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Knox spent weeks planning another expedition in which a line of forts would be built in the northwest Ohio Territory to protect the settlers. In his orders to General Arthur St. Clair on March 28, 1791, he emphasized the need to restore confidence in the army: "You are well informed of the unfavorable impressions which the issue of the last expedition has made on the public mind."

The tensions within Washington's cabinet were beginning to split the administration. Knox and Hamilton were in an ideological and political battle with Thomas Jefferson as each man struggled to win the favor of the president. Knox often found himself aligned with Hamilton, although Henry
continued to view the treasury secretary as "Colonel Hamilton," and his inferior in rank. But he found little in common with Jefferson, and the sage of Monticello had a natural aversion to Knox.

Knox had risen from New England, where inhabitants disdained distinctions of class. Jefferson, like Washington, was an affluent planter who sat among the elite of patriarchal Virginia. Henry's experiences during the war as well and his services as war secretary had led him to favor a strong federal government. He had been part of a national army in which state allegiances held little meaning, and the weakness of the central government had continually hindered his ambitions as an artillery commander and as an architect of the nation's military. Jefferson's political orientation was completely opposite. Educated as a lawyer, Jefferson had served as the representative of his state in the Continental Congress and also as Virginia's governor during the Revolution, which led him to think in terms of his state rather than from the perspective of the national government. He saw himself as a protector of state's rights, fighting against the encroachment of national power. He abhorred businessmen, bankers, and land jobbers, discounted the merit of military service, and put little stock in the heroics of men such as Knox and Washington.

Hamilton and Jefferson were also at odds. Hamilton emerged as the dominant figure among the Federalists, who favored strong national defense and the encouragement of business. Jefferson became the leader of the anti-Federalists, who favored a strict interpretation of the Constitution and fought the growth of the War and Treasury departments.

As the divide in his cabinet widened, Washington left for a tour of the southern states and for a visit to Mount Vernon in the spring of 1791. Jefferson and James Madison began a tour of New England states and New York to garner anti-Federalist support.

Lucy gave birth to a daughter in July, whom they named Caroline. But no sooner had they added one child then they lost another. Marcus Camillus, their eight-year-old son, died in September 1791, at his school in Princeton. On September 8, Washington wrote in condolence to Henry and Lucy: "Parental feelings are too much alive in the moment of these misfortunes to admit the consolations of religion or philosophy; but I am persuaded reason will call one or both of them to your aid as soon as the keenness of your anguish is abated.“
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No words could console Knox, who responded to Washington that "[i]n this moment, neither philosophy nor reason have their proper office." He wrote a letter to the headmaster of the Princeton school thanking him for
sending the remains of his son home. Knox's friend and wartime colleague, Henry Jackson, sent a letter expressing his sense of loss over the death: "That so lovely, promising and amiable a boy should be taken from his parents and friends who love and adore him, while the lives of thousands are spared who are a burden to themselves and society.“
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Lucy and the children had returned to Boston for the summer, and their son, Henry Jackson Knox, had been placed in a boarding school. With the frontier troubles unresolved, Henry stayed in Philadelphia. Life in the capital became dull in Knox's estimation. He wrote to Lucy that she was not missing out on any tempting social events, only two teas had been held that summer. On Sunday, July 15, he wrote her "[m]y evenings cannot possible be any cause of jealousy. They are stupid indeed. I drive out pretty often, come home, read the evening paper, then got to a solitary and painful bed—painful from the reflection that the companion of my soul is at a distance and that I am deprived of the blessed solace of her arms."

In a letter to his daughter Lucy, he confessed that his passion for public accolades had waned. "All my life I have been pursing illusive bubbles which burst on being grasped, and 'tis high time I should quit public life and attend to the solid interests of my family.“
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By early 1793, the world plunged into a global war. Knox was concerned about the country's ability to defend itself, but he was handcuffed in his efforts to prepare the nation's defenses because of budget concerns and the huge federal debt amassed during the Revolution. The War Department not only had to deal with the domestic troubles regarding the Indians but with the prospect of an invasion by a foreign European power. France was in the throes of a revolution. The French king, Louis XVI, who had been so helpful to the American's during its revolution, was guillotined with Marie Antoinette before a jeering mob on January 21, 1793. The new French government declared war on Great Britain, Spain, and the Netherlands on February 1, 1793.

The Girondist regime of the French republic sent an ambassador to America by the name of Edmond Charles "Citizen" Genêt, who arrived in Charleston on April 9, 1793. Genêt was welcomed with great fanfare, as many Americans hailed the French Revolution as an extension of their own struggle for liberty against monarchy. While in Charleston, he commissioned privateers and armed ships to prey upon British merchant ships even before presenting himself for recognition before Washington's administration. Genêt
never questioned the Franco-American alliance and the treaty between the two nations that had been signed during the American Revolution with the now-deposed royal French government. Many political leaders in America also viewed the treaty as perfectly valid, despite the change in French governments. The governor of South Carolina applauded Genêt's efforts, and the Frenchman was enthusiastically greeted all along his trip to Philadelphia. Washington, who took the oath of office for a second term on March 4, was apprehensive that Genêt's actions would drag America into a war with Britain and sent a list of questions to his cabinet asking if the French treaty was still valid and whether Genêt should be received.

The issue split the administration along party lines. Secretary of State Jefferson loved France, where he had served as an American minister. He welcomed Genêt as a friend and believed that the United States was bound by treaty to align itself with France. Knox and Hamilton disagreed, and believed America should avoid insulting Britain and risking another war.

Jefferson again felt the odd man. In an April cabinet meeting called to discuss the Genêt issue and the validity of the French treaty, Hamilton, followed by Knox, voiced their opposition to Genêt. Jefferson had little patience with either man and wrote derisively of Henry in his journal: "Knox subscribed at once to Hamilton's opinion that we ought to declare the treaty void, acknowledging, at the same time, like a fool as he is, that he knew nothing about it. It was clear it remained valid.“
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Washington sided with Hamilton and Knox. He requested that Genêt be recalled and the French obliged. The president also issued a "Neutrality Proclamation" on April 22 that warned American citizens not to aid any nation in its war effort.

Meetings within the administration grew increasingly contentious as the split between the Federalist and Republicans widened. Jefferson's relationship with Washington and his influence within the administration were irreparably harmed by the Genêt affair. Realizing that he had lost the political rivalry with Hamilton, Jefferson turned in a letter of resignation on July 31 and agreed to serve out the remainder of the year as the secretary of state.

Both France and England were unhappy with the U.S. policy of neutrality. Each nation sent warships to prey on vulnerable American merchant vessels under the pretense of stopping any shipments of supplies destined for their enemy's docks. Shipping lanes on the high seas across the globe suddenly became
a lawless haven for piracy. American merchant ships sailing across the Atlantic and through the Mediterranean were especially targeted because the United States did not possess a navy to protect its vessels or exact retribution on those who attacked its ships. On October 8, 1793, the American minister to Portugal, David Humphreys, sent a letter to U.S. authorities with the warning that Barbary pirates from Algiers were also capturing American vessels. Panic spread among captains shipping cargo in the Mediterranean under the Stars and Stripes. Every American vessel bound for Lisbon, Cadiz, or the Straits of Gibraltar was in danger of being attacked and its crew thrown into slavery.

In mid-December, American newspapers reported that ten American ships, including the
Hope of New York
, had been captured along with 110 sailors who were brought to Algiers, where they were stripped, shackled, and sold into slavery. The Algiers pirates used brutal tactics. Fast-sailing corsair ships preyed on slow, unarmed American business vessels, with pirates throwing long lateen yards across their prey's rails and then hopping aboard, armed with cutlasses and pistols. Any merchant seamen who resisted were killed, and the rest were sent below decks in chains.

A public clamor rose for the War Department to defend Americans on the high seas and for the formation of a navy. Knox had argued the need for a naval force as far back as the Confederation government. By the end of the Revolution, all but two of the Continental Navy's thirteen ships had been captured or destroyed, and the navy was disbanded.

Any project to establish a navy would fall under the authority of the War Department. A separate naval department would not be created until 1798. On January 2, 1794, a closely divided House resolved by a vote of 46 to 44 "[t]hat a Naval force, adequate to the protection of the commerce of the United States against the Algerine corsairs, ought to be provided.“
21
The issue was sent to a committee to estimate the cost of building the naval force.

Although Knox was the son of a shipwright and grew up along the Boston docks, he knew little about building ships or what kind of vessels would suit America's needs. He walked the numerous shipyards of Philadelphia, talking to master shipwrights, captains, and sailors. At the time, the city was the largest shipbuilding center in the United States. More than 8,000 tons of shipping were constructed there, twice the tonnage of any other port in America. More than a quarter of the nation's $7 million in total exports sailed from its docks.
22

Knox was swayed by a proposal given to him the previous year, dated January 6, 1793, from the city's leading shipwright, forty-two-year-old Joshua Humphreys, who observed that: "As our Navy must for a considerable time be inferior in numbers, we are to consider what sized ships will be most formidable and be an overmatch for those of an enemy.“
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