Hamilton favored a capital close to the major commercial centers of the Northeast, while Washington, Jefferson, and other agrarians wanted it located to the south.[139] After lengthy deadlock, the Compromise of 1790 was struck, permanently locating the capital on the Potomac River, and the federal government assumed the war debts of all thirteen states.[139]
While serving in the government in Philadelphia, Jefferson and political protegee Congressman James Madison founded the National Gazette in 1791, along with author Phillip Freneau, in an effort to counter Hamilton's Federalist policies, which Hamilton was promoting through the influential Federalist newspaper the Gazette of the United States. The National Gazette made particular criticism of the policies promoted by Hamilton, often through anonymous essays signed by the pen name Brutus at Jefferson's urging, which were actually written by Madison.[140] In the Spring of 1791, Jefferson and Madison took a vacation to Vermont. Jefferson had been suffering from migraines and he was tired of Hamilton in-fighting.[141]
In May 1792, Jefferson was alarmed at the political rivalries taking shape; he wrote to Washington, imploring him to run for re-election that year as a unifying influence.