Provides background accounts of political development in the USA from the American War of Independence to the Philadelphia Convention, and establish that, by 1787, Congress was marked by military weakness and financial insolvency. Here, an account is given of the efforts of Congress to implement the fiscal clauses of the US Constitution, which shows that the national government created by the Articles of Confederation experienced serious difficulties in its ability to raise money, and in the end failed to raise sufficient money to meet its expenses. The focus of the chapter is on the means by which Congress raised money from the outbreak of the War of Independence up to the Philadelphia Convention, and also on how, one by one, these means were lost, so that by 1787 the insolvency of the national government was total. The first two parts of the chapter describe the attempts of Congress to raise money through fiat (printed) money, loans, and taxes, with the author contending that the Federalists accepted existing restrictions to taxation and formed a tax system that would be able to generate sufficient income for the national government without putting undue pressure on the American people. The last section of the chapter looks at the problem of the public debts run up by Congress and the states during the War of Independence, and at the reasons for the federal assumption of state debts – whether they were democratic or economic – and the reasons given by the Federalists as to why Congress had to resume payment of the public domestic and foreign debt.
Keywords: American War of Independence, federal assumption of state debts, Federalism, fiat money, fiscal powers, insolvency, loans, national government, payment of public debts, political development, public debts, taxation, taxes, US Congress, US Constitution, USA
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