Alexander Hamilton advocated for the assumption of the states’ debts by the Federal government. Why was this so significant? The reasons Chernow gives in his book are:

  • the wealthy bond holders would have a stake in preserving a government that owed them money

  • if the government didn't assume states' debts, states might take import duties which would clash with federal import duties

This all makes sense, but these reasons don’t seem as significant if this is just a one-time assumption? I say one-time because today states can take out debt. The only reasons I can think that Hamilton would give up the capital for this assumption was because:

  • the state debt was so significant and wouldn’t be paid off by the most debt-burdened states

  • something to do with the fact that it was debt from the revolutionary war

  • the legislation was not a one-time assumption but a permanent assumption which was later changed in other legislation

  • 2
    The federal governments' responsibility for the war debts of the states was a statement of federal responsibility for the defense of the country; that is, we were now a United States. Feb 4, 2019 at 12:04

1 Answer 1


The significance of this act was its importance in the Hamilton-Jefferson debate. Basically, Hamilton's idea was that of a large, strong, federal government. Jefferson and his supporters favored a weaker, de-centralized, and (in most cases) a state based government. Hamilton won this round by "federalizing" what had been Revolutionary war (and subsequent) debt.

The assumption of the states' debt meant that there would be one large centralized "national" debt, instead of 13 smaller ones. It was much easier for lenders, foreign as well as domestic, to monitor and deal with one federal debt, which had earlier been incurred by the states mainly to fight the Revolution, and to operate until the "United States" got going.

Yes, the states later incurred their own state debts, but for local matters, (usually) funded by "local" citizens. These debts were much smaller than the "national" debt that had been undertaken to fight the Revolution. By repaying the national debt promptly and in full, America established the credit it needed to fight future wars and to deal with other national emergencies.

There was one other thing. The federal responsibility to pay off the central debt was accompanied its control over most revenue sources, mainly tariffs and excise taxes (income taxes were permanently established in 1913, over a century later).

  • The primary income of the Federal government during the early days was the sale of land in the Federal territories, such as the Territory Northwest of the Ohio River. This source of revenue continued on through much of the 19th century. Feb 4, 2019 at 21:13
  • Just to add to the answer, this was the Compromise of 1790 and was also responsible for the nation's capital to be where it is (Virginia/Maryland border). This compromise led to the Whiskey Rebellion, the war of 1812 (financing) and the Louisiana Purchase. en.wikipedia.org/wiki/Compromise_of_1790
    – Tombo
    Feb 5, 2019 at 19:12

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