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How Washington, D.C., became the Capital of the United States

Some capitals emerge from the eternal depths of history. Legend has it that Washington, D.C., was the result of a backroom political compromise. President Washington, newly sworn into office at New York’s Federal Hall in 1789, faced a daunting challenge: War had strained the colonies’ finances to the breaking point, and the young nation was deeply in debt. Creditors were clamoring to be paid.

Much of this debt was owed by individual states, but Alexander Hamilton, Secretary of the Treasury in the new Washington administration, had a plan. In his First Report on Public Credit, delivered to Congress in January 1790, Hamilton proposed that the national government fully assume the debts of the states.

Hamilton’s proposal was met with swift opposition, led by Secretary of State Thomas Jefferson and James Madison, a member of the House of Representatives from Virginia. The two men leveled three main lines of attack:

  • By this point, the debt was held largely by speculators who, in many cases, had bought it from desperate soldiers for far below its original value. Thus, speculators would profit at the expense of the heroes of the American Revolution.

  • As everyone recognized, the assumption of the states’ debts would greatly increase the power of the federal government because subsequently all creditors would look to one central authority for repayment, necessitating that the federal government raise revenues.

  • The debts themselves were not evenly distributed among the states. Some southern states, Virginia among them, had already paid most of their war-era debts. Others, including several northern states, had paid little and were still struggling financially.

    If the federal government assumed responsibility for all state debts and began collecting federal taxes, states like Virginia would essentially be forced to help pay off the debts of the less financially disciplined states.

Hamilton needed a deal to get around this political impasse. With Jefferson’s help, a bargain was struck in which Madison, both a Virginian and the most influential member of the House, would help get Hamilton the votes needed to pass the Funding Act, which would allow the federal government to assume the states’ debts.

In exchange, Hamilton would help Madison get the votes needed to pass the Residence Act, which would fix the site of the national capital along the Potomac River, thereby giving the South increased political power to balance the North’s growing economic power. The decision on the capital’s final location would be left to President Washington.

In essence, the capital would be the reward for acquiescing to the debt deal — not a pretty beginning, but a harbinger of political deal-making to come.

On January 24, 1791, acting under the authority granted to him by the Residence Act, President Washington issued a proclamation fixing the boundaries of the new federal district. The capital would be a square measuring 10 miles on each side, although oriented on a map it would appear in the shape of a diamond.

It would include 69 square miles of Maryland territory (including Georgetown) and 31 square miles of Virginia territory (including Alexandria). All that remained to be done was build a city from scratch.

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