HAMILTON'S FINANCIAL POLICY.

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mediate and the absolutely reliable support of every president.

The anti-Federalists did not permit the administration to remain a moment in doubt that they held fast to the maxim which declared mistrust of the government to be the corner-stone of freedom. Wherever they found the least positive ground of mistrust, there they, too, were to be found holding up the most sombre picture which their excited imaginations could suggest, precisely as they had done in their efforts against the ratification of the constitution. The burthen of their speeches was no longer the danger to the liberty of the individual, but to the rights. of the states, which were threatened on every side. Every question was treated with direct reference to state. sovereignty. The more the legal consolidation of the Union became an accomplished fact, the greater was the reaction of particularistic tendencies against the increased pressure. The mere fact of the adoption of the constitution could not at once change the real state of affairs or the modes of thought of the people. Nothing but time could operate any change in these two most essential factors. To begin with, the preponderance of particularistic tendencies was still great enough to afford, from the very first, the strongest proof of Hamilton's assertion that this constitution was the least which, spite of the actual condition of things and the mode of thought of the people, could hold the Union together.1

Hamilton had recognized, and rightly, that the government should, first of all, direct its attention to the question of finance. The Federalists shared his conviction that nothing would have so much influence in confirming the new order of things as his financial projects. There were some even who believed that the continued existence of the

1 " I propose to discuss the necessity of a government at least equally energetic with the one proposed, to the attainment of this project [the preservation of the Union]." The Federalist, No. I.

Union depended upon their adoption. This may have been going too far; but it is certain that no other measure of the federal government contributed in even an approximate degree to the actual consolidation of the Union.

The unconcealed contempt with which the European powers looked down upon the United States was keenly felt by the American people. But the good opinion of foreign countries could be regained only on condition that the credit of the Union was restored. The only means by which the advantages of the new over the old constitution could be shown to any great extent, and in a tangible manner, was to take the comparison between them, in one most important matter, out of the domain of speculation. Trade and commerce, the depressed condition of which had most effectually opened the way for a recognition of the insufficiency of the articles of confederation, would necessarily be greatly and favorably influenced thereby. By this means there would be created a real bond of interest between the government and the people which could not easily be dis solved. All attempts to dissolve it must be in vain, so far as the creditors of the state were concerned, since their interests demanded still more unconditionally the greatest possible strengthening of the federal government. In case the creditors of the individual states were taught to look to the general government too, these reasons would apply

'The elder Wolcott writes, April 23, 1790: "Your observations respecting the public debts as essential to the existence of the national government are undoubtedly just-there certainly cannot at present exist any other cement. The assumption of the state debts is as necessary, and indeed more so, for the existence of the national government than those of any other description; if the state governments are to provide for their payment, these creditors will forever oppose all national provisions as being inconsistent with their interest; which circumstances, together with the habits and pride of local jurisdictions, will render the states very refractory. A refusal to provide for the state debts, which it seems has been done by a committee of congress, if persisted in, I consider as an overthrow of the national government." Gibbs, Mem. of Wolcott, I., p. 45.

ASSUMPTION OF STATE DEBTS.

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equally to them. The funding of the debt of the Union and the assumption by the Union of the debts of the states. were, therefore, the two principal pillars on which the new political structure could be made to rest. If the govern. ment could point to a steady and rapidly-increasing prosperity, instead of the almost universal bankruptcy under the confederation; if the creditors of the Union and of the states alike would support it; it could stand even greater storms than the pusillanimous men of 1789 had prophesied. Violent storms did assail it, but it withstood them.

The anti-Federalists did not ignore the bearing of the so-called Funding Act and Assumption Bill. The Assumption Bill was very unpopular in several of the states, because the sordid designs which, during the last years of the confederation, had been asserted with so much shameless. boldness were still pursued by many. The main cause, however, of the obstinate opposition to both bills was their political significance. Only when the material interests affected were very considerable, did political considerations have little weight.'

Even a part of those who, from 1785 to 1787, had been, because of impending anarchy, the warmest advocates of a stronger general government, allowed themselves, at the first attempt to instil life into the letter of the constitution, the fruit of so much labor, to be carried off in a contrary direction by the particularistic instincts which had become a part of their very flesh and blood. Madison now took the first step on the path which soon completely separated him from his old associate Hamilton, and even from his own past. True, Jefferson brought about a compromise and effected the adoption of Hamilton's resolutions. But he

1 South Carolina agreed with Massachusetts on the question of the assumption of the state debts, because her debt was over five millions of dollars. In New Hampshire and Pennsylvania, on the other hand, the opposition to the bill was great, and with many convincing.

* July 16, 1790.

declared later that he had been misled by Hamilton and that he regretted this mistake more than any other of his political life.1

Hamilton had, however, to pay a price for this service, a fact which afterwards proved to be of the highest importance. He saw himself compelled to do so because the Assumption Bill was rejected by the house, in committee of the whole, and because party feeling had reached such a height that the action of congress had come to a complete standstill. White and Lee of Virginia finally concluded to change their votes.

The consideration paid by Hamilton was that he induced certain of his friends to vote for the establishment of the new capital on the Potomac instead of on the Susquehanna.

The whole compromise was a bargain between the north and the south. True, there were decided Federalists in the south, and some of the members of congress from the northern states emulated the hot-headed anti-Federalists of the south. But the friends of Hamilton's financial policy were so preponderantly from the northern states, and its opponents from the southern, that the "geographical" and "sectional" character of the parties was a matter of frequent mention and lament. It is well to call special attention to this, because the erroneous view largely prevailed afterwards that the mischievous political division.

'Jefferson writes to Washington, September 9, 1792: "The first and only instance of variance with the former part of my resolution (to intermeddle not at all with the legislature) I was duped into by the secretary of the treasury and made a tool for forwarding his schemes, not then sufficiently understood by me; and of all the errors of my political life, this has occasioned me the deepest regret." Jefferson, Works, Vol. III., p. 460.

* Debates of Congress, I., pp. 287, 292, 296. (When mention is made in this work of the Debates of Congress, Benton's Abridgment is always meant, unless express reference is made to some other. I prefer as a rule to refer to it, as it is more readily accessible to readers.) Gibbs, Mem. of Wolcott, I., p. 46.

of the country by a geographical line dates back only to the Missouri compromise.1 In the case before us, the geographical separation of parties was determined to some extent by the differences in the economic situation of the two sections, and more especially by the purely financial side of the question. Yet the principal reason was the difference of political thought in general, and the different interpretation of the nature and object of the Union. In debate it was attempted not to permit this side to appear

'Certain letters of Jefferson especially are frequently adduced in support of this view. Jefferson himself, however, writes to Washington, May 23, 1792: "But the division of sentiment and interest happens unfortunately to be so geographical that no mortal can say that what is most wise and temperate would prevail against what is most easy and obvious." Jefferson, Works, III., p. 363. The view referred to in the text, however, is well founded to this extent that by the Missouri compromise a new and important element was introduced into the geographical division, an element of which more will be said hereafter.

The memorial of the Virginia legislature mentioned in the next paragraph designates "the prostration of agriculture at the feet of commerce," as one of the two consequences of Hamilton's financial policy. The "anti-Federalists . . . fearful that the interests of agriculture might be sacrificed to the protection of commerce and manufactures, etc." Hildreth, Hist. of the U. S., IV., p. 119.

3

"The owners of the debt are in the southern and the holders of it in the northern division." Jefferson, Works, III., p. 363. Hildreth (Hist. of the U. S., IV., pp. 137, 138) shows that this assertion was not wholly without foundation, although it was greatly exaggerated.

'Hildreth, Hist. of the U. S., IV., p. 119, says: "It may hence be concluded . . . that no question of fundamental principles as to the theory of government was really in debate between the Federalists and anti-Federalists, and that the different views they took of the new constitution grew much more out of difference of position and of local and personal interest than out of any differences of opinion as to what ought to be the ends and functions of government or the method of its administration." This is not a wrong view, but it is easy to misunderstand it. In the application of the theory parties diverged from one another so widely that their agreement on the theory of "government" had only a negative practical value: both parties made use of that theory for their own justification when their interests impelled them to a change of position with their opponents.