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Compromise of 1790

The Compromise of 1790 was a deal between Alexander Hamilton, Thomas Jefferson, and James Madison. Jefferson & Madison got Columbia district.

The Compromise of 1790 was a deal between Alexander Hamilton, Thomas Jefferson, and James Madison in which Hamilton gained the choice for the national government to take over and pay the state debts, while Jefferson and Madison got the South the national capital (the District of Columbia). 

The impasse in Congress was broken by this arrangement. Southerners had been opposing the Treasury’s acquisition of state debts, thereby killing Hamilton’s plan for a fiscally strong federal government. 

The idea to situate the permanent national capital on the Virginia–Maryland boundary, which was favored by Virginians, was rejected by Northerners.

Only Thomas Jefferson, James Madison, and Alexander Hamilton were present at the meeting, which was convened by Thomas Jefferson. As a result, a lot of assumptions were made regarding what was addressed at the meeting.

The Residence and Funding (Assumption) Acts were passed in July and August 1790 as a result of the agreement. It is “usually recognized as one of the most important bargains in American history,” according to historian Jacob Cooke, “ranking just below the better known Missouri Compromise and the Compromise of 1850.”

Meeting

Unofficial negotiations were used by politicians at the federal and state levels to break the legislative deadlock. In the summer of 1790, a number of secret meetings and political dinners were conducted in New York City, which was then serving as the nation’s temporary capital.

In the closing stages of these compromise efforts, the “dining table bargain” was a significant occurrence. The “meal” was a private meeting between Secretary of the Treasury Alexander Hamilton and U.S. House of Representatives member James Madison, according to an account supplied by former Secretary of State Thomas Jefferson two years after the occurrence.

Shortly after the Assumption Bill was defeated for the second time in the House in June, Hamilton, fearful that his financial strategy would be thwarted, appealed to the newly appointed Jefferson to use his clout in the matter. 

On or around June 20, 1790, Jefferson hosted a supper for the two officials at his home in New York City, according to Jefferson’s recollection. The meeting resulted in a political solution to the crisis of “assumption” and “residence.”

With the enactment of the Assumption Act, the essential provision of Secretary Hamilton’s First Report on the Public Credit was approved, laying the groundwork for public credit.

Because of the Residence Act, the permanent US capital was established in the agrarian states of Maryland and Virginia, the country’s population center at the time, rather than in a metropolitan and financial center like New York City or Philadelphia. As part of the deal, Jefferson and Madison won a lucrative debt adjustment for their state of Virginia from Hamilton.

Assumption

Max M. Edling, a historian, explained how assumptions operated. It was the most important issue; the capital’s location was only a negotiating tactic. Hamilton recommended that the federal Treasury take over and settle the states’ debts for the American Revolutionary War.

The Treasury would issue bonds that wealthy people might purchase, giving them a tangible interest in the national government’s performance. Hamilton recommended that the new debts be paid off with money from the new import duty.

Jefferson initially supported the plan, but Madison persuaded him to change his mind by saying that allowing the federal government to control the debt would give the federal government too much authority.

The assumption was accepted after it was passed in 1790, according to Edling. Madison attempted to pay speculators less than 100% of the face value of the state bonds they held, regardless of how little they had paid for them. 

When Jefferson was elected president, he kept the system in place. The United States’ credit was well-established at home and abroad, and Hamilton was able to recruit many bondholders to his new Federalist Party. 

Albert Gallatin, Jefferson’s Treasury Secretary, had good credit and was able to borrow in Europe to finance the Louisiana Purchase in 1803, as well as the War of 1812.

In popular culture

Lin-Manuel Miranda’s musical Hamilton dramatizes the compromise in the song “The Room Where It Happens,” which depicts the story from Aaron Burr’s perspective.

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