The Lynchpin of Alexander Hamilton’s Assumption Plan, Signed by Thomas Jefferson
“An Act making Provision for the Debt of the United States”
“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.”
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, which included the federal assumption of all states’ war debts. Most of the debt was originally held by ordinary citizens, whose dire straits caused them to sell to speculators for pennies on the dollar. The idea of rewarding speculators was very unpopular, but records didn’t exist to track original owners’ sales, and Hamilton knew that paying current holders in full would help establish the nation’s credit-worthiness. 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.
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 national capital, then in New York, temporarily in Philadelphia, and then permanently on the banks of the Potomac River.
★ THOMAS JEFFERSON. Printed Document Signed as Secretary of State. “An Act making Provision for the Debt of the United States,” New York, N.Y., August 4, 1790. Certified a “True Copy by Jefferson with his signature and signed in type by George Washington as President, John Adams as Vice President, and Frederick Augustus Muhlenberg as Speaker of the House. 8 pp., 9 x 13¼ in. #23219