Department of Economics

University of Delaware

Working Paper #2007-02

The Net Worth of the U.S. Federal Government, 1784-1802

Farley Grubb

ABSTRACT

    The War for Independence (1775-1783) left the federal government deeply in debt.  The spoils from winning that war also gave it an empire of land.  So, post-1783 was the federal government solvent, or at what point did it become solvent?  Did winning the war, in effect, pay for the war?  While these questions have not been addressed before, knowing the answer is important for understanding why a particular method was chosen for funding the national debt, how the new Constitution adopted by Congress in 1789 affected public finance, and how this new untried government - that was deeply in debt and had been in default on this debt for half a decade after independence - could garner an excellent credit rating by the early 1790s.  Evidence is gathered on the government's liabilities and assets to estimate its net worth and so answer these questions.