Trouble on Two Fronts
Chapter 7, Section 1
By 1781 the money printed during the
Revolutionary War had depreciated, or fallen
in value, so far that it was almost worthless.
To have value paper money needs to be
backed by hard currency like gold or silver.
However, the Continental Congress and the
states printed so much paper money during
the war without it being backed by hard
currency that it quickly lost value. This led to
inflation as it takes more and more paper
money to buy the same amount of goods. It
got so bad that there were food riots in many
of the major cities like Boston.
Also fighting the war left the Continental
Congress with a large debt. The Congress
had borrowed money from American
citizens and foreign countries; it still owed
Revolutionary soldiers their pay for
military service and it lacked the
resources to pay off these debts. The
Confederation could not raise money
through taxes and it requested funds from
the states but the states contributed only a
small portion of the money needed.
Faced with the total
collapse of the
country’s finances, the
Confederation Congress
created a department of
finance to find a
solution. It was headed
by Philadelphia
merchant Robert Morris.
In 1781 he proposed a 5
% tax on imported goods
to help pay the national
debt.
The plan required the Articles of
Confederation to be changed to give
Congress the power to levy taxes. As
required the 13 states voted on the issue
but could not gain the required
unanimous vote. In 1783 as the financial
situation became worse the plan was sent
for another vote but failed to win
approval.
Problems with Britain
In the Treaty of Paris of 1783 that ended
the Revolutionary War, Britain had
promised to withdraw their troops from
the western territory past the
Appalachian Mountains. Yet the British
troops continued to occupy several
strategic forts in the Great Lakes region.
The British also kept American
merchants out of the West Indies and
other profitable British markets for trade.
In 1785 Congress
sent John Adams
to London to
discuss these
issues.
But the British refused, pointing out
that the United States had failed to
honor its promises in the Treaty of
Paris and repay the Loyalists for
the property taken from them
during the war. Congress had
recommended that the states pay
the Loyalists, but the states having
more power than the national
government had refused.
Problems with Spain
America also had problems with Spain.
Spain was wary of America trying to
take it lands in Florida and the Gulf
coast. To stop Americans from moving
into this territory they closed the lower
Mississippi River to American shipping
in 1784. This created a major economic
disadvantage for the western farmers
who depended on the river for
transportation of goods.
In 1786, American
diplomats, headed by
secretary of foreign
affairs John Jay,
reached an agreement
with Spain. Southern
representatives
blocked the agreement
from being ratified
because it did not
include the right to use
the Mississippi River.
The weakness of the Confederation and
its inability to deal with problems worried
many leaders. As George Washington
described the government as a “shadow
without substance,” many Americans
began to agree that the country needed a
stronger government. A call will go out to
revise the Articles of Confederation, yet
many founders of the nation believed
that a further step must be taken—the
creation of a new plan of government.