Jefferson and Hamilton (41 page)

That may have been correct, but it was also true that Hamilton had learned the political arts and practiced them with an adroitness that in 1790 set him apart from most officeholders. His years in the cauldron of New York politics had been a learning experience, as had his long, uphill battle for consolidation and the ratification of the Constitution. He had learned much from General Washington, a political master who at times dispatched his well-coached aide to meet with state officials and others. Hamilton was never reluctant to bargain, and he expended much of his legendary energy in meeting after meeting, often behind closed doors, where he must have had to draw on all his arts of persuasion and manipulation. Furthermore, the treasury secretary entered this fray with a well-crafted organization and a plan of action that took his adversaries by surprise.

Nevertheless, as the long battle for consolidation had demonstrated, machinations and organization did not always lead to immediate success. As spring turned to summer, it was clear that Congress would endorse funding, but the fate of his proposed plan to assume state debts was far from certain. It was unpopular in states such as Virginia, which had already retired what it owed. With a vital cog in his program in jeopardy, Hamilton began casting about for a compromise.

The dealings of politicians are seldom transparent, and that was true of James Madison’s behavior in 1790. He may never have wanted to defeat either funding or assumption. Madison was mending fences at home, where he had
been damaged by his support for consolidation. It is also a good bet that he too was trolling for a compromise that would net something for Virginia. Indeed, in the early discussions over Hamilton’s program, the question of the location of the national capital, an issue that had been bruited about in Congress since 1779, arose once again.
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One of five sites seemed certain to be chosen to be the capital: New York, Philadelphia, Baltimore, somewhere on the Susquehanna River in the Pennsylvania backcountry, or some undetermined place on the Potomac River. Madison badly wanted the capital to be located on the Potomac, and he ultimately got his way through what he called a fortunate “coincidence of causes.”
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Jefferson, on the other hand, attributed the outcome of the assumption/national capital contests to a grand deal—often called the “Compromise of 1790”—that he, Madison, and Hamilton concluded.

The narrative of a bargain struck quickly and neatly had its inception in an account penned by Jefferson several years later. Sometime during the summer of 1790, Jefferson recalled, he had met a “somber, haggard, and dejected” Hamilton at the door to the president’s residence. One part of his story rings true. Hamilton, he said, opened the conversation with a threat: the Union could not survive unless assumption and a “general fiscal arrangement” were approved. Supposedly, Hamilton then asked Jefferson to intercede with southern congressmen to support the Assumption Bill. Though Jefferson had remained aloof from the legislative battle, and he subsequently claimed that to this point he had not even “considered it [assumption] sufficiently,” he said that he sought “conciliation” by hosting a dinner at which Hamilton and Madison were the guests.

Jefferson depicted the dinner as one at which he remained on the sideline while Madison and Hamilton bargained. The agreement that they allegedly reached called for Madison and Jefferson to persuade a couple of recalcitrant Virginia congressmen to support assumption, and for Hamilton to convince some Pennsylvania representatives, who longed for Philadelphia to be the nation’s capital, to consent to locating the capital on the Potomac. On the surface, it appeared that Madison and Jefferson swallowed a bitter pill in order to get the capital, while Hamilton scuttled his friends back home who were depending on him to give them the opportunity to become very rich by making New York the national capital. “This is the real history of the assumption,” Jefferson declared.
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Jefferson’s story is true insofar as assumption was part of a bargain that involved the national capital, but the negotiations were more extensive than he recalled, or acknowledged, and a settlement was not reached until long after his famous dinner. Before the issue was settled, many congressmen, as
well as the president, got into the act. Senator Maclay of Pennsylvania said that Washington exerted a “great influence in this business,” and he depicted the president as Hamilton’s tool, his “dishclout of … dirty speculation,” for Washington’s “name goes to wipe away blame and silence all murmuring.” The senator was wrong about Washington being anyone’s puppet. Washington wanted both assumption and a capital on the Potomac, and he fought to persuade Congress to select a site on the Potomac near where he owned vast amounts of property at Mount Vernon and in Alexandria. The president lobbied members of at least four state delegations. Hamilton had begun “jockeying and bargaining” well before the dinner that Jefferson hosted, and he continued to negotiate for a month thereafter, and Jefferson probably did so as well. Senator Maclay, who opposed assumption and badly wanted Philadelphia to become the capital, knew that his aspirations were doomed the moment he saw the tandem of Hamilton and Washington in action. “If Hamilton has his hand in the residence [the choice of the national capital] now, he will have his foot in it before the end of the session,” Maclay predicted.
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The whole story will never be known, in part because Madison had long since mastered the arts of backroom negotiating and Hamilton was a maestro at intrigue. Nor was Jefferson as naïve or as dispassionate with regard to assumption as he wished others to think. Ever after, Jefferson depicted himself as a guileless innocent who was taken advantage of by Hamilton. Having been abroad for years, he claimed to have been a “stranger” both to the putative crisis that led to the overthrow of the Articles of Confederation and to the meaning of, and the need for, the “system of finances” that Hamilton advocated. “I was most ignorantly and innocently made to hold the candle,” he said of the role he had played. Later, he told Washington: “I was duped into it 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.”
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At the time, however, Jefferson said that he supported Hamilton’s program from the fear that “something much worse will happen” if funding and assumption were rejected. The “something worse” was the ruin of American credit in Europe, which he believed would usher in “the greatest of all calamities.” But Jefferson’s tale of naïveté was not entirely a fabrication. He failed to understand that funding and assumption constituted only the foundation of Hamilton’s grand design. More was to come, and it was only upon discovering that Hamilton harbored still other plans that Jefferson came to feel that he had been deceived.
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In the end, Congress in July enacted both the Assumption and Residence Bills. The latter moved the capital to Philadelphia for ten years while a new capital city was constructed at some site on the Potomac. The exact location
was left to Washington’s choosing. Not surprisingly, he selected a plot as near to Mount Vernon as possible.
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Soon after Congress acted, the government moved to Philadelphia. Hamilton was one of the first to find a home for his department and his family. He situated the Treasury Department in a modest two-story brick building on Third Street, between Walnut and Chestnut, just two blocks east of the Pennsylvania State House, where the Continental Congress and Constitutional Convention had met. Hamilton rented a house half a block away. Jefferson, who had resided in New York for only about one hundred days, came to Philadelphia shortly after Hamilton. He rented two new adjoining four-story brick houses on Market Street, situated only one block north and five blocks west of Hamilton’s offices and residence. Jefferson’s plan was to live on the ground floor—typically, he hired workers to renovate one of the houses, expanding the dining room and adding a library, stables for five horses and three carriages, and a garden house—and to utilize the remaining space for the State Department.
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All three departments commenced operations in more or less the same size buildings, but that did not last long. While War and State each had only six employees and did not grow, Treasury’s staff of ninety-three grew to more than five hundred employees before the capital moved to the Potomac in 1800. By then, its Philadelphia offices stretched from one end of the block to the other.

Jefferson returned home in mid-September, stopping en route for his first visit to Mount Vernon. He spent a busy fifty days at Monticello, during which he found a home nearby for Patsy and her husband. He also took more painful steps to cope with his indebtedness. He sold more slaves—he would sell more than fifty of his chattel during the first five years after his return from France—and he negotiated the sale of more than a thousand acres below the James River for approximately three thousand dollars. (Patsy’s dowry included one thousand acres of his Poplar Forest property in Bedford County as well as twenty-seven slaves, some or all of whom he might otherwise have sold to cope with his indebtedness.)
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Jefferson may have begun to wrestle with his quagmire of debt, but decisions that he made in 1790 foreshadowed the losing battle that he would wage. Convincing himself that he could beat indebtedness both through altering business operations at Monticello and by selling his surplus lands and slaves, Jefferson recklessly lived beyond his means. The cost of the offices that he rented for the State Department exceeded by threefold his government allotment for rent. He had borne the expense of lavishly remodeling his New York residence, only to live in it for three months, and now he was engaged in a
similar undertaking in Philadelphia. He beseeched Adrien Petit, his maître d’hôtel in Paris, to work for him in Philadelphia, not only paying him a handsome salary but covering his Atlantic crossing as well. Atop those expenditures, at year’s end he was presented with a considerable bill for the cost of having shipped eighty cases of furniture, books, and assorted other items that he had left in Paris the year before, thinking that he would soon return to France.
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After seven weeks at home, Jefferson started back to Philadelphia. He stopped for two or three nights at Mount Vernon but was back in the temporary capital by the last week of November.
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Years later, Jefferson recalled that strident party warfare had originated in the battle over assumption. It had indeed been what he called a “bitter and angry contest,” but it was only when Hamilton unveiled the next step in his program that unbridled partisanship developed. This second phase of Hamiltonian economics sparked a jarring battle, but even more, it brought about ideological divisions that Jefferson correctly labeled “the real ground of the opposition” to Hamiltonians. These differences, and the partisanship that accompanied them, defined the first decade of the new republic.
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Deep within his Report on Public Credit, Hamilton had included a proposal to levy an excise tax on “every gallon of those Spirits” distilled in the United States and duties “upon all Stills employed in distilling Spirits.” In short, Hamilton was proposing what would become widely known as the “whiskey tax.” He had recommended such a step because he did not believe that the revenue raised from the duties on foreign imports would be sufficient for the needs of the federal government, but he also privately told Washington that he was taking this step to monopolize this source of revenue before the states latched on to it. Hamilton anticipated formidable opposition. Not only had excise taxes been denounced by the Continental Congress prior to American independence, but Hamilton himself had acknowledged in
The Federalist
that the citizenry would “ill brook” sweeping excise taxes. He was correct. In fact, when Congress passed the Funding Bill, it had stricken Hamilton’s proposed excise tax from the legislation.
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But in December 1790, with the federal government facing a shortfall of some eight hundred thousand dollars, Hamilton resurrected his proposal for a tax on domestically distilled whiskey. (He also called for excise taxes on spirits that entered the country and rum produced in the United States from imported materials.) He thought it would produce about one-quarter of the needed revenue. Predictably, immediate and stormy opposition ensued. Five state legislatures from Pennsylvania southward denounced the proposed tax,
knowing it would fall principally on farmers who distilled whiskey from the corn they raised. Their congressional delegations fought the tax, fearful that it would trigger farmers’ uprisings akin to Shays’ Rebellion. Skeptics also suspected hidden motives on the part of the treasury secretary. More than one was convinced that Hamilton’s ultimate goal was the elimination of the states. Others were certain that he longed for a farmers’ rebellion, as it would afford the administration with the pretext for raising a large American army. However, there was support for a levy on spirits in the eastern portion of many states, where merchants and the wealthy preferred a whiskey tax to its most discussed alternatives: a land tax or an increase in the impost. Hamilton’s foes fought tenaciously, but once again the treasury secretary’s forces were better organized. Proponents of the excise descended on Congress and soothingly told the skeptics that the whiskey tax would be devoid of the “absurdity, villainy, and deplorable effect on society” that had characterized European excises. They knew this duty would be for the best, they said, because they had “consulted Hamilton.” But their finishing touch was to broadcast that Washington supported the bill. Anything “that can be fairly fixed on the President” will win support in Congress, one member murmured. On the day the Senate was to vote, Pennsylvania’s Maclay cautioned against “the box of Pandora.” However, the legislation passed, and in the House as well, prompting Maclay to sigh: “Mr. Hamilton is all-powerful, and fails in nothing he attempts.”
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