Why did Hamilton argue that the national government should pay the states wartime debts?

Answer 1

During Washington's first term as president there were two competing theories as to what sort of central government the US should have - a strong central government, or a weak one (but stronger than that under the Articles of Confederation). Hamilton favored a strong central government, and as part of this led the fight for "assumption" which was a big issue during Washington's first term. The idea was the national government would "assume" the debts the states had incurred in financing the war, and in return the states would cede to the national government all their claims to "western lands". There were many unfair aspects to this plan. Among these were that some states were "landlocked" and had no claims at all to any western land - states such as South Carolina, Delaware, and New Jersey. These states would thus be giving up nothing in return for the national government paying their war debts. Other states had large claims to western lands, such as North Carolina, which under its colonial charter extended all the way across the continent to the Pacific Ocean. Another was that some states, such as Virginia (which had extensive claims to western lands) had already taxed their people and paid almost all of their war debts, while others (such as New York) had done almost nothing to pay off their wartime indebtedness. So under Hamilton's plan the people of Virginia, already taxed once by the state to pay their own debts, would now be taxed again by the federal government to pay the debts of others who had not bothered to even try to pay their own obligations, and Virginia would also have to give up her claims to western lands in return for not just practically nothing, but in return for this right to be taxed again and pay the debts of others. Some states, which had no claim to western land and had done nothing to pay their own debts, were very much in favor of Hamilton's plan, since they would give up nothing and everyone else would have to help pay the debts about which they had done nothing. Others, situated more as Virginia was, were very much opposed. The debate over this issue was among the most serious of the early Constitutional period. In the end, Hamilton had his way and all the states had to cede to the national government their claims to western lands, in return for federal assumption of any remaining war debt.

Answer 2

Hamilton argued that the national government should assume and pay the states' wartime debts for two main reasons. First, he believed that assuming the debts would help establish the creditworthiness of the new country and strengthen its financial reputation. Second, it would ensure that the states were paying their fair share of the war effort, promoting national unity and solidarity among the states.