From 1803 to 1805, President Hamilton and his Federalist cabinet endured a turbulent political atmosphere that threatened the unity of the Federalist Party. The divisive issue of this period concerned the question of Ohio's admission into the Union, which caused political rifts in Congress and severely damaged the popularity of the government. Former allies of President Hamilton abandoned their leader and supported the inclusive policy of the Democratic-Republicans, which demanded Ohio's immediate admittance into the Union as a state. The contest was finally settled in 1805, when Democratic-Republicans and Federalists settled the issue with a legislative compromise known as the Compromise of 1805.

The Ohio Crisis

The annexation of Louisiana as territories of the United States faced little opposition during the Quasi War or the subsequent negotiations with France and Great Britain. But after the brief tranquility of the First Establishment, the Senate began to debate the organization of the new Louisiana district. The question of westward statehood became the central issue of the Senate after the Federalists delayed the consideration of the Enabling Bill, which would authorize the residents of Ohio to draft a state constitution and prepare for admittance into the union. Governor Arthur St. Clair II (F) of the North-West territory was determined to divide the Ohio territory in a way that would delay statehood and preserve the power of regional federalist strongholds on a local and congressional level. President Hamilton and his cabinent realized that sudden admittance of Ohio into the Union would establish a precedent for rapid statehood admissions — the Louisiana District would soon become subject to the same rules that were enacted for the Northwest Territory. 

Jefferson and James Madison were more than perceptive of the Federalist's machinations; the Democratic-Republicans excoriated Hamilton for promulgating his factional interest ahead of the common good. In Congress, Senator John Breckinridge of Virginia (D-R) demanded that the administration put a plan for statehood before the upper chamber. Under pressure to produce at least a prospective plan, Vice-President Charles Cotesworth Pinckney asked Governor St. Clair to guide a tolerable plan for statehood through the Ohio Territory's assembly.

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