Having established the importance of unity under a federal government, Hamilton explains why the current political situation under the Articles of Confederation has America teetering over the abyss of “impending anarchy” (67). At present, America is unable to pay its debts, both to foreign nations and to private citizens who fought in the American Revolution. Valuable territories on the continent are occupied by foreign powers, and America lacks the money and troops to repel them. Even worse, America’s “respectability in the eyes of foreign powers” (68) is so low that it invites further encroachment of the country’s existing territories.

The reason for this miserable state of affairs, Hamilton writes, is that there is no recourse to punish states that disobey the laws of the Articles of Confederation. Thus, the United States can neither raise armies nor revenue in the form of taxes. Disputes between states and citizens are settled violently instead of by the law, which is unenforceable. Hamilton writes, “[E]very breach of the laws must involve a state of war [...] Such a state of things can certainly not deserve the name of government, nor would any prudent man choose to commit his happiness to it” (71).