What was Alexander Hamilton's program for dealing with national and state debt?

After the Constitution was ratified, one issue we had to face was our debt. Alexander Hamilton, as Secretary of the Treasury, developed a plan to pay our debt. Alexander Hamilton wanted to combine the debts of the state governments and the national government into one, large federal debt. He wanted to issue new bonds and also use tax revenue to pay off the debt. This plan was very controversial.

The controversy centered on several issues....

After the Constitution was ratified, one issue we had to face was our debt. Alexander Hamilton, as Secretary of the Treasury, developed a plan to pay our debt. Alexander Hamilton wanted to combine the debts of the state governments and the national government into one, large federal debt. He wanted to issue new bonds and also use tax revenue to pay off the debt. This plan was very controversial.

The controversy centered on several issues. Some states, mainly southern states, had paid their debt. Now they were going to have to cover the debt of other states. They weren’t happy about this scenario. Some people believed the plan was unconstitutional since the Constitution said nothing about the federal government paying off debts with such a plan. Also, there was significant concern about redeeming the old bonds, issued during the Revolutionary War, at full value. Many people sold those bonds to northern speculators for a fraction of the full value of the bond. Now the speculators would make a lot of money if Hamilton’s plan went through. The northerners would benefit more than southerners.

To pass the plan, a compromise was reached. In order for southerners to support the plan, the capital would move to Washington, D.C. from New York. Virginia and Maryland would donate the land for the capital. This compromise was accepted, the debt plan went into effect, and the capital eventually moved to Washington, D.C.