The United States experienced change in many areas as it took on its new identity. One of those areas of change was its economy. In early America, farming was the basis of the economy. Most farmers were self-sufficient and bartered for goods and services. As the colonies entered the war, the need for money to fund the war increased. The Congress under the Articles of Confederation borrowed money from American citizens and from other countries to fund the Revolutionary War. As a result, when the new republic began, those loans became due. The economy of the new nation had a shaky start.

When George Washington became president, he inherited the huge war debt. Some who had purchased government bonds were beginning to lose confidence in the economy, and they believed their bonds were worthless. They began selling the bonds for far less than their value.

Source: Alexander Hamilton, Library of Congress

On September 11, 1789, George Washington appointed Alexander Hamilton as Secretary of the Treasury. The government's debt at that time was more than $64 million. Hamilton's solution was to pay off the debt, but that was an unpopular decision. His opposition felt that the United States should not be responsible for the mistakes that the old government made and should simply wipe the slate clean.

You Decide

Imagine that you have been appointed to the position of Secretary of Treasury, and you have inherited this large debt. You have the power to resolve it. Read more about the problem and possible options below, and answer the questions that follow in your notes.

Problem	Option 1	Option 2
The government owes more than 64 million dollars to various investors and countries who loaned the United States money during the last war.	You may pay off the debt of the country.	You may ignore the debt and allow the government to start fresh with a zero balance.

1. Which option do you believe is best for the country?
2. Why did you choose this option?
3. How will the option that you chose impact the economy of the nation?

Click on the link below to see how your decision compares to Alexander Hamilton's decision to solve the debt crisis.

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• Alexander Hamilton decided to pay off the debt.
• Congress approved the measure.
• When Hamilton left office in 1795, the United States had a good credit rating.
• People began to buy U.S. government bonds, and the economy was more stable than when he entered office.

The United States experienced many changes and challenges during its early years as a republic. In the early years of the republic, leaders were concerned with the security of the nation and stabilizing the economy. The nation's first president, George Washington, set an example for future presidents in his adherence to the Constitution and in his fairness and integrity in enforcing the laws of the United States.