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This also gave rise to a warm debate, in which Messrs. Boudinot and Ames took the lead in replying to Mr. Madison's speech, and endeavored to show that the strongest considerations of policy, as well as of justice, were in favor of the assumption.

Some other amendments were made, particularly one for funding the outstanding bills of credit at one hundred for one; and on the second of June the bill passed the House, and was sent to the Senate.

The very lively interest which this question excited arose in part from considerations that were independent of its real merits. These were:

First. The very large amount of debts due from the States of Massachusetts and South Carolina, each exceeding five millions of dollars, which they would find it difficult, if not impracticable, to provide for, when they were deprived of so important a source of revenue as the impost.

Secondly. Because the State debts had either already become a subject of speculation, or would become so, if the debts were assumed; and thus all those who wished to realize the profits of the purchases they made, or who hoped to realize them from such purchases as they should make, became active and zealous advocates for the assumption.

Thirdly. Those who expected that every public creditor of a funded debt would be a firm supporter of the new government, and who honestly believed that such support was needed, until it was strengthened by time and habit, were also friends of the assumption.

On the other hand, the assumption was more strenuously opposed by others on both of these last accounts. They not only did not wish to see the class of moneyed men, and of crafty speculators, still further enriched at

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[CHAP. V. the expense of those whose property or services had contributed to give independence and liberty to their country; but they considered that the power and influence of the General government were already too great for the rights of the States; and that the assumption would hasten that process of consolidation of the States which they thought they saw in prospect, and which would destroy the just equilibrium between the Confederacy and the States.

While the bill making provision for the public debts was before the Senate, and its fate was in suspense, this troublesome question was adjusted by one of those pieces of out-door management which often, by an unseen agency, control legislation; and which, whether the compromise when abstractedly considered, advances the public benefit or not, have at least the merit of putting an end to the discord of conflicting parties.

From the time that Congress had decided to remove its place of meeting from Philadelphia, in consequence of the attempt made by some of the Pennsylvania line to overawe Congress, there had been a great contest among the States, each striving to secure the seat of government within its own territory, or as near to it as possible. By a combination of the Northern States, a majority had at one time decided on Germantown as the permanent seat of government: then, in consequence of the offer of Virginia and Maryland to make a cession of ten miles square to the Federal government, a majority seemed to be in favor of some place on the Potomac. After Congress decided on meeting in New York, Pennsylvania, lest it should be permanently fixed in that city, united with the Southern States to have the seat of government further south; and Baltimore was selected as the temporary place of meeting. It was

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STATE DEBTS ASSUMED.

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therefore suggested that, in consideration of fixing it permanently on the Potomac, which Virginia and Maryland anxiously desired, a vote or two in favor of assumption might be obtained from those States, by which changes there would be a majority in favor of that measure.'

The arrangement accordingly took place, and it was agreed that Congress, after meeting for two years at Philadelphia, should then meet at some point on the Potomac, to be selected by the President, which place should then be the permanent seat of government. Two of the Virginia delegation, who had hitherto been opposed to the assumption, then voted in favor of it, by which it was finally carried.

In accordance with this arrangement, the bill for fixing the seat of government originated in the Senate, where it was passed on the first of July; and the bill making provision for the public debt, sent from the House, was amended in the Senate so as to assume the debts of the States to the amount of twenty-one millions of dollars. Some other amendments were proposed, and among them one to fund the bills of credit at forty for one, which being rejected, it was then proposed to fund them at seventyfive for one, which was also rejected. Some of the amendments, modifying the terms of the loan, finally prevailed on a conference between the two Houses.

Now that the feelings which this question once excited are passed away, when we have the means of appreciating the merit of the arguments urged both by its supporters

This compromise was brought about by the agency of Alexander Hamilton, who appealed to the patriotism of Thomas Jefferson, in consequence of which his influence was successfully exerted on two of the members of Congress from Virginia, Messrs. White and Blair. See Mr. Jefferson's account of this compromise. respondence.

Jefferson's Cor

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POLICY OF THE ASSUMPTION.

[CHAP. V.

and opponents which they did not possess, we may pronounce on it,

That, as a measure of justice, the claims of the State creditors were scarcely distinguishable from those of the United States, and it would be right to give to their claims, so long postponed, the addition of value they could derive from being funded, but that this purpose of thus benefiting a meritorious class was in a great degree defeated by the speculations made on them after the Secretary's report, and during the debate.

That, as a measure affording temporary relief to Massachusetts and South Carolina, the benefit to those States greatly outweighed any inconvenience which other States might have suffered from it.

As a measure of policy, in giving desirable support to the Federal government, or weakening the rights and independence of those States, its influence seems to have been egregiously overrated by both parties. If it made of every new fund-holder a friend to the General government, it probably also made many more enemies by preventing further examples of the cunning and greedy speculator running off with the spoils of the honest and unwary creditor, and by alarming the jealous fears of consolidation, and monarchy, and aristocracy, which already filled the minds of many with vain and imaginary terrors. Arguments quite as plausible present themselves, that every addition to the public debt weakened the government, as that they gave it strength; and the effect, either way, was probably insignificant. But as a financial measure it must be unhesitatingly condemned.

Since, in funding the public debt, it was proposed to pay the creditors less than they were fairly entitled to, or a lower interest, on the ground of the inability of the govern

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CONSEQUENCES OF THE ASSUMPTION.

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ment to do full justice, it was obviously desirable to assume no more than was necessary, since every addition to the debt, by pressing more heavily on the public resources, would lessen the value of the rest. When the debts of the States were small, it was easy for the States to discharge them from their own revenues; and accordingly States so circumstanced did not wish for the assumption. But it might happen, and was even probable, that the States which had the largest debts were also creditors of the United States to the largest amount; in which case, their debt would be so reduced as to be not beyond their resources. This accordingly proved to be the fact. On an adjustment of the accounts of the States, it appeared that if the assumption had been deferred until that settlement had taken place, a large part of what had been thus assumed had been entirely unnecessary. A settlement was made by Commissioners in 1793, when it appeared that had the United States postponed the assumption until such settlement, they would have attained the same result by assuming eleven millions of dollars, as was attained by assuming twenty-three millions.1

It is true that the same sum would, in either case, have been drawn from the people, but as the Government found great practical difficulty in providing for its debt and its current expenses, and it could not do so without the aid of an excise which caused an insurrection, and a great increase of expenses, it would have been better that these eleven million of dollars should have been paid by the States, which had shown, both before and after the assumption, that they could easily pay their quotas.

Thus, to afford temporary relief to two States, and to benefit that number of State creditors whose debts were

1 Gallatin on Finances, page 107.