We often forget that the main reason the Constitutional Convention met in 1787 was to resolve a financial crisis—one more serious even than ours of today.
In the wake of the successful American Revolution, the United States government was flat broke. We owed $11.7 million—real money, in those days—to European creditors (mostly the French government and Dutch bankers), $40.4 million to creditors in the United States, and an additional $25 million in state debts incurred during the war. The interest alone was over seven times the annual operating budget of the then-United States government.
This is the stuff of national disaster. More than any other single objective, the United States Constitution was designed to provide long-term institutional solutions to the young nation’s fiscal woes.
The central problem in 1787 was that the United States government, under the Articles of Confederation, had power to borrow, but not to tax. That is a nasty combination. Federal revenues slowed to a trickle. The United States was out of money.