Source: Joseph J. Ellis. Founding Brothers - The Revolutionary Generation (2000)
Madison’s opposition to assumption struck Hamilton as even more naive than his plan on reimbursing the holders of securities, and even sinister, Hamilton felt that way since Madison had advocated smaller versions of assumption in the 1780s when they were both ardent nationalists. As far as the amount of taxes Virginia would pay under assumption, Hamilton felt that the amount could always be negotiated. Hamilton was shocked that Madison had accused him of trying to lure the states into some kind of Faustian bargain that was designed to destroy the sovereignty of the states. Hamilton firmly believed that a nationalized economy would benefit all Americans.
It didn’t help matters that in Hamilton’s offensive to promote public credit and assumption he used words like “consolidation” and “nationalize”, which raised alarm bells to Madison and the Southern states. Hamilton’s plan was a projection of his own audacious personality during the fluid conditions that existed in the early years of the nation under the Constitution. Hamilton was unique in that he recognized that to unleash the beast that was the US economy, there needed to be strategic management and orchestration, which could only be done if the federal government had the power to do so. Jefferson and Madison believed that the government should just get out of the way and the natural economic forces would work. But Hamilton, long before John Maynard Keynes, saw that a national government could play a role in managing a nation’s economy, and then perhaps to achieve unparalleled prosperity.
It didn’t help matters that in Hamilton’s offensive to promote public credit and assumption he used words like “consolidation” and “nationalize”, which raised alarm bells to Madison and the Southern states. Hamilton’s plan was a projection of his own audacious personality during the fluid conditions that existed in the early years of the nation under the Constitution. Hamilton was unique in that he recognized that to unleash the beast that was the US economy, there needed to be strategic management and orchestration, which could only be done if the federal government had the power to do so. Jefferson and Madison believed that the government should just get out of the way and the natural economic forces would work. But Hamilton, long before John Maynard Keynes, saw that a national government could play a role in managing a nation’s economy, and then perhaps to achieve unparalleled prosperity.
Hamilton’s model for his fiscal plan centered largely on the Bank of England; both he and Washington believed that a national bank was the key for America to develop and prosper. To Jefferson and Madison, the Bank of England was an institution that should have been forever repudiated as a result of the Revolutionary War. To Hamilton, consolidation was a wonderful idea, not a threatening menace. In short, Hamilton was thinking economically while Jefferson and Madison were thinking politically (States' Rights).
To Hamilton, when money was spread out, it was only money, but when it was concentrated, it was capital. To Hamilton, a national debt would be a “national blessing”, but to Madison a “Public Debt was a Public Curse”. Hamilton saw America’s urban elites (merchants, bankers, business owners) as the central figures in the ascendancy of the nation. Hamilton’s financial plan was a total endorsement of commerce as the lifeblood of America. Hamilton wanted to channel the self-interest of the urban elites into promoting the national interest.
But Virginians such as Jefferson and Madison were psychologically incapable of getting their minds around basic economic concepts, since to them land, not fluid capital, was the center of all things. Bankers and speculators didn’t add to an economy, to Jefferson and Madison they were a bane; to them, the real problem was commercial sources of wealth crowding out agricultural wealth. Also, many in the planter class, such as Jefferson, , were heavily in debt to British and Scottish creditors; the planter class simply believed that they were being bled to death by a conspiracy. The refusal to bring their behavior into economic reality, of denying that they were the reason for their own predicament led to the willful ignorance of the economic systems of which Hamilton was expert. In a strange way, Jefferson and Madison took great pride in not having the slightest understanding of what Hamilton was trying to accomplish.
To Hamilton, when money was spread out, it was only money, but when it was concentrated, it was capital. To Hamilton, a national debt would be a “national blessing”, but to Madison a “Public Debt was a Public Curse”. Hamilton saw America’s urban elites (merchants, bankers, business owners) as the central figures in the ascendancy of the nation. Hamilton’s financial plan was a total endorsement of commerce as the lifeblood of America. Hamilton wanted to channel the self-interest of the urban elites into promoting the national interest.
But Virginians such as Jefferson and Madison were psychologically incapable of getting their minds around basic economic concepts, since to them land, not fluid capital, was the center of all things. Bankers and speculators didn’t add to an economy, to Jefferson and Madison they were a bane; to them, the real problem was commercial sources of wealth crowding out agricultural wealth. Also, many in the planter class, such as Jefferson, , were heavily in debt to British and Scottish creditors; the planter class simply believed that they were being bled to death by a conspiracy. The refusal to bring their behavior into economic reality, of denying that they were the reason for their own predicament led to the willful ignorance of the economic systems of which Hamilton was expert. In a strange way, Jefferson and Madison took great pride in not having the slightest understanding of what Hamilton was trying to accomplish.
Jefferson had been abroad during the constitutional reforms of the 1780s; his views on national vs. state sovereignty were largely unknown due to his lengthy absences in Europe. Jefferson deferred to Madison’s superior judgment on those matters when he accepted Washington’s offer to be the first Secretary of State. Jefferson believed that foreign policy was the one area where the nation should speak with only one voice. Jefferson had vowed to never again accept public office after his miserable run as Virginia’s military governor during the Revolutionary War. Jefferson wasn’t too keen on becoming SecState, but Madison convinced him that he was the only and best one to serve Washington and the nation in that capacity.
Inviting Madison and Hamilton to a dinner party fit Jefferson’s personality in large part because he absolutely hated (and avoided) face-to-face confrontation. Jefferson was miserable in a debate because the whole tone of arguing freaked him out. To Jefferson, argument was a dissonant noise that served to do nothing but distract and to upset the natural order of things. Madison knew there was an invisible line inside of Jefferson that when crossed, out came Jefferson the Tiger where he was engaged in a Holy War, not an argument. Short of that invisible line, Jefferson was endlessly polite and accommodating, and genuinely pained with the process of partisan politics, at least in 1790. As SecState, Jefferson understood the need to rescue America’s credit rating since the US would never be taken seriously in Europe (e.g. Dutch bankers). The Jefferson of 1790 saw Hamilton’s plan overall as a good thing for the nation. To Jefferson then, the more important issue was the debate over where the future permanent national capital would be located, which by September 1789 had started to become fierce.
Inviting Madison and Hamilton to a dinner party fit Jefferson’s personality in large part because he absolutely hated (and avoided) face-to-face confrontation. Jefferson was miserable in a debate because the whole tone of arguing freaked him out. To Jefferson, argument was a dissonant noise that served to do nothing but distract and to upset the natural order of things. Madison knew there was an invisible line inside of Jefferson that when crossed, out came Jefferson the Tiger where he was engaged in a Holy War, not an argument. Short of that invisible line, Jefferson was endlessly polite and accommodating, and genuinely pained with the process of partisan politics, at least in 1790. As SecState, Jefferson understood the need to rescue America’s credit rating since the US would never be taken seriously in Europe (e.g. Dutch bankers). The Jefferson of 1790 saw Hamilton’s plan overall as a good thing for the nation. To Jefferson then, the more important issue was the debate over where the future permanent national capital would be located, which by September 1789 had started to become fierce.
The Constitution had set the parameters for a future location of the national capital which could not exceed 100 square miles, and that the land would be purchased from the proximate states. But the residency debate centered around WHERE the permanent capital would be located, and there seemed to be no possible consensus. All the regions claimed that they were the most important region, and therefore the future capital should reside in their orbit. The location had to be passed by both the House and the Senate, which had been proven to be impossible.
Complicating the situation was that it was agreed that there should be a temporary capital while the future permanent capital was built; but there was serious concern that the temporary capital would become the permanent capital. When Jefferson arrived in New York City in March 1790, there had been 16 proposed sites for the future capital, and all had failed to pass, among them were: Annapolis, Baltimore, Carlisle (PA), Frederick (MD), Germantown (PA), New York City, Philadelphia, Trenton (NJ), and the Susquehanna and Potomac Rivers. Geographically, it seemed that Philadelphia had the edge over all the other sites.
By June 1790, Madison was not promoting the Potomac, but rallying opposition against Philadelphia. Madison had pointed out that from northern Maine (which was part of Massachusetts) to southern Georgia, the geographic midpoint of the nation was Mount Vernon. Non non-Virginians, Madison’s (and Washington’s) preference for the Potomac was seen as a “Wigwam Place”. Madison kept the Potomac in the mix, promoting it as the link to the interior of the US via the Ohio River Valley (Virginians viewed themselves as the Gateway to the West). But that perspective was confined to Virginia, and was viewed as nothing more than a fancy of Madison’s imagination by non-Virginians. By June 1790, Madison had largely given up hope that the Potomac would win out in the residency debate . . . and then came the possibility of making a deal.
Complicating the situation was that it was agreed that there should be a temporary capital while the future permanent capital was built; but there was serious concern that the temporary capital would become the permanent capital. When Jefferson arrived in New York City in March 1790, there had been 16 proposed sites for the future capital, and all had failed to pass, among them were: Annapolis, Baltimore, Carlisle (PA), Frederick (MD), Germantown (PA), New York City, Philadelphia, Trenton (NJ), and the Susquehanna and Potomac Rivers. Geographically, it seemed that Philadelphia had the edge over all the other sites.
By June 1790, Madison was not promoting the Potomac, but rallying opposition against Philadelphia. Madison had pointed out that from northern Maine (which was part of Massachusetts) to southern Georgia, the geographic midpoint of the nation was Mount Vernon. Non non-Virginians, Madison’s (and Washington’s) preference for the Potomac was seen as a “Wigwam Place”. Madison kept the Potomac in the mix, promoting it as the link to the interior of the US via the Ohio River Valley (Virginians viewed themselves as the Gateway to the West). But that perspective was confined to Virginia, and was viewed as nothing more than a fancy of Madison’s imagination by non-Virginians. By June 1790, Madison had largely given up hope that the Potomac would win out in the residency debate . . . and then came the possibility of making a deal.
Pennsylvania had tried to work out a deal with Hamilton in that the Pennsylvania delegations in the House and Senate would support assumption while Hamilton would steer Philadelphia through as the temporary, and then permanent capital. Unsurprisingly, Hamilton was unable to get the necessary votes in Congress. Other dinner parties had Pennsylvania and Virginia discuss a potential deal where Philadelphia was the temporary capital, and the Potomac would be the permanent location; Pennsylvania believed that once they had the national capital, temporary it may be, the capital would remain in that city.
In effect, the dinner party hosted by Jefferson was the final chapter after many other meetings on the topic, which in essence meant that the groundwork for a bargain had already been laid out. In actuality, the Potomac had already been secured as the location of the future capital before Jefferson’s dinner party, which meant that Hamilton didn’t have to work to change any votes in Congress on residency, which he had already shown that he could not do. Instead, Hamilton needed to convince members in Congress from Massachusetts and New York to not change their vote. It was Madison that had to work to get fellow members in Congress to change their votes on assumption. Madison needed at least three representatives to change their vote, and eventually four switched, all of them from districts that bordered the Potomac.
Therefore, the major business of Jefferson’s dinner party was something else, most likely determining the debt/tax total for Virginia concerning assumption. So Madison got what he wanted, a specific financial calculation for Virginia before the vote on assumption, and Hamilton did what he said he would do, be flexible to make Virginia more comfortable with assumption. Jefferson left that out of his account of the dinner party in 1792 since it wasn’t very romantic, but he immediately sent out letters to confidants telling them that Virginia’s debt and tax amount had been recalculated (conveniently, the Virginia debt assumed and the taxes paid to the federal government each amounted to $3.5m).
In effect, the dinner party hosted by Jefferson was the final chapter after many other meetings on the topic, which in essence meant that the groundwork for a bargain had already been laid out. In actuality, the Potomac had already been secured as the location of the future capital before Jefferson’s dinner party, which meant that Hamilton didn’t have to work to change any votes in Congress on residency, which he had already shown that he could not do. Instead, Hamilton needed to convince members in Congress from Massachusetts and New York to not change their vote. It was Madison that had to work to get fellow members in Congress to change their votes on assumption. Madison needed at least three representatives to change their vote, and eventually four switched, all of them from districts that bordered the Potomac.
Therefore, the major business of Jefferson’s dinner party was something else, most likely determining the debt/tax total for Virginia concerning assumption. So Madison got what he wanted, a specific financial calculation for Virginia before the vote on assumption, and Hamilton did what he said he would do, be flexible to make Virginia more comfortable with assumption. Jefferson left that out of his account of the dinner party in 1792 since it wasn’t very romantic, but he immediately sent out letters to confidants telling them that Virginia’s debt and tax amount had been recalculated (conveniently, the Virginia debt assumed and the taxes paid to the federal government each amounted to $3.5m).
For Virginia then, assumption became a non-issue, and with the future permanent capital on the Potomac, in 1790 Jefferson and Madison had every reason to smile. Virginia won on each point of the bargain with residency, the debt assumed, and the tax settlement for assumption. Jefferson and Madison made their contribution in the months afterward, making sure that the Potomac held as the future capital, in that they made sure that the residency question would never again be brought in front of Congress, where the Potomac would have been killed by a thousand cuts.
In August 1790, Jefferson proposed that the details and decisions concerning the actual location, size, and shape of the future capital on the Potomac be made by the Executive branch (meaning Washington). Jefferson and Madison toured the Potomac River, and made their decision on the location by January 1791. So, the District of Columbia (featuring "Washington’s City") was created by an army under the command of George Washington, with Jefferson and Madison as loyal lieutenants.
By the Fall of 1790, Jefferson advised Washington to start construction as soon as possible, arguing that once government buildings were completed, Philadelphia would have no more cards to play. Interestingly, during that same fall, a joint resolution was passed in the Virginia Assembly that denounced assumption, and even featured language that strongly hinted at secession. During the Constitutional Convention, Hamilton predicted that the nation would endure only if the national government forced the states into a subservient status, and by the Fall of 1790, Hamilton’s prediction seemed to have merit.
In August 1790, Jefferson proposed that the details and decisions concerning the actual location, size, and shape of the future capital on the Potomac be made by the Executive branch (meaning Washington). Jefferson and Madison toured the Potomac River, and made their decision on the location by January 1791. So, the District of Columbia (featuring "Washington’s City") was created by an army under the command of George Washington, with Jefferson and Madison as loyal lieutenants.
By the Fall of 1790, Jefferson advised Washington to start construction as soon as possible, arguing that once government buildings were completed, Philadelphia would have no more cards to play. Interestingly, during that same fall, a joint resolution was passed in the Virginia Assembly that denounced assumption, and even featured language that strongly hinted at secession. During the Constitutional Convention, Hamilton predicted that the nation would endure only if the national government forced the states into a subservient status, and by the Fall of 1790, Hamilton’s prediction seemed to have merit.
The Compromise of 1790 averted a crisis that could have ended the long-term survival of the nation. However, it also exposed differences that would not abate in the following decades, showing again that winning a revolution is easier than securing one. The Compromise of 1790 didn’t resolve any of the disputes, but rather kept them from exploding, and bought time so future debates/arguments could continue as designed by the Constitution. And due to Jefferson and Madison, the ongoing/future debates would have a strong Southern point-of-view. To be fair to Jefferson and Madison, by 1790 Virginia had 20% of the population and the state generated 33% of the nation’s commerce.
By selecting the Potomac, the nation had decided to split its political capital from its economic capital (NYC), which was a departure from the European norm. So the main focus of Jefferson’s dinner party should not be on assumption, but rather more on the Potomac. That dinner party in June 1790 also signaled the resumption of the Jefferson/Madison partnership which had been on hold for five years, so the “Great Collaboration” by 1790 was an alliance worthy of its lofty label.
Jefferson and Madison may have shared Virginia’s dominant view that Hamilton was trying to take down the state, but in 1790 they did not share in the secessionist sentiments. The strategy of Jefferson and Madison was that they were not going to abandon the federal government but to capture it, gambling that the new capital on the Potomac would become an extension of Virginia. In the following decade as the leaders of the Republicans and then as President/Secretary of State, Jefferson would be the visionary leader and Madison would be the detail man in the trenches.
By selecting the Potomac, the nation had decided to split its political capital from its economic capital (NYC), which was a departure from the European norm. So the main focus of Jefferson’s dinner party should not be on assumption, but rather more on the Potomac. That dinner party in June 1790 also signaled the resumption of the Jefferson/Madison partnership which had been on hold for five years, so the “Great Collaboration” by 1790 was an alliance worthy of its lofty label.
Jefferson and Madison may have shared Virginia’s dominant view that Hamilton was trying to take down the state, but in 1790 they did not share in the secessionist sentiments. The strategy of Jefferson and Madison was that they were not going to abandon the federal government but to capture it, gambling that the new capital on the Potomac would become an extension of Virginia. In the following decade as the leaders of the Republicans and then as President/Secretary of State, Jefferson would be the visionary leader and Madison would be the detail man in the trenches.