From September 5, 1774, to March 1, 1781, the Continental Congress functioned as the provisional government of the United States. Delegates to the First (1774) and then the Second (1775–1781) Continental Congress were chosen largely through the action of committees of correspondence in various colonies rather than through the colonial or later state legislatures. In no formal sense was it a gathering representative of existing colonial governments; it represented the dissatisfied elements of the people, such persons as were sufficiently interested to act, despite the strenuous opposition of the loyalists and the obstruction or disfavor of colonial governors. The process of selecting the delegates for the First and Second Continental Congresses underscores the revolutionary role of the people of the colonies in establishing a central governing body. Endowed by the people collectively, the Continental Congress alone possessed those attributes of external sovereignty which entitled it to be called a state in the international sense, while the separate states, exercising a limited or internal sovereignty, may rightly be considered a creation of the Continental Congress, which preceded them and brought them into being.
Articles of Confederation
The Articles of Confederation and Perpetual Union was the first constitution of the United States. It was drafted by the Second Continental Congress from mid-1776 through late 1777, and ratification by all 13 states was completed by early 1781. The Articles of Confederation gave little power to the central government. The Confederation Congress could make decisions, but lacked enforcement powers. Implementation of most decisions, including modifications to the Articles, required unanimous approval of all thirteen state legislatures.
Although, in a way, the Congressional powers in Article 9 made the "league of states as cohesive and strong as any similar sort of republican confederation in history", the chief problem was, in the words of George Washington, "no money". The Continental Congress could print money but it was worthless. Congress could borrow money, but couldn't pay it back. No state paid all their U.S. taxes; some paid nothing. Some few paid an amount equal to interest on the national debt owed to their citizens, but no more. No interest was paid on debt owed foreign governments. By 1786, the United States would default on outstanding debts as their dates came due.
Internationally, the United States had little ability to defend its sovereignty. Most of the troops in the 625-man United States Army were deployed facing – but not threatening – British forts on American soil. They had not been paid; some were deserting and others threatening mutiny. Spain closed New Orleans to American commerce; U.S. officials protested, but to no effect. Barbary pirates began seizing American ships of commerce; the Treasury had no funds to pay their ransom. If any military crisis required action, the Congress had no credit or taxing power to finance a response.
Domestically, the Articles of Confederation was failing to bring unity to the diverse sentiments and interests of the various states. Although the Treaty of Paris (1783) was signed between Great Britain and the U.S., and named each of the American states, various states proceeded blithely to violate it. New York and South Carolina repeatedly prosecuted Loyalists for wartime activity and redistributed their lands. Individual state legislatures independently laid embargoes, negotiated directly with foreign authorities, raised armies, and made war, all violating the letter and the spirit of the Articles.
In September 1786, during an inter–state convention to discuss and develop a consensus about reversing the protectionist trade barriers that each state had erected, James Madison angrily questioned whether the Articles of Confederation was a binding compact or even a viable government. Connecticut paid nothing and "positively refused" to pay U.S. assessments for two years. A rumor had it that a "seditious party" of New York legislators had opened a conversation with the Viceroy of Canada. To the south, the British were said to be openly funding Creek Indian raids on Georgia, and the state was under martial law. Additionally, during Shays' Rebellion (August 1786 – June 1787) in Massachusetts, Congress could provide no money to support an endangered constituent state. General Benjamin Lincoln was obliged to raise funds from Boston merchants to pay for a volunteer army.
Congress was paralyzed. It could do nothing significant without nine states, and some legislation required all thirteen. When a state produced only one member in attendance, its vote was not counted. If a state's delegation were evenly divided, its vote could not be counted towards the nine-count requirement. The Articles Congress had "virtually ceased trying to govern". The vision of a "respectable nation" among nations seemed to be fading in the eyes of revolutionaries such as George Washington, Benjamin Franklin, and Rufus King. Their dream of a republic, a nation without hereditary rulers, with power derived from the people in frequent elections, was in doubt.
On February 21, 1787, the Confederation Congress called a convention of state delegates at Philadelphia to propose a plan of government. Unlike earlier attempts, the convention was not meant for new laws or piecemeal alterations, but for the "sole and express purpose of revising the Articles of Confederation". The convention was not limited to commerce; rather, it was intended to "render the federal constitution adequate to the exigencies of government and the preservation of the Union." The proposal might take effect when approved by Congress and the states.