as
a separate state. The next year Kentucky came into the Union. This was
originally a part of Virginia, and the colonists had brought their
slaves with them to their new homes. Kentucky, therefore, was a slave
state. Vermont was a free state, and its constitution forbade slavery.

[Illustration: CENTER OF POPULATION]

[Sidenote: Origin of the National Debt. For details, see _McMaster_,
198-200.]

[Sidenote: Bonds.]

202. The National Debt.--The National Debt was the price of
independence. During the war Congress had been too poor to pay gold and
silver for what it needed to carry on the war. So it had given promises
to pay at some future time. These promises to pay were called by various
names as bonds, certificates of indebtedness, and paper money. Taken all
together they formed what was called the Domestic Debt, because it was
owed to persons living in the United States. There was also a Foreign
Debt. This was owed to the King of France and to other foreigners who
had lent money to the United States.

[Sidenote: Hamilton as a financier.]

[Sidenote: His plan.]

[Sidenote: Objections to it.]

203. Hamilton's Financial Policy.--Alexander Hamilton was the
ablest Secretary of the Treasury the United States has ever had. To give
people confidence in the new government, he proposed to redeem the old
certificates and bonds, dollar for dollar, in new bonds. To this plan
there was violent objection. Most of the original holders of the
certificates and bonds had sold them long ago. They were now mainly held
by speculators who had paid about thirty or forty cents for each dollar.
Why should the speculator get one dollar for that which had cost him
only thirty or forty cents? Hamilton insisted that his plan was the only
way to place the public credit on a firm foundation, and it was
finally adopted.

[Illustration: ALEXANDER HAMILTON. "He smote the rock of the national
resources and abundant streams of revenue gushed forth. He touched the
dead corpse of the public credit and it sprang upon its
feet."--WEBSTER.]

[Sidenote: The state debts. _Source-Book_, 186-188.]

[Sidenote: Hamilton's plan of assumption.]

[Sidenote: Objections to it.]

[Sidenote: Failure of the bill.]

204. Assumption of State Debts.--A further part of Hamilton's
original scheme aroused even greater opposition. During the
Revolutionary War the states, too, had become heavily in debt. They had
furnished soldiers and supplies to Congress. S