On June 20, 1790, when Congress was temporarily meeting in New York City, Secretary of State Thomas Jefferson hosted a dinner. In attendance were Secretary of Treasury Alexander Hamilton and Representative from Virginia James Madison.
Keep in mind these men were on opposing ends of the political spectrum. Hamilton, a Federalist, wanted the Federal Government to hold the bulk of the political and economic power; Madison and Jefferson, Republicans, wanted that power to remain with the states.
Nonetheless, the three men met to discuss a prolonged deadlock in Congress, and this meeting was a pivotal turning point in what is known as the “Compromise of 1790.”
Back in January 1790, Hamilton had given his “First Report on Public Credit” to Congress. One of the most contentious issues in the report was Hamilton’s recommendation that the Federal Government assume the states’ substantial Revolutionary War debts.
Hamilton believed this was necessary to establish the United States’ credit and promote investment. Furthermore, the debt rested in the hands of a small number of wealthy citizens. Hamilton knew these men would take a keen interest in the success of a country that owed them money.
The assumption issue had been debated in Congress for months. Northern members supported it because their debts were largely unpaid but Southern members, including Madison, opposed it because southern states had paid off a significant portion of their debt.
At the same time, Congress had been at a standstill over the location of the permanent capital. Although the Constitution mandated a seat of the Federal Government, it had not specified an exact location. Congress, over the course of its first year, had considered more than a dozen potential locations.
When Senator Pierce Butler of South Carolina presented a new Residence bill on May 31, 1790, he left the location blank. The deadlock continued into June, when the Senate failed to pass a motion to fill the spot with “the easterly bank of the Patomack.” Subsequent motions designating Baltimore, MD, and Wilmington, DE, also failed.
Hence the dinner meeting. Key was a bargain in which Madison agreed not to block assumption of state debt and convince enough southern members to support it. In exchange, Congress would first pass legislation locating the capital city on the Potomac, after a 10-year temporary move to Philadelphia.
This may be one of the earliest examples of legislative “log rolling,” or voting trading in Congress. Although there is no dispute that this meeting took place, historians have been skeptical to what extent it had on the eventual compromise.
Nonetheless, Congress passed the Residence Act in July, establishing the permanent capital in what would become Washington, DC. And the next month, Congress passed the Funding Act, which included the assumption of states’ debt.