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“Justice and the support of the public credit require, that provision should be made for fulfilling the engagements of the United States, in respect to their foreign debt, and for funding their domestic debt upon equitable and satisfactory terms.”
Alexander Hamilton understood the necessity of placing the new nation on firm financial ground.
On January 9, 1790, Hamilton delivered to Congress his First Report on Public Credit, a strategy for achieving seven key goals for America’s financial system. One of his primary recommendations was the federal assumption of all states’ war debts, amounting to approximately $22 million in addition to foreign powers who were owed nearly $11 million, and American citizens who had sold food, horses, and supplies to the Army, who held $43 million in debt. Hamilton’s ambitious debt plan aimed to draw both creditors and debtors closer to the federal government by honoring all the Revolutionary War debts in full, paying off the resulting national debt over time from excise taxes and land sales.
Many Southerners opposed Hamilton’s plan, believing it would create a dangerous centralization of power, unfairly penalize the southern states who had already paid off more of their debts, and give the North too much financial control. Ultimately, in a deal between Hamilton, James Madison and Secretary of State Thomas Jefferson, southern legislators agreed to support the Plan in return for locating the permanent national capital (then temporarily in NY) on the banks of the Potomac River.
The Gazette of the United States, the semi-official newspaper of the federal government, published the acts that codified Hamilton’s Assumption Plan in four parts: “An Act Making Provision for the Debt of the United States” (passed Aug. 4, in the Aug. 7 issue); “An Act to Provide more Effectually for the Settlement of the Accounts between the United States and the Individual States” (passed Aug. 5, in the Aug. 14 issue); “An Act Making Further Provision for the Payment of the Debts of the United States” (padded Aug. 10, in the Aug 21 issue); “An Act making Provision for the Reduction of the Public Debt” (passed Aug 12, in the Aug. 28 issue).
ALEXANDER HAMILTON.
Each of the four
Gazette of the United States, August 7, 14, 21, and 28, 1790, were printed in New York: John Fenno. 4 pp. each. The four parts of Hamilton’s Assumption Plan, as passed by Congress, are included in full only days after each were passed. #30022.37-.40
Inventory #30022.37-.40 & 30022.41
SOLD — please inquire about other items
The August 4 act was the lynchpin, laying out the specific amounts of state debt to be absorbed by the federal government, along with the fiscal scheme making it possible. Most of the debt had originally been held by ordinary citizens, but the payment arrangement was a boon to speculators, who had bought the worthless paper notes for pennies on the dollar. Though “rewarding” speculators was very unpopular, Hamilton recognized that it would ultimately lower the cost of debt by publicizing that the new government would always honor its bills.
The Assumption Plan, the bedrock of Hamilton’s financial strategy, laid out the specific amounts of state debt to be absorbed by the federal government, along with the fiscal scheme making it possible. Most of the debt had originally been held by ordinary citizens. Since the end of the Revolution, however, speculators had bought paper notes for pennies on the dollar and taken on the majority of the federal debt notes. The confederation government had not kept records of the original holders of debt, and there was no way of verifying—after 1787—that the desperate veterans and citizens who had sold their claims to speculators had been the original holders. Hamilton, who knew that paper notes would need to be paid in full to their current holders if the nation were to establish its credit-worthiness, was accused of “rewarding” speculators. This had several consequences for the new government. It publicized that the U.S. financial system would honor its bills, reward risk, and give the holders of the now-federal debt a stake in the new government’s success. It also, however, fueled tensions between those rising in wealth and power under the new federal government and those who felt left behind by the new economic reality, a group that included many disillusioned Revolutionary War veterans.
Extract from Aug 4th Act
“Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled, That reserving out of the monies which have arisen since the last day of December last past, and which shall hereafter arise from the duties on goods, wares and merchandise imported into the United States, and on the tonnage of ships or vessels, the yearly sum of six hundred thousand 600,000 dollars annually for support of government….
Sec. 2. Be it further enacted, That the President of the United States be, and he is hereby authorized, to cause to be borrowed on behalf of the United States, a sum or sums, not exceeding in the whole twelve million of dollars; and that so much of this sum as may be necessary to the discharge of the said arrears and instalments, and (if it can be effected upon terms advantageous to the United States) to the paying off the whole of the said foreign debt, be appropriated solely to those purposes: And the President is moreover further authorized to cause to be made such other contracts respecting the said debt as shall be found for the interest of the said States. Provided nevertheless, That no engagement nor contract shall be entered into which shall preclude the United States from reimbursing any sum or sums borrowed within fifteen years after the same shall have been lent or advanced.”
Other content:
Aug 7: House “Debate on the Amendment of the Senate to the Funding Bill, to assume a part of the State Debts,”noting that “A message was received from the President of the United States, informing the House that the act to provide more effectually for settling the accounts between the United States and the individual states had received his consent”; Aug 14: President Washington’s Proclamation“of a Treaty of Peace and Friendship between the United States of America and the Creek Nation of Indians,” signed by Washington on August 13, 1790; Aug. 21: House “Debates on the amendment of the Senate to the Funding Bill, to assume a part of the State Debts”; Aug. 28: House “Debates on the amendment of the Senate to the Funding Bill, to assume a part of the State Debts” continued.
The Residence Act: Jefferson’s Quid pro Quo for Accepting Hamilton’s Plan
“A district of territory ... to be located as hereafter directed on the river Potomac ... is hereby accepted for the permanent seat of the government of the United States …”
Gazette of the United States. July 17, 1790. New York: John Fenno. 4 pp. Includes complete early printing of An Act for Establishing the Temporary and Permanent Seat of the Government of the United States, passed on July 16, 1790. 10¼ x 16¼ in. #30022.41
While his First Report was debated in Congress, Hamilton became more determined to place the new nation on firm financial ground. Jefferson, Hamilton’s greatest ideological rival in Washington’s cabinet, resolutely disputed Hamilton’s proposals. Jefferson feared that the Assumption Plan would make the federal government too powerful, would dangerously cement the centralization of financial power in the Northeast, and penalize Virginia and other Southern states that had already paid most of their war debts.
Both statesmen, seeking a pragmatic resolution, compromised in June of 1790. In exchange for moving the future national capital south to a site on the banks of the Potomac River, and for reducing Virginia’s net payments to the government to zero, Jefferson agreed to work with Southern legislators on behalf of Hamilton’s Assumption Plan. Their compromise, the Residence Act, passed Congress on July 16, 1790, two weeks ahead of Hamilton’s Assumption Plan.
The Residence Act provided that Congress would move from New York to Philadelphia in December 1790, then to the permanent capital on the Potomac River in the year 1800.
The issue of the Gazette offered here also includes: A lengthy Committee of the Whole “Sketch of the Debate on the Residence Bill”; A report noting that President Washington had informed Congress of his consent to the bill; An announcement that “The Resolution for assuming the State debts was agreed to in the Senate by a majority of two”; House debates over the “Post Office Bill” and postage on newspapers; Lengthy report from Marseilles: “Citizens … attacked the citadel of that place” (Fort St. Jean) on May 2, demanding its surrender. The soldiers responded with cannon shot, and the citizens mounted another attack; 417 people were reported killed, including the fort’s commander.
