Hamilton's Role in having the Federal Government Pay for the Debts of the States


The Causes of that so called Whiskey Insurrection of 1794

By C. M. Ewing (1930)

For the moment we must return to the seat of the now government in New York. Came the day in June 1790. Thomas Jefferson, Secretary of State in the cabinet of President Washington, is strolling down Cherry Street enjoying the warmth of this early summer day. No doubt he is longing for his home and friends back in Virginia, as his present situation bored him greatly. Jefferson abhorred the pomp and farce of state. Upon reaching the corner of Cherry Street and Franklin Square he met Alexander Hamilton, now Secretary of the Treasury, just leaving the temporary, residence of the President. They immediately entered upon a long and earnest conversation. Each had an axe to grind, so Alex proposed that he would scratch Tom's back if Tom in return would thoroughly carry his spinal column. Regardless of the scratching, this historic street corner conversation resulted in Jefferson entertaining Hamilton and several other leading men at the "little house in Maiden Lane" the next evening.

 Hamilton's assumption measure had encountered strong opposition in the House from Virginia and Pennsylvania. A few votes needs be altered to assure its passage. There was, moreover, another sectional dispute that was beginning to make bad blood. That was as to where the national capitol should eventually end permanently be located. Jefferson very naturally favored its being located on the Potomac River near Georgetown. This measure also required an alteration of a few votes. As they gathered around Jefferson's festive boards, Hamilton was intent on making one of the great plays of his career. By the end of the evening Hamilton was assured the required number of votes necessary to pass his assumption bill in the House. His power in Congress already great, would thus become greater, definitely promised that the new capitol of the United States would be in Philadelphia for ten years, and after that forever on the Potomac. That Hamilton carried his promise into effect is obvious. While the passage of the assumption act August 4, 1790, is definite assurance that Jefferson succumbed to the Hamiltonian influence. That he had permitted this designing "Scotch brat" to out-talk him was Jefferson's greatest regret. It resulted in a lasting enmity between the two men upon whom Washington placed his greatest reliance.

 By the assumption act the Federal Government assumed the payment of the State debts contracted in the national cause during the Revolutionary War. By this measure the worthless Continental currency and scrip would be assumed at face value. From the time that Hamilton's plan was first suggested this paper had been rising in price. However, many were ignorant of this advance, especially in the more remote sections, taking advantage of this situation, the money bags of the east, many of whom members of Congress, sent agents into every state, town and country neighborhood to buy up this paper before the people gained knowledge of its value. That none should escape their slimy grasp, couriers and relay horses were used to reach the most isolated sections, thereby making complete the greatest financial atrocity in our national history. The price they paid was five, and even so low as two shillings in the pound. Immense sums were thus filched from the poor and ignorant. The rich were made richer and the poor made poorer.

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