The Dinner-Party Compromise that Resolved a Debt Crisis (And Gave Us Washington, D.C.)

It’s been reported that President Obama and House Speaker John Boehner are set to play a friendly round of golf on June 18th. While this might strike some as a unique approach to solving our debt crisis, hosting social engagements to discuss political matters is nothing new. Our Founding Fathers used similar methods to resolve their partisan issues.

Samuel Adams and Massachusetts Ratify Assumption of State War Debt, 1794; Image courtesy of the Raab Collection

This month, we put on display a new artifact loan that helps tell the story of one famous compromise that also happened to involve our nation’s finances. Signed by Samuel Adams, then Governor of Massachusetts, the document is Massachusetts’s ratification of a plan to rid the states of their massive Revolutionary War debt.

The plan was conceived by the first Secretary of the Treasury, Alexander Hamilton. Back in 1790, Hamilton wanted to get the young nation off on good financial footing. He proposed that the federal government should take on the war debt still owed by the states – a collective total of $25 million – in exchange for the states accepting new, interest-paying securities. This action, Hamilton believed, would help establish the United States’ credit and promote investment and business.

Not everyone agreed with Hamilton’s idea. Some states, like Massachusetts, had a lot of debt and would benefit from the plan. But other states, like Virginia and most of the South, had already paid off a large amount of their debt. If they agreed, they would be charged more in new taxes than the amount they were being relieved of.

It’s not hard to guess what happened next – congressional gridlock. Alexander Hamilton submitted his financial plan to Congress in January 1790, but by June it had still not passed. Approval of the assumption of war debt was being blocked by a coalition of southern congressmen let by Virginia Representative James Madison. With neither side willing to budge, bitter partisanship looked to threaten the very survival of the new nation.

The story of how this conflict was resolved is part history and part legend. Historian Joseph Ellis recounts it beautifully in his Pulitzer Prize-winning book Founding Brothers. In a chapter called “The Dinner,” Ellis describes the political interests that brought Hamilton and Madison together at a dinner party hosted by Secretary of State Thomas Jefferson.

There, according to the only account, provided by Jefferson, three American icons came to an agreement for the ages: Madison would stand down and let Hamilton’s financial plan pass or fail without a strenuous effort to block it. In return, Hamilton would use his influence to pass a bill that would find a permanent home for the nation’s capital along the Potomac River, bordered by Virginia and Maryland.

Thus, a simple dinner party thwarted a major financial crisis (Hamilton’s plan proved to be a great success) and paved the way for what would become Washington, D.C. So what might a round of golf accomplish? We may never know for sure, but Madison, Hamilton and Jefferson would certainly approve.

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  1. Randall Sawyer says

    Personally as a Tea Party member, the idea of the Speaker and the President playing golf together bothers me. Speaker Boehner seems to have a strong distaste for the Tea Party and we were hoping for sweeping changes back to a tighter, smaller system of Government, instead it appears as if nothing ever really changes. Same ol’ same ol’ trash talking in public and hanging out together afterwards makes them seem insincere to their constituants and flexible to their beliefs. We just can’t trust them to firmly stand up for us.