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 policy of assumption, Hamilton argued, required expanded federal taxation, including a tariff and an excise tax on whiskey.
The Compromise of 1790 was reached by Hamilton, Jefferson, and Madison to include both assumption of state debts and the location of the permanent national capital in the South.
Jefferson originally approved the scheme, but Madison had turned him around by arguing that federal control of debt would consolidate too much power in the national government.
The credit of the U.S. was solidly established at home and abroad, and Hamilton was successful in signing up many of the bondholders in his new Federalist Party.