A speculative bubble had burst in 1836–39, causing a collapse of the financial sector and a subsequent depression. The country became deeply divided over the best response to the crisis. Conditions got even worse in early 1842 because a deadline was looming. A decade earlier, when the economy was strong, Congress had promised Southern states that there would be a reduction in hated federal tariffs. Northern states welcomed tariffs, which protected their infant industries. But the South had no industrial base and depended on open access to British markets for their cotton.[100] In a recommendation to Congress, Tyler lamented that it would be necessary to override the Compromise Tariff of 1833 and raise rates beyond the 20 percent limit. Under the previous deal, this would suspend the distribution program, with all revenues going to the federal government.[101]
The defiant Whig Congress would not raise tariffs in a way that would affect the distribution of funds to states. In June 1842 they passed two bills that would raise tariffs and unconditionally extend the distribution program. 