The States, the Taxpayers, and the Debtors
THE MOST complex problem facing Americans after the Revolution was that of public and private finance. The Revolution resulted in a staggering burden of public debt as compared with colonial wars, which had been financed in part by cash grants from the British government. Furthermore, few Americans in 1775 envisaged the quantity of paper money that would be issued, or the way prices would rise. Laws passed to fix prices, and to make paper money legal tender in the payment of private debts and public taxes, all failed to stop the inflation that accompanied vast issues of paper money and wartime speculation and profiteering.
Despite exhortations by Congress and legislation by the states, inflation went on at so rapid a rate that in March 1780 Congress recommended that the states abolish old paper money as legal tender. At the same time Congress proposed a "new emission" of ten millions in paper to be backed by the states, but most of them refused to accept it. By the end of the war most of the states had declared that paper money was no longer legal tender in payment of private debts, and most of them refused to receive it for taxes.1 While the states endeavored to meet expenses by specie____________________