Assumption
Assumption
ASSUMPTION. "Assumption" was the term applied to the economic policy proposed by Secretary of the Treasury Alexander Hamilton in his First Report on the Public Credit, which he presented to Congress on 14 January 1790. Under this policy the new federal government would "assume" about $25 million of debt that states had contracted during the War of Independence. State debts, along with about $40 million owed by the former central government, would be converted into new federal government securities to be redeemed over the long term. Representatives from states that had undertaken often painful financial measures to retire their own debt had no interest in assuming part of the burden of their less fiscally responsible neighbors. At the same time, there was a controversy over the site for the national capital. Thomas Jefferson, then secretary of state, engineered a dinner meeting, probably on 20 June 1790, at which Hamilton and James Madison of Virginia, a state that had retired much of its war debt, agreed to a compromise. In return for Hamilton's help in getting the federal capital moved to a site on the Potomac River (what is now Washington, D.C.), Madison, a leader in the House of Representatives, endorsed the assumption of debts the states could prove were contracted to prosecute the war. The entire plan was passed into law on 4 August 1790.
SEE ALSO Hamilton, Alexander; Jefferson, Thomas; Madison, James.
BIBLIOGRAPHY
Ellis, Joseph. Founding Brothers: The Revolutionary Generation. New York: Knopf, 2001.
revised by Harold E. Selesky