Since Irving's story is concerned with pre-Revolutionary times and the immediate time after the American Revolution, whether America per se has improved or not is not the issue since it was a country yet in its infancy within the setting of "Rip Van Winkle" as evinced by the discussion of his being a Tory. Rather, the contrast for Rip is between the time before the Revolution in which he was a younger man living in one of the thirteen British colonies and the twenty years after he awakens to the birth of a new country. And, indeed, a great deal has changed!
For, when Rip returns home from the mountain and his long-induced sleep, he finds his village a strange place as he is greeted by a cacophony of voices and asked is he is a Federal or Democrat. Then, when Rip declares that he is a loyal subject of King George, a general shout "burst from the bystanders" that he is a British sympathizer. But, Rip is finally able to identify himself, especially to his son. Then, he is informed that he is now a free citizen of the United States of America. To Rip this news is not as wonderful as the news that he has been freed of "the yoke of matrimony" since Dame Van Winkle has died. The noisy and contentious crowd of the newly-formed country and the "Babylonish jargon" that he now hears is not nearly as comforting to him as in Colonial times,
He looked in vain for the sage NicholausVedder with his broad face, double chin, and fair long pipe, uttering clouds of tobacco smoke instead of idle speeches....In place of these a lean bilious-looking fellow...was haranguing vehemently about rights of citizens.
Clearly, Irving connotes a nostalgia for the days in which America belonged to England, before it was a raw new country seeking its place in the world. The Romantic Irving satirizes his contemporary post-revolutionary society, suggesting that it may be too disputatious, dogmatic, and rationalistic. He would rather it retain the calm, stability, and natural beauty of the colonial village.