefferson was winning popular support among Southern landowners, the mechanics, workers, and the masses in general. His party was also much better with publicity than the Federalist. On the other hand, division in the Federalist party between the followers of Adams and Hamilton was seen. ("Columbia Encyclopedia")
The continuation of the program of Jeffersonian repression as well as wartime taxes even after Adams moved toward peace with France substantially contributed to the Republican triumph in the 1800 elections.