Commentary
In an attempt to maintain the good credit of the
United States in the eyes of foreign nations and
creditors, the Confederation Congress
guaranteed that all debts contracted by the
Continental Congress would be repaid. However, this
commitment to repay debts is not matched in the
Articles by any articulated means of repayment.
Other than the taxes that the states were supposed
to supply, Congress had no independent source
of revenue with which to repay its creditors.
Because many individual states had their own debts
from the war, they were typically more inclined to
pay those first before contributing to repayment of
the national debt. These issues were compounded by
the fact that each state printed its own paper
money and established its own set of commerce
regulations. Furthermore, inflation raged out of
control in both the national and state currencies.
Given the limited range of authority in matters of
finance, it is amazing that the U.S. Congress
managed to stay financially afloat at all. Much of this
could be contributed to the abilities of the first
Secretary of Finance, Robert Morris, who tried to
work within the confines of the system as much as
possible. In 1782, he established the Bank of North
America. Although this was suspected by some to be
an illegal extension of the authority of Congress,
it passed Congress and greatly assisted in financial
stability. However, his attempts, along with Alexander
Hamilton, to pass an amendment empowering Congress to collect a 5% impost
failed in both 1781 and 1783.
Without an established source of revenue, Congress
also could not pay the soldiers in the Continental
Army. This moved troops close to mutiny on two
separate occasions. At Newburgh in March of 1783,
troops protesting their lack of pay came close to
mutiny until George Washington intervened. In
Philadelphia in June 1783, another group of
mutinous troops demanding pay forced Congress to
retreat to Princeton. During this year, Robert
Morris resigned from the position, haunted by
accusations of corrupt politics and inability to
perform his job due to the limitations of Congress.
The issue of debt repayment deeply worried
individual states as well. Massachusetts levied
high taxes and imposed strict regulations about
debt repayment after the war. In 1787, these taxation methods
resulted in an armed protest of Massachusetts
farmers, led by Daniel Shays, a former captain
in the Continental Army. The Massachusetts legislature's unyielding attempts to
immediately repay its debts abused the rights of citizens in much the same way
as the British Parliament had a decade earlier: the Massachusetts farmers
rallied under the same cry as the American Revolutionaries, "no taxation without
representation," and relied on similar military tactics.
When the legislature failed to respond to their
petitions for change, Shays and his followers
closed the courts and attempted to capture a
federal arsenal of weapons in Springfield, MA.
Referred to as Shays' Rebellion, this group of
farmers, although defeated by the local militia,
proved to many that issues of taxation would
continue to stir up internal conflict unless
managed by a strong national government. Reactions
to Shays' Rebellion largely propelled politicians
to favor a strengthening of the national government
and encouraged their participation in the
Constitutional Convention of 1787.
