On June 14, 1777, the Continental Congress passed a resolution for a national flag day. The resolution called for thirteen alternating red and white stripes and thirteen stars representing the thirteen colonies. The stars were to be white in a blue field representing a new constellation.
Since George Washington's first flag in 1776, there have been many designs and modifications. His flag, the Great Union flag, was basically an adaptation of the British naval flag. Washington added the stripes to show separation from Britain but maintained the British emblem. A year and a half later, the British union emblem was replaced by the thirteen stars thus creating the basis for the "stars and stripes" of today.
Betsy Ross is often credited with making the first flag. Indeed she was a fine seamstress and flag maker but her involvement is unclear in historical records. Her legend was first created by her grandson who claims her involvement was known as part of family tradition. However, there is no record of her alleged commission by Congress to make a flag in 1776.
For a period of time, as new states joined the union, both new stars and stripes were added. This practice became increasingly impractical as new states were admitted to the union so on April 4, 1818, a new flag resolution was passed setting the thirteen stripes to represent the original colonies and the stars to represent the states. The last two stars were added on July 4, 1959 and 1960 representing the admission of Alaska and Hawaii to the United States
The first national observance of Flag day was a hundred years after George Washington's display of the first flag. Since that day in 1877, June 14 has been celebrated each year as the national flag day.
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