Source: Joseph J. Ellis. Founding Brothers - The Revolutionary Generation (2000)
By chance in mid-June 1790, Secretary of State Thomas Jefferson encountered the Secretary of the Treasury, Alexander Hamilton, outside of President George Washington's office. Jefferson discovered that Hamilton was not his normal confident and resplendent self, and looked like a “beaten man”. Hamilton admitted to Jefferson that his financial plan for public credit was trapped in the House due to the opposition of assumption that had been organized by the leader of the House, James Madison. Hamilton was simultaneously fatalistic and melodramatic, believing that the gridlock over assumption would force him out of the political arena. To Hamilton, if his financial plan for the nation didn’t become a reality, then the nation itself wouldn’t last very long.
Jefferson suggested that perhaps he could be of assistance. Jefferson thought that if he could get Hamilton and Madison together on a friendly discussion of the topic, then some sort of an agreement might be made. Jefferson offered to host a private dinner party for the three of them. Jefferson’s account was the only one that survived, and it no doubt was at least partially self-serving and misleading. But Jefferson was able to broker a political bargain of far-reaching historical significance, in that Madison agreed to allow Hamilton’s fiscal program to pass the House (with Madison remaining in public opposition), while Hamilton agreed to use his influence to get the nation’s permanent capital on the Potomac River. In many ways, this dinner party was the Compromise of 1790.
Jefferson suggested that perhaps he could be of assistance. Jefferson thought that if he could get Hamilton and Madison together on a friendly discussion of the topic, then some sort of an agreement might be made. Jefferson offered to host a private dinner party for the three of them. Jefferson’s account was the only one that survived, and it no doubt was at least partially self-serving and misleading. But Jefferson was able to broker a political bargain of far-reaching historical significance, in that Madison agreed to allow Hamilton’s fiscal program to pass the House (with Madison remaining in public opposition), while Hamilton agreed to use his influence to get the nation’s permanent capital on the Potomac River. In many ways, this dinner party was the Compromise of 1790.
But is the story of the dinner party hosted by Jefferson and attended by Madison, and Hamilton true? Most historians see it as essentially true, in that the dinner party did occur in late-June 1790. Then on 9 July 1790, the House passed the Residence Bill, in which the future permanent capital would be located on the Potomac after ten years on Philadelphia on a vote of 32 - 29. On 26 July 1790, the House passed the Assumption Bill by a vote of 34 - 28, and newspapers commented that there must have been some sort of behind-the-scenes deal to get that result since some representatives changed their vote. Also, on the day the bargain was struck, Jefferson wrote James Monroe to prepare him for future developments concerning both bills, since Monroe adamantly opposed assumption.
Monroe responded to Jefferson writing that as far as Virginia was concerned, Hamilton’s fiscal plan was viewed as toxic. Monroe went on to say that the location of the permanent capital was of no real consequence or concern to Virginia; in two years, Jefferson would see things the same way as Monroe, telling Washington that the dinner party was the biggest political mistake of his life.
Actually, Jefferson’s version of the dinner party was written in 1792, where his great regret is evident. In fact, several secret meetings occurred in the same general time frame surrounding the debates on the assumption and residence bills. The overriding questions: why were brilliant and sensible men such as Jefferson, Madison, and Hamilton all convinced that the newly established government under the Constitution was so precarious and problematic? Why was the passage of assumption so threatening to so many? What was the Potomac River so symbolic?
Monroe responded to Jefferson writing that as far as Virginia was concerned, Hamilton’s fiscal plan was viewed as toxic. Monroe went on to say that the location of the permanent capital was of no real consequence or concern to Virginia; in two years, Jefferson would see things the same way as Monroe, telling Washington that the dinner party was the biggest political mistake of his life.
Actually, Jefferson’s version of the dinner party was written in 1792, where his great regret is evident. In fact, several secret meetings occurred in the same general time frame surrounding the debates on the assumption and residence bills. The overriding questions: why were brilliant and sensible men such as Jefferson, Madison, and Hamilton all convinced that the newly established government under the Constitution was so precarious and problematic? Why was the passage of assumption so threatening to so many? What was the Potomac River so symbolic?
The answers of course varied based on the perspective of each participant, which meant that Jefferson, Madison, and Hamilton arrived at that dinner with different agendas, experiences, and stories to tell afterwards. Madison was the most centrally situated as the leader of the House, having led the debates over both assumption and residence. Madison enjoyed his reputation as a preeminent nationalist and a favored son of Virginia. By 1790,
Madison had already proven to be the most shrewd and politically savvy veteran of the tumultuous constitutional battles of the 1780s, culminating with his authorship of the Bill of Rights.
Madison had become the master of the inoffensive argument, which again and again proved to be effective and decisive. Madison was so obviously gentle and eager to give credit to others, especially his opponents, that it was very difficult to unleash one’s full fury on Madison without coming off as a brute and/or an idiot. Madison also would wait until someone gave him permission to address what he knew, and then Madison would often go on for hours until the person threw in the towel. Madison was practically invisible and entirely unthreatening, and he used both traits very effectively. Eventually, Jefferson would provide the sweeping vision while Madison would focus on the details to make it happen. But in 1790, Madison’s invisibility didn’t mean subservience to Jefferson, and Madison, behind the scenes, exercised quite a bit of independence from Jefferson.
Madison had already proven to be the most shrewd and politically savvy veteran of the tumultuous constitutional battles of the 1780s, culminating with his authorship of the Bill of Rights.
Madison had become the master of the inoffensive argument, which again and again proved to be effective and decisive. Madison was so obviously gentle and eager to give credit to others, especially his opponents, that it was very difficult to unleash one’s full fury on Madison without coming off as a brute and/or an idiot. Madison also would wait until someone gave him permission to address what he knew, and then Madison would often go on for hours until the person threw in the towel. Madison was practically invisible and entirely unthreatening, and he used both traits very effectively. Eventually, Jefferson would provide the sweeping vision while Madison would focus on the details to make it happen. But in 1790, Madison’s invisibility didn’t mean subservience to Jefferson, and Madison, behind the scenes, exercised quite a bit of independence from Jefferson.
Also, by 1790 Madison had collaborated far more with Hamilton as a fellow nationalist during the years of the Articles of Confederation and the Constitutional Convention/Ratification. While Madison would soon become the most important, influential, and ardent Jeffersonian of his era, before 1790 Madison and Jefferson were on opposite sides in terms of how powerful the new national government should become. But in the months before the dinner, Madison had started to see the interests of Virginia as equal-or-greater than national interests, and that changed started to occur before Jefferson returned from Paris.
If there was a specific point in time that started Madison to change, it occurred in January 1790 when Hamilton released his Report on the Public Credit to Congress. Hamilton’s fiscal goals matched up with Madison’s nationalism as recently as Ratification. What troubled Madison wasn’t the goal of properly dealing with the nation’s public credit crisis, but Hamilton’s methods. First up was Hamilton’s plan to reimburse the current holders of securities (the old Continental Dollars). Speculators, having inside information, had purchased who knows how many securities at a fraction of their original value from citizens that had no idea what was coming. Hamilton was surprised when on 11 February 1790 Madison, on the House floor, denounced Hamilton’s reimbursement plan (Madison labeled it as a “scheme”) as a repudiation of the principles of the Revolutionary War.
If there was a specific point in time that started Madison to change, it occurred in January 1790 when Hamilton released his Report on the Public Credit to Congress. Hamilton’s fiscal goals matched up with Madison’s nationalism as recently as Ratification. What troubled Madison wasn’t the goal of properly dealing with the nation’s public credit crisis, but Hamilton’s methods. First up was Hamilton’s plan to reimburse the current holders of securities (the old Continental Dollars). Speculators, having inside information, had purchased who knows how many securities at a fraction of their original value from citizens that had no idea what was coming. Hamilton was surprised when on 11 February 1790 Madison, on the House floor, denounced Hamilton’s reimbursement plan (Madison labeled it as a “scheme”) as a repudiation of the principles of the Revolutionary War.
Madison proposed to either pay the original AND the current holder, or make some sort of shared payout, or don’t pay anyone. Unlike Jefferson, who hated to lose, Madison was always gracious in defeat (and great at adjusting his strategy as a result), but Madison hated it that those that served in the Revolutionary War were getting fleeced by those that hadn’t. Also in the picture was that Madison’s idealistic vision of principled virtuous men running the new national government was not going to happen. In other words, to Madison the last phase of the Revolution was falling into the hands of the parasites, the enemy. The debate over assumption made things more stark for Madison, to the point where he felt a sense of betrayal.
On the surface, assumption seemed simple enough, in that the federal government would take on (assume) all the accumulated debts of the states (most of which were due to the Revolutionary War). Instead of 13 separate state ledgers, there would only be a national ledger. On 24 February 1790, Madison spoke on the House floor arguing that Hamilton’s plan for assumption was far more complicated than it looked. Madison’s core argument seemed to be economic (but it was largely pro-VA), in that states such as Virginia had paid off most of the wartime debt, and that assumption would force Virginia, via a large tax payment to the national government, to bail out the states that didn’t have their act together.
On the surface, assumption seemed simple enough, in that the federal government would take on (assume) all the accumulated debts of the states (most of which were due to the Revolutionary War). Instead of 13 separate state ledgers, there would only be a national ledger. On 24 February 1790, Madison spoke on the House floor arguing that Hamilton’s plan for assumption was far more complicated than it looked. Madison’s core argument seemed to be economic (but it was largely pro-VA), in that states such as Virginia had paid off most of the wartime debt, and that assumption would force Virginia, via a large tax payment to the national government, to bail out the states that didn’t have their act together.
Madison continued, saying that there wasn’t an official estimate yet of the specific amount each state would have to pay in the form of a federal tax to fund assumption. To Madison, knowing how much came before voting on assumption; according to Madison’s calculations, Virginia would transfer about $3m in debt to the federal government, and then be taxed $5m. To Madison, this was just as unfair as repaying the current holders of the securities.
Madison realized that if Hamilton’s fiscal plan passed, then the new national government would have economic sovereignty over the 13 states. Madison didn’t want his beloved Virginia to trust its future to the new national government. To Madison, assumption was more about power than economics, about true independence. Madison was getting hit by shrill accusations from all sides, with Hamiltonians slamming him for not working towards building a government that would last, to others that called Madison a hypocrite since he had been a nationalist, but now he had reservations.
The key word that Jefferson, Madison, and the South focused on was “consolidation”, which meant to them that the states would be absorbed by the national government. That being said, in letters Madison kept telling confidants that Virginia was safe, in that Washington was President, Jefferson was the Secretary of State, Edmund Randolph was the Attorney General, and that he was the leader in the House. In many ways, Madison was the calm at the center of the storm.
Madison realized that if Hamilton’s fiscal plan passed, then the new national government would have economic sovereignty over the 13 states. Madison didn’t want his beloved Virginia to trust its future to the new national government. To Madison, assumption was more about power than economics, about true independence. Madison was getting hit by shrill accusations from all sides, with Hamiltonians slamming him for not working towards building a government that would last, to others that called Madison a hypocrite since he had been a nationalist, but now he had reservations.
The key word that Jefferson, Madison, and the South focused on was “consolidation”, which meant to them that the states would be absorbed by the national government. That being said, in letters Madison kept telling confidants that Virginia was safe, in that Washington was President, Jefferson was the Secretary of State, Edmund Randolph was the Attorney General, and that he was the leader in the House. In many ways, Madison was the calm at the center of the storm.
Hamilton didn’t have any of Madison’s reservations or ambiguities, since he believed his fiscal plan would rescue the nation from financial disaster. Once faced with an obstacle, Hamilton went on the offensive and never looked back. Hamilton’s pattern was to unleash his formidable energies and talents on a blitzkrieg of overt productivity, which meant that in essence he was the storm. Hamilton did not believe in stealth as did Madison, and therefore he became a convenient lightning rod of controversy and a man easy to despise and distrust. Hamilton’s opponents became even more incensed when Hamilton was proven right.
Like Madison, in 1790 Hamilton had amassed the most power and influence he had experienced up to that point. What Hamilton believed he was doing was simple: to bring the mess that was the US economy out of the abyss and to transform the nation into a global economic player with a great credit rating. To Hamilton, that meant that he not only needed a financial plan, but also ways to tap into the potential of US economic production. Hamilton didn’t have the slightest concern as to whether his plan negatively affected any individual or state.
Hamilton saw Madison’s plan to reimburse the original holders of the securities as unrealistic and naive, and Hamilton criticized Madison that he had not bore arms in the Revolutionary War as he had. Hamilton added that the original holders of the securities had not been forced to sell to those speculators for a multitude of reasons. To do what Madison proposed would have been a bureaucratic nightmare, and Hamilton wanted to get the nation past those kind of entanglements. Hamilton wanted to create trust by placing the debt into the hands of those that would use it to foster the national interest.
Like Madison, in 1790 Hamilton had amassed the most power and influence he had experienced up to that point. What Hamilton believed he was doing was simple: to bring the mess that was the US economy out of the abyss and to transform the nation into a global economic player with a great credit rating. To Hamilton, that meant that he not only needed a financial plan, but also ways to tap into the potential of US economic production. Hamilton didn’t have the slightest concern as to whether his plan negatively affected any individual or state.
Hamilton saw Madison’s plan to reimburse the original holders of the securities as unrealistic and naive, and Hamilton criticized Madison that he had not bore arms in the Revolutionary War as he had. Hamilton added that the original holders of the securities had not been forced to sell to those speculators for a multitude of reasons. To do what Madison proposed would have been a bureaucratic nightmare, and Hamilton wanted to get the nation past those kind of entanglements. Hamilton wanted to create trust by placing the debt into the hands of those that would use it to foster the national interest.
