History Smackdown - "The Compromise of 1790". Part I

Thomas Jefferson
Thomas Jefferson
James Madison
James Madison

Author's Note: Due to its length this article is published in two parts. I guarantee it is worth it...so stick with me!


When those of us who are old enough think back to some of the great one on one rivalries of the 1970’s, several epic contests come to mind - the “Thrilla in Manila” between Muhammad Ali and Joe Frasier, Bjorn Borg vs. Jimmy Connors at Wimbledon, the “Duel in the Sun” between Jack Nicklaus and Tom Watson at Turnberry, Scotland….or even perhaps the greatest contest of all time, the 1976 fight between Apollo Creed and Rocky Balboa in Philadelphia (ok so this last one isn’t real…but it’s my favorite !). But for some inexplicable reason the herculean battle between historians Jacob E. Cooke and Kenneth R. Bowling over the meaning and importance of the famous dinner party hosted by Thomas Jefferson that resulted in the “Compromise of 1790” never seems to be one of them. 1 Before getting into that however, let’s review the standard telling of what the compromise was and it came about.

The traditional story of the "Compromise of 1790" is well known among historians . The two most important and contentious issues confronting the first federal congress during their second session were how to fund the operations of the national government so that investor confidence in the United States would be restored, and where to locate the capital of the United States.2 Where each state stood on these issues depended on several factors including their size, their view of the role of federal power, how much debt they had accrued during the war, and how much money they had loaned the continental congress to support the war effort. But the most important factor of all was geography. These issues produced the first significant schism between north and south after the adoption of the constitution.3 Any solution would have to result in each section getting some part of what it wanted. In other words – a compromise.

Alexander Hamilton
Alexander Hamilton

Producing proposals to solve the funding problem fell to Alexander Hamilton who eagerly embraced the task. George Washington’s newly “minted” Secretary of the Treasury, and future face of the ten-dollar bill, submitted to congress his Report on Public Credit, an extraordinary document that, it can be argued, set America on its capitalist course.4 In it were many complex and interlocking proposals that only a banker or bureaucrat could love, however its overarching goal was to put the nation’s credit on solid footing. This meant settling debt owed both by the federal government and the states individually. His first proposal to pay foreign creditors was non-controversial and was passed by congress very quickly. Another proposal designed to settle domestic debt incurred by the Continental Congress was more contentious in its particulars, but it was widely agreed a settlement was needed. It was his third proposal – federal assumption of state debt – that was the most controversial and which was eventually resolved we are told, as a part of the “Compromise of 1790.”

Assumption, Hamilton hoped, would accomplish a number of things. First, it would “contribute, in an eminent degree, to an orderly, stable and satisfactory arrangement of the national finances,” thus reducing the confusion attendant with servicing the debt of thirteen separate entities.5 Second, states and the federal government would no longer be competing for revenue, and third, because settlement of this debt would be handled centrally rather than distributed throughout the states, efficiencies of scale would ultimately reduce its overall cost to the taxpayer.6 Once it was established that the United States could be counted on to pay its debts, credit would become more widely available and on better terms, encouraging among other things the growth of industry and manufacture, ultimately benefiting everybody.7 With the benefit of hindsight (always 20/20 of course), this was the logical thing to do, and the result is instantly recognizable as the way in which businesses are funded to this day. At the time however it was highly controversial producing an ideological and geographical split in congress.

To varying degrees northern states were generally in favor of this proposal.8 Two of them – Massachusetts and Connecticut - had crushing war debt to pay which was only going to be made worse if the settlement of federal debt from the war was resolved before assumption was passed.9 Other northern states though not as vociferous in their support were not opposed to the idea. In contrast, though southern states recognized the need to put the United States on a more solid financial footing, most were nevertheless strongly opposed to the whole concept of assumption. These states had largely paid the debt they owed and didn’t want to subsidize the debt of the north. Northern states counter argued that this was only just because most of the war had taken place on northern soil and thus they had necessarily incurred more debt. Only South Carolina broke from this pattern. Much of the southern campaign had taken place on their soil and Charleston had been ravaged by British forces. They had run up an enormous debt and were thus in favor of Hamilton’s proposal for assumption. Other southern states however, even though they had benefited from the 3/5 compromise which would eventually yield a representation in congress far greater than their free population number would warrant, were nevertheless loathe to cede any power advantage to the north. In their view, assumption would simply put southern farmers in hoc to the big bad money men in the north, many of whom were in turn in hoc to foreign investors. In addition many southerners shared Jefferson’s aversion to a powerful central government. And so, already unhappy that the capitol was located in the north, most southerners viewed the assumption proposal as another dangerous step toward the consolidation of power in the hands of a political aristocracy.10 On the former issue however, proposals were already wending their way through the legislative process.

Where to locate the capital city had been debated almost since independence was declared in 1776, and it revealed a widening division between northern and southern states. It was thought by both sections that whichever received the capital would be the beneficiaries of a greater political and economic influence. Later justifying his vote for assumption as a part of the compromise, Richard Bland Lee noted that “assumption would not harm Virginia if the national capital were so situated as to spread equally to the extremes of the nation the wealth a capital would generate.”11 In recognition of this division the confederation congress in 1783 actually passed a bill splitting the difference by establishing two capitals – one near Trenton, NJ and the second along the Potomac. The following year they attempted to consolidate the two in Trenton but were blocked by southern members from funding its construction.12 Late in the first term of the federal congress in 1789 the issue came up again and the House of Representatives passed a bill keeping New York as the capital on a temporary basis and then moving it to a permanent site along the Susquehanna River in Pennsylvania. This was only defeated when the Senate substituted Germantown for the permanent location and in the resulting confusion James Madison was able to persuade the Congress to hold the issue over to the second term. 13

By May of 1790 the residence issue again made its way to the floor of the House of Representatives, and though its prospects had improved as the result of an agreement between Pennsylvania and southern legislators to put the capital temporarily in Philadelphia and then permanently in the south, it was still susceptible to the political maneuverings of states supporting New York’s efforts to retain the capital. In addition to this, the prospects for passage of assumption had deteriorated. On April 12th the house had defeated an assumption measure by a vote of 32-29, and with the arrival of previously missing legislators from North Carolina and the death of assumption supporter Theodorick Bland of Virginia, assumption seemed nearly dead. It appeared only some deft political maneuvering and compromise could save the day.

Richard Bland Lee
Richard Bland Lee

It was in this atmosphere that the famous “Compromise of 1790" was born. Sometime between June 14 and June 20th, 1790 Secretary of State Thomas Jefferson invited James Madison and Alexander Hamilton to dinner to hash out a way to break the impasse on assumption. Mainly they needed to find a way to make it more palatable to (primarily) southern opponents in order to induce enough of them to change their votes and support it. Among the inducements proposed was an agreement by Hamilton to insure there was no interference with the existing arrangement between Pennsylvania and the South on residence, an agreement to extend the deadline for assumption of state debts, and to apportion debt by population. In return Madison, while not supporting assumption himself, agreed to temper his opposition and to try and convince two previous opponents to switch their votes in favor. Accordingly he approached two fellow Virginians, congressmen Alexander White and Richard Bland Lee. Both represented districts that would benefit from the location of the capital along the Potomac, and so both agreed to switch their votes on assumption. Later, believing more votes were needed to assure passage, two other members representing districts along the Potomac were approached, and Marylanders George Gale and Daniel Carroll also switched their votes in favor of the measure. Thus arranged, both measures passed, were signed into law by President George Washington, and the legend of the “Compromise of 1790” was born. But was this how it really happened?

Of the three primary parties to the compromise – Jefferson, Hamilton, and Madison – only Thomas Jefferson left a written account of it produced in 1792. In it, Jefferson stated his belief that all of the parties involved did what they said they would do resulting in the approval of Hamilton’s assumption proposal as well as the southern desire that the capital be moved to the south, though he didn’t know the details on how it was actually accomplished.And though there are other references to linkage between the two issues in newspaper accounts and letters, the form of the compromise that has since been widely accepted comes from the Jefferson version of events. And it is this version that, starting about forty years ago, has produced the most contention among historians with some arguing that traditional account of the compromise is accurate while others largely discount Jefferson’s version and argue that each issue was passed on its own merits with no explicit linkage. The two heavyweight combatants in this battle are historians Kenneth R. Bowling and Jacob E. Cooke.

We will look at this contest in Part 2!!

1 Dr. Kenneth R. Bowling received his Ph.D. from the University of Wisconsin-Madison in 1968. He is currently co-chairman of the First Federal Congress Project at George Washington University in Washington DC. Dr. Jacob E. Cooke received his Ph.D. from Columbia University and is now Professor Emeritus at Lafayette College in Easton, PA.

2 The primary issues confronting congress during their first session were the passage of the Bill of Rights, establishment of the federal judiciary, and defining the structure of the constitutionally defined departments of State, Treasury, Justice and War.

3 One of the most contentious issues between the north and south at the Constitutional Convention revolved around the issue of representation and whether slaves should be counted for that purpose. A compromise was eventually reached whereby each slave would count as 3/5 of a person for purposes of determining representation in Congress, a decision that historians such as Gary Wills (Negro President Houghton Mifflin, 2001) argue guaranteed the south a political power it would refuse to relinquish, resulting in the American Civil War.

4 Followed by Operations of the Act Laying Duties on Imports, which resulted in the Tariff of 1790, the Second Report on Public Credit, which proposed the formation of a national bank (forerunner of today’s Federal Reserve), Report on the Establishment of a Mint, and the Report on Manufacturers, whose proposals were not immediately adopted, but were later the foundation of Henry Clay’s “American System,” that proposed the national government become an active player promoting the economic well being of industry through tariffs and large scale internal improvements. Most of these proposals were later adopted and are in effect today.

5 Hamilton, Alexander. Report on Public Credit available at http://www.constitution.org/ah/rpt1_public_credit.doc

6 Wright, Robert E. Ph.D. One Nation Under Debt (New York: McGraw-Hill Press, 2008), p. 132-133

7 More than just settling of debt was required of course. Integral to the efficient distribution of credit was a national bank that could enforce lending standards and issue a uniform currency. No bank could succeed without first putting the country on a sound financial footing.

8 The Massachusetts and Connecticut delegations were strongly in favor of the proposal. Majorities in the delegations from New Hampshire, New York, New Jersey, Delaware and Pennsylvania were uncommitted, though none were unreservedly opposed.

9 Both the states individually and the continental congress had incurred debt during the war. States incurred it to fund the provision of their own troops and militia. The continental congress incurred it to fund and provision the continental army. In addition to foreign interests, in many cases states were creditors to the congress. A settlement of federal debt would show several of the states to be creditors to the federal government. States with a large amount of debt believed repayment of federal debt would put assumption in jeopardy.

10 Of course, Jefferson as President presided over one of the largest expansions of federal power up to that point with the purchase of the Louisiana territory from Napoleon.

11 Richard Bland Lee to Theodorick Lee, April 9, 1790, Richard Bland Lee Papers, Library of Congress

12 George Washington University. “Locating the United States Capital” First Federal Congress Project, http://www.gwu.edu/~ffcp/exhibit/p12/index.html

13 This maneuvering was part of a larger political battle between New York and Philadelphia. Pennsylvania had come to an agreement with southern legislators to put the capital temporarily in Philadelphia and then permanently in the south. Pennsylvania believed once situated there would be no stomach to move again, and southern states believed this was the only way to secure northern votes for a southern location. This compromise was disrupted when Massachusetts, supporting New York’s bid to get the capital placed there temporarily, proposed a spot on the Susquehanna as the permanent site, thus splitting the Philadelphia-Southern coalition.

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