The Articles of Confederation
1776 brought a declaration of and a war for independence to Britain’s
North American colonies. While they had all acted in concert to reach this
decision, their memories of colonial life under the centralized British monarchy
had lasting effect upon their views of what the federal government of their new
republic would have the power to do. In the years following the Declaration of
Independence, Congress came up with the Articles of Confederation to loosely
govern the new republic at the federal level. 1781 found all 13 states ratifying the
Articles of the Confederation as well as the conclusion of the War for
Independence, with the signing of the Treaty of Paris. Already, the
weaknesses of the Articles of the Confederation were beginning to show.
Every one of the 13 colonies suffered economic setbacks as a result of the
War for Independence. Devalued American currency as a result of the Congress’
habit of printing new paper money to cover the new republic’s war debt and the
British blockade created high prices for goods. The end of the war hardly helped
the situation as Congress found itself powerless to levy taxes to pay off the war
debt, powerless to regulate trade with other nations, and powerless to regulate
workers wages and the price of goods.
This unregulated economic climate provoked citizens who were
shouldering much of the debt as a result. Farmers of western Massachusetts
who saw banks moving to foreclose on the mortgages of their farms demanded
that the government do something to protect them in their time of financial need.
They saw the lower legislative house of Massachusetts draft and approve a
measure, which included relief measures for them. Under the influence of the
farmers’ creditors, the upper house blocked the actions of the lower house, which
further enraged these local farmers. In 1786, a captain of the old Continental
army Daniel Shays, led 2000 armed farmers against the state government. They
shut down county courts to prevent foreclosure proceedings on their farms, and
marched on the Federal Arsenal at Springfield, evidently to properly arm
themselves.
Eventually in 1787, the Massachusetts state militia put down the rebellion.
Both sides in the mess were unhappy with the new republic’s role (or lack
thereof) in the crisis. Farmers were unhappy that the government wasn’t taking
steps to protect their property from creditors, and creditors were unhappy that the
to declare war was vested in the Congress. This decision set the stage for the
For five years after Revolutionary war each state basically governed themselves. Although there was national government in place, it held little power over the states. It soon became apparent that the Articles of Confederation needed to be readdressed to combat the increasing problems that were brewing in the country. The first attempt to redress was dismissed by many of the states. Nevertheless, a second attempt produced results with twelve of the states sending delegates to redress the Articles of Confederation.
In the beginning of the 1830s, the United States experienced a short period of expansion and a prosperous economy. Land sales, new taxes, such as the Tariff of 1833, and the newly constructed railroads brought a lot of money into the government’s possession; never before in the history of the country had the government experienced a surplus in its national bank. By 1835, the government was able to accumulate enough money to pay off its national debt. Much of the country was happy with this newly accumulated wealth, but President Jackson, before leaving office in 1836, issued what is called a Specie Circular. Many local and state governments liked to save specie, or gold and silver, and use paper money to take care of transactions. President Jackson, in his Specie Circular, said that the Treasury was no longer allowed to accept paper money as payment for the sales of land and the like. Most, if not all, of the country did not like this, and as a result many banks restricted credit and discontinued the loans. The effects of Jackson’s Specie Circular took effect in 1837, when Martin van Buren became president. All investors became scared, and in 1837, attempted to withdraw all of their money at once. Soon after this, unemployment and riots occurred in many cities, and the continued expansion of the railroad ceased to be.
In fact, a notable expert on the Confederacy revealed that “the single greatest weakness of the Confederate government, he thought, was in the mishandling of finances” (Eaton 196). Due to the excessive amount of time Davis spent in military affairs, the reigns of the Confederate economy remained in the hands of the Secretary of the Treasury, Christopher Memminger. As the war raged on, the economy of the South declined because Memminger was forced to issue paper money to maintain the ailing Confederate army because the states failed to collect effective taxes and tariffs during wartime (197). Excessive amounts of paper money flooded the economy with no gold backing by government reserves which led to massive inflation and a low valued currency. Davis’s failure to react in a timely manner to the declining economy led to the desperate by Congress measure which “enacted law taxing all property, real and personal (slaves), 5 percent, and jewelry and articles of luxury ten percent” but only raised “about one per cent income in taxes” (200). The discrepancy between the large increase and taxes and the minimal increase in income created insurmountable inflation in the economy. Although Memminger and Congress were responsible for fixing the faltering economy, Davis failed to effectively oversee his Secretary of Treasury to ensure the economic state of the
Unfortunately, the President’s consistency with Republican principles in matters of political power was not nearly as strong as his resolve to reduce the national debt. Under Jefferson and Madison, the federal government assumed political powers that the Constitution did not allot for. While prior to his presidency, Jefferson, then a strict constructionist had argued that the government should not assume any power unless specifically provided for in the Constitution, the Louisiana Purchase where America purchased a vast tract of land for $15 million, compromised these lofty ideals. In terms of the military, Thomas Jefferson had come to power vowing to reduce military size and power. Contrary to those principles, the Barbary War, where for nearly three years the American military exercised a naval blockade of the North African coast wasted millions of dollars of the people’s money and unconstitutionally violated states rights and strict constructionist principles, in their place asserting an alien un-Republican nationalism.
resulted in the doubling of the debt of the United States. He used the money for
As seen in Document C, Congress had so little money that it couldn’t afford to pay the army their bonuses. The army, of course, was discontented in this lack of action and thought they were being treated unjustly. The delay was so slow that the army did not think they were going to get paid. This, in itself, exhibits the great need for the national government to acquire the power to tax.
After the Revolutionary War the United States had a massive debt to deal with, but because of the Articles of Confederation the federal government could not raise taxes to pay off the debt (Blake). States were responsible for helping to pay off the federal government’s debt along with any of their own debt, so Massachusetts decided to institute heavy taxes that had to be paid in cash. According to historian Leonard Richards, “Taxes levied by the state [Massachusetts] were now much more oppressive—indeed many times more oppressive—than those that had been levied by the British on the eve of the American Revolution” (Richards 88).Ninety percent of all taxes collected were for property or poll taxes (Smith). Each family had to pay a tax for every male that was older than sixteen in the household under the poll tax, leaving the farmer who had grown sons very venerable. Many were unable to pay taxes and were thrown into prison. The farmers who could pay the taxes were left with very little cash to pay for necessities like food or clothing, to be able to acquire these items farmers had to trade their agricultural products. After British investors stopped giving credit to American merchants and demanded cash, the mer...
Paper money that was issued by the colonial government was a concern. Certain paper money could only be used for paying public debts, including military supplies or taxe...
The US has been in and out of debt countless times throughout history, going as far back as the Civil War. However, debt did not become a truly relevant problem until much later, in the 1980s (Budget Deficits). Up to that point, large budget deficits were generally only allowed during wartime, but this pattern ended after the Great Depression. Roosevelt’s New Deal meant that the government spent much more than it previously did, even after the economy improved (Budget De...
Friedman, Milton and Jacobson Schwartz, Anna. A Monetary History of the United States, 1867-1960. Princeton, 1963
The greater part of the country’s problems were rooted in economic interests. Citizens were not repaid for their contributions to the war and foreign countries were hesitant to loan money to a country that couldn’t honor its existing debts. The federal treasury relied on the generosity of the states and thus remained essentially empty. Congress attempted to sell land and levy a small import tax to raise funds, but dealt with little interest and a firm refusal from the states, respectively. Furthermore, between those states was a constantly fluctuating exchange rate for each state’s individual currency and steep taxes, both showcasing the firm grasp the states had on their singular, unique identities. The cohesion from the common enemy during the Revolutionary War had long since worn
The move from the Articles of Confederation to the United States Constitution caused several people to be unhappy. For 6 years the Articles weakened the United States in more ways than one. In the summer of 1787 a new form of government was created, a radical move from the Articles of Confederation.
On January 8th, 1835, a senator stood up to declare that the national debt had been paid(for now)(“npr.org”). This was a enormous moment in his presidency and U.S. history. This was an important thing to Andrew Jackson who hated debt, and though it was immoral(“npr.org”). At the start of his presidency, he disbanded the national banks, he hated the banks more than the debt. To begin the process of removing debt, Andrew Jackson blocked every bill to spend money(“npr.org”). After that, he began selling all of the land in the west because, there was a large demand as the country was expanding(“waltercoffey.com”). After Andrew Jackson was able to remove the debt, he was said, “Let us commemorate the payment of the public debt as an event that gives us increased power as a nation and reflects luster on our Federal Union.(Encyclopedia of Presidents)” However, this perpetual bliss could not last forever. Since the banks had been removed, Jackson had nowhere to put the money, so he gave it to the states(“npr.org”).The states then started printing massive ammounts of money, which caused the economy to enflate drastically(“npr.org”). In an effort to slow this down, Jackson required that all government land sales be done with gold or silver(“npr.org”). However, this caused the economy to crash. After that, we went into a depression, which we were only able to get out
According to the Federalists in the early stages of the American republic, a strong central government was necessary to provide uniform supervision to the states thus aiding in the preservation of the Union. This necessity for a more organized central government was a result of the ineffectiveness of the Article of Confederation’s government that was without a unifying government body. One component of this philosophy was the creation of an executive and other federal branche...