The Articles of Confederation that had been ratified in 1781 deliberately kept the federal government weak. Most Americans wanted power to be centered as locally as possible. Both during and after the war, Americans paid a price for their suspicion of authority. The United States government faced great difficulties in organizing itself for war. Despite the labors of Robert Morris, the government's financial situation remained bleak. The government could not take effective steps to curb inflation. Unable to raise revenue, it could not make good the public debt.

Americans distrusted a strong executive. In the state constitutions adopted during the war, the power of governors was curtailed. The federal government did not have a chief executive. The president presided only over Congress. Charles Thomson, who served as the secretary for Congress from 1774 to 1789, provided some administrative continuity and institutional memory. For most of the war, congressional committees handled most of the administrative work of the federal government. In 1781, Congress created three departments to handle foreign affairs, finance, and war. Each department had a head who reported to Congress.

The federal government was responsible for matters that jointly concerned all the states. Congress was empowered to conduct foreign affairs and to declare and wage war. It also supervised the postal service, the coining of money, relations with the Indians, and all issues related to the common territories in the west. On matters of special significance, such as the declaration of war or the ratification of a treaty, a majority of nine states was required. To impose a tariff on imports, unanimous consent of the states was required. This gave Rhode Island the ability to frustrate the financial plans of Robert Morris and Alexander Hamilton. Congress could arbitrate disagreements between the states, but it had no way of compelling a state to accept its judgment in such a case.

The issue of the western lands had delayed the final ratification of the Articles of Confederation. Providing for the orderly settlement and eventual self-government of these territories was one of the most important tasks facing the fledgling federal government. Resolving this problem would be one of the greatest accomplishments of the American government during the Confederation period.

Thomas Jefferson drew up a plan for organizing the western territories in 1784. The west would be divided into several territories. The people of these territories would elect their own governments. Once the population of one of these territories equaled that of the least populous state, it would be admitted to the union on a basis of full equality. Jefferson wanted slavery to be barred from the west, but Southern opposition to this provision ensured it was dropped from the legislation.

The next year, Congress passed the Land Ordinance of 1785, which laid out a plan for organizing and selling the land in the west. All land not occupied by Indians was to be surveyed and divided into six-mile-square townships. Each township was subdivided into thirty-six sections. Each section was one mile square, or 640 acres. These sections would be sold for no less than one dollar per acre. The money from the sale of one section in each township was to be reserved for the construction of a school. Congress hoped to realize some much needed income from the sale of western lands. Unfortunately, few farmers could afford to buy a section of land at one dollar an acre. A group of land speculators organized as the Ohio Company offered to buy 1.5 million acres north of the Ohio River for one million dollars, and Congress agreed to the transaction.

To facilitate the orderly settlement of the western lands north of the Ohio River, Congress passed the Northwest Ordinance in 1787. These lands would be divided into three to five territories. Initially, the territories would be governed by officials appointed by Congress. Once 5,000 adult male settlers inhabited a territory, they could elect an assembly and send a nonvoting delegate to Congress. When the population reached 60,000, the territory could apply for statehood. A Bill of Rights in the Northwest Ordinance guaranteed the settlers freedom of religion, trial by jury, proportional representation in the assembly, and other fundamental rights enjoyed by the citizens of the original states. The introduction of slavery was forbidden.