Final answer:
In the Compromise of 1790, key figures agreed to establish the national capital along the Potomac River, resulting in the passage of the Residence Bill and Assumption Bill, which located the capital temporarily in Philadelphia and addressed the federal assumption of state debts.
Step-by-step explanation:
Formation of the National Capital
The decision to establish a national capital outside any state's jurisdiction was a result of concerns about the financial health of the United States and the need for a stronger federal government. The Congress of the Confederation, which operated under the Articles of Confederation, was greatly concerned with such matters in the 1780s. Section 8 Clause 17 of the Constitution later gave Congress the power to establish a national capital.
In the Compromise of 1790, key figures like Alexander Hamilton and James Madison agreed to move the capital to a site on the Potomac River. Consequently, the Residence Bill was passed in July, stating that the capital would temporarily be in Philadelphia until the permanent site near the Potomac, which was carved out of Virginia and Maryland, was ready. This strategic location later became known as the District of Columbia, housing the national government and its Congress in the Capitol Building.
Moreover, the Assumption Bill was also passed which allowed the federal government to assume state debts, a move that would strengthen the central government. This resolution came after much deliberation and revealed the differing visions for the country's future between leaders like Jefferson, Madison, Washington, and Hamilton.