1790, Hamilton analyzed the financial situation with masterly clearness and set forth his plans for the adjustment of the national debt. The determination of Congress to make adequate provision for the support of the public credit was justified in his mind by every consideration. A country like the United States, possessed of little active wealth, must borrow in emergencies; to borrow on good terms, it must establish its credit; and to maintain its credit, it must faithfully observe its contracts. But over and above these considerations, dictated by expediency, were "immutable principles of moral obligation." Moreover, the national debt was no ordinary obligation: it was "the price of liberty." On all sides, it was agreed that the debt contracted abroad should be provided for in the precise terms of the contracts.

It was only in regard to the domestic debt that differences of opinion were likely to arise. The notes representing this debt were of all sorts and kinds. Much of it had changed hands and all of it had depreciated in value. Some of it still circulated as a monetary medium. The vital question was: how were the present holders to be paid? At the face value of the paper, or at the price for which it had been purchased? Hamilton argued firmly against any discrimination, both because it was a breach of contract and because it was a violation of the rights of a fair buyer.

When this part of Hamilton's plan came before Congress in concrete form, it gave rise to the bitterest debate which had been heard. That it would give opportunity for immoderate speculation was plain

enough; yet every alternative which aimed to do jus tice by both the original and the present holder was confessedly inadequate, when a certificate of indebtedness, for example, had passed through several hands without record.

No sooner was Hamilton's proposal made than a wild scramble began for the possession of the hitherto worthless government paper. "Couriers and relay horses by land, and swift sailing pilot boats by sea, were flying in all directions," wrote Jefferson. "Active partners and agents were associated and employed in every state, town, and country neighborhood, and this paper was bought up at 5/ and even as low as 2/ in the pound, before the holder knew Congress had already provided for its redemption at par. Immense fortunes were thus filched from the poor and ignorant, and fortunes accumulated by those who had themselves been poor enough before."

The second part of the scheme outlined in Hamilton's first report aroused even more bitter opposition. With a fine audacity he proposed the assumption of state debts. It is difficult to believe that Hamilton was perfectly ingenuous in stating his reasons for this move. He apprehended, he said, that the States would be hampered in satisfying their creditors because they had surrendered one important source of revenue to the central Government, duties on imports. In resorting to other means, the States might pass conflicting measures which would oppose industry. Besides, the debts had been incurred in the cause of Union and should be borne by all. But deeper than these reasons was probably a political

motive. Hamilton had no local attachments. A thoroughgoing nationalist, he saw in the claims of the States to autonomy only so many obstacles in the path of national unity. "To cement more closely the Union of States " by creating a solidarity of financial interests, was, indeed, the basal principle of his fiscal plans.

The wrath of Congressmen from States like Virginia, which had already discharged most of their debts, knew no bounds. After they had practiced thrift and met their obligations, should they, forsooth, now aid their less provident sisters? The chief opponents of assumption came from the South, and the chief advocates from the North. South Carolina and New Hampshire parted company with their neighbors, the one because it had a large debt and the other because it had not. Pennsylvania was divided on this question. For a time the opposition was too strong to be overcome. On May 25, 1790, an adverse vote seemed to seal the fate of "Miss Assumption," as the wits of the day called this measure. Just at this juncture the question of the location of the future capital, which had been debated inconclusively during the first session, was revived. Here again the North was arrayed against the South. Should the capital be located on the Potomac, as Maryland and the Southern States wished, or somewhere in Pennsylvania? New York was now out of the question, and since Pennsylvania would not support assumption, the New England States rather spitefully opposed the claims of Philadelphia.

Here was a situation which called for the finesse

of the politician. Might not votes for one project be traded for the other? Would the Virginia representatives abandon their opposition to assumption for the sake of locating the capital on the banks of the Potomac? It was at this juncture that Hamilton sought out Jefferson, whose influence over the Congressmen from Virginia was very considerable, and laid the project before him. With a readiness which he afterward regretted, Jefferson fell in with the scheme, and invited Hamilton and certain Virginia Representatives to dine at his table. In this comfortable fashion, over their wine, these gentlemen reached an amicable agreement. Such is Jefferson's account, but the matter could not have been quite so simple, for other Representatives than those from Virginia changed their votes and so contributed to the final settlement of the controversy. Nor is Jefferson quite ingenuous when he afterward described himself as duped by Hamilton, for he had not shown himself averse to assumption at any time. Be this as it may, Congress voted to assume the debts of the States, and to remove the seat of government from Philadelphia after ten years to a district ten miles square on the Potomac, which Washington was to select. The need of further revenue was now imperative. As Hamilton said in his second report on the public credit, the duties on imported articles had reached a point which might not be exceeded "without contravening the sense of the body of the merchants." When Congress met for its third session in December, 1790, Hamilton boldly urged what was perhaps as unpopular a tax as he could have proposed -- a