The French alliance did create one unintended problem for the Continental Army. When Americans heard that France was sending troops, fewer men volunteered for military service. Local officials had the authority to draft men into the army or to accept substitutes for draftees. In the late 1770s, some draftees forced enslaved men to take their place; others hired landless laborers, the handicapped, or the mentally unfit as substitutes.

As the war spread south and west in 1778–1779, Continental forces were stretched thin, and enlistments faltered further. Soldiers faced injuries, disease, and shortages of food and ammunition. They also risked capture by the British, one of the worst fates to befall a Continental. Considered traitors by the British, most captives were held on ships in New York harbor. They faced filthy accommodations, a horrid stench, inadequate water, and widespread disease and abuse. Altogether, between 8,000 and 11,500 patriots died in British prisons in New York—more than died in battle.

Even if the British had allowed the Continental Congress to aid prisoners, it could do little, given the financial problems it faced. With no authority to impose taxes on American citizens, the congress had to borrow money from wealthy patriots, accept loans from France and the Netherlands, and print money of its own—some $200 million by 1780. However, money printed by the states was used far more widely than were Continental dollars. “Continentals” depreciated so quickly that by late 1780 it took one hundred continentals to buy one silver dollar’s worth of goods. In 1779, with the cost of goods skyrocketing, housewives, sailors, and artisans in Philadelphia and other cities attacked merchants who were hoarding goods, forcing officials to distribute food to the poor.

The congress finally improved its financial standing slightly by using a $6 million loan from France to back certificates issued to wealthy patriots. Meanwhile states raised money through taxes to provide funds for government operations, backing for its paper money, and other expenses. Most residents found such taxes incredibly burdensome given wartime inflation, and even the most patriotic began to protest increased taxation. Thus the financial status of the new nation remained precarious.