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Debt Assumption, or simply assumption, was a US financial policy executed under the Funding Act of 1790. The Washington administration pursued the policy, under Secretary of the Treasury Alexander Hamilton 's leadership, to assume the outstanding debt of states that had not yet repaid their American Revolutionary War bonds and a scrip.
The Funding Act of 1790, the full title of which is An Act making provision for the [payment of the] Debt of the United States, was passed on August 4, 1790, by the United States Congress as part of the Compromise of 1790, to address the issue of funding (debt service, repayment, and retirement) of the domestic debt incurred by the state governments, first as Thirteen Colonies, then as states ...
[5]: x By 1775 the population had grown to 6.1 million, of which 2.1 million were white, 540,000 black and 3.5 million Native American, giving the colonies about one-third of the population of Britain. The three most populated colonies in 1775 were Virginia, with a 21% share, and Pennsylvania and Massachusetts with 11% each.
Alexander Hamilton, a portrait by William J. Weaver now housed in the U.S. Department of State. In United States history, the Hamiltonian economic program was the set of measures that were proposed by American Founding Father and first Secretary of the Treasury Alexander Hamilton in four notable reports and implemented by Congress during George Washington's first term.
The key provision in Hamilton's fiscal reform was termed "assumption" and called for the 13 states to consolidate their outstanding debt of $25 million [68] and to transfer it to the federal government for servicing under a general funding plan. [69] Hamilton's chief objectives were both economic and political.
The Power of the Purse: A History of American Public Finance, 1776–1790 (1961) online; Herring, William Rodney. "The Rhetoric of Credit, the Rhetoric of Debt: Economic Arguments in Early America and Beyond." Rhetoric and Public Affairs 19.1 (2016): 45–82. Kohn, Richard H. "The Inside History of the Newburgh Conspiracy: America and the Coup ...
In his Report on the Public Credit, Hamilton called for the federal assumption of state debt and the mass issuance of federal bonds. Hamilton believed that these measures would restore the ailing economy, ensure a stable and adequate money stock, and make it easier for the federal government to borrow during emergencies such as wars.
The Compromise of 1790 was a compromise among Alexander Hamilton, Thomas Jefferson, and James Madison, where Hamilton won the decision for the national government to take over and pay the state debts, and Jefferson and Madison obtained the national capital, called the District of Columbia, for the South.