Despite the growing concern throughout the nation over a string of acts asserting national over state power, the Washington administration remained dominated by Federalists, led by Secretary of Treasury Alexander Hamilton. Hamilton's initiatives aroused the ire of those who maintained the politics of the Anti-federalists. Hamilton's main goals were to achieve the financial stability necessary to fight another war should one arise with the foreign threats of Britain and Spain, and to dull assertions of state power that might diminish national power. In his Report on Public Credit, submitted to Congress in January 1790, Hamilton calculated the US debt at $54 million, with individual states owing an additional $25 million. American credit abroad was poor, and continued to fall with every day the debt was left unpaid. Hamilton suggested funding the debt by selling government bonds, and further proposed that state debts be assumed by the national government. (Burner & McDonald, 1985)
Hamilton advocated the selling of western land to pay off US debt to European nations in order to rebuild credit, but suggested that the debt to US creditors be maintained as a perpetual debt. He argued the US could continue paying interest on its domestic debt, thus maintaining good credit, if the US creditors would accept the debt as a secure investment which paid yearly interest. This plan generated opposition from many, objecting to the fact that under the plan, astute wealthy speculators who had bought the debt certificates of others, many at great discounts, would benefit, while the Americans who actually financed the war would lose out.
Heavy opposition arose to Hamilton's proposal that the national government assume the debts of the states as well. Opposition ran especially high in the South, which, excluding South Carolina had paid off 83 percent of the region's debt.............
