Adding a running sequence number while appending 2 files

Hi,

I have to append 2 files and while appending i need to add a running sequence number (counter ) for each line at the first column.

For e.g. If file x contains details as below.
Tom
Dick
Harry
Charlie
and file y contains
Boston
Newyork
LA
Toledo

Then the new file should like with a running sequence number inserted at first column

1 Tom Boston
2 Dick Newyork
3 Harry LA
4 Charlie Toledo

Please suggest how I can do this.

 
$ cat file1 
Tom 
Dick 
Harry 
Charlie 
$ cat file2 
Boston 
Newyork 
LA 
Toledo 
$ paste file{1,2} | cat -n
      1  Tom     Boston
      2  Dick    Newyork
      3  Harry   LA
      4  Charlie Toledo