Once the celebrations over the signing of the Treaty of Paris were over in the new United States, reality set in. The government was deeply in debt to its citizens as well as to foreign powers. According to HistoryCentral.com, our country owed other countries $12M and its citizens $44M. State governments borrowed another $25M from the people for a total of $81M, In 2020 dollars, it translates to $1,972,386,207 or, approximately $631 for each of the 3,134,172 citizens of the new country. Back then, $631 was a lot of money!
To pay its citizens back, the Continental Congress and state legislatures had to tax those same citizens who lent the money to fund the war to get the money to pay off their loans or for the good and services they provided to the Continental Army and Navy. In other words, let me tax you so I can give you the money back!
Those who were in debt due to money owed to them by the government, didn’t have the money to pay it back. Well known financiers who raised money through bonds and loans wound up in debtors prison because the government could not raise the money to pay them.
It gets worse. Right after the Treaty of Paris was signed, U.S. exports to Britain, our largest market before the Revolution and trade with the British held islands in the Caribbean was prohibited. France went into recession so that market died. Even if we could have sent goods overseas, the country didn’t have enough ships to carry the cargo because many American owned merchant ships had been seized by the British.
Before the Revolution, our ships were protected by the Royal Navy. After the French joined on our side, their Navy protected our merchant shipping. We disbanded our navy so there was no force to protect them.
And, yes, it still gets worse. Inflation was rampant. Not out of control, but significant. Some economists estimate that per capita income dropped 22%!
One major problem was our country was operating under the Articles of Confederation which was an agreement by design that gave our national leaders very little power.
This economic crisis and the realization that in order for the United States to succeed, it needed to replace the Articles of Confederation with a new document that created a strong, but limited Federal government. The process to create a workable document agreeable to all the states began on May 25, 1787 and ended roughly four months later on September 17, 1787.
On September 28th, 1787, the Constitution was submitted to the states for ratification. Nine were needed for it to be adopted and on June 21st, 1788, New Hampshire became the ninth state to ratify the U.S. Constitution followed quickly by New York, New Jersey and Virginia. North Carolina adopted it on November 29th, 1789 and Rhode Island was the last to ratify on May 29th, 1790. The rest, as they say, is history.