United States Public Debt - History

History

Except for about a year during 1835–1836, the United States has continuously held a public debt since the US Constitution legally went into effect on March 4, 1789. Debts incurred during the American Revolutionary War and under the Articles of Confederation amounted to $75,463,476.52 on January 1, 1791. From 1796 to 1811 there were 14 budget surpluses and 2 deficits. There was a sharp increase in the debt as a result of the War of 1812. In the 20 years following that war, there were 18 surpluses. The federal government actually paid off its debt entirely in January 1835, only to begin accruing debt anew by 1836 (the debt on January 1, 1836 was $37,000).

Another sharp increase in the debt occurred as a result of the Civil War. The debt was $65 million in 1860, but passed $1 billion in 1863 and reached $2.7 billion by the end of the war. During the following 47 years, there were 36 surpluses and 11 deficits. During this period 55% of the national debt was paid off. Debt increased again during World War I (1914–1918), reaching $25.5 billion at its conclusion. This was followed by 11 consecutive surpluses that saw the debt reduced by 36%.

The next period of major increase in the national debt took place between 1930 and 1945. In 1930, debt held by the public stood at $15.05 billion or 16.5% of GDP. Decreased tax revenues and social programs enacted during the Great Depression increased the debt, and by 1939, the debt held by the public had increased to $39.65 billion or 43% of GDP. The buildup and involvement in World War II during the Roosevelt and Truman presidencies caused an even larger increase; debt held by the public had reached $251.43 billion or 112% of GDP at its conclusion in 1945. Rapid economic growth after the war reduced debt as a percentage of GDP, and it reached a post-WWII low of 24.6% in 1974.

Debt held by the public relative to GDP rose rapidly again in the 1980s. President Ronald Reagan's economic policies lowered tax rates and increased military spending, while congressional Democrats blocked attempts to reverse spending on social programs. As a result, debt as a share of GDP increased from 26.2% in 1980 to 40.9% in 1988, and continued to rise during the presidency of George H. W. Bush, reaching 48.3% of GDP in 1992.

Debt held by the public reached 49.5% of GDP at the beginning of President Clinton's first term. However, it fell to 34.5% of GDP by the end of Clinton's presidency due in part to decreased military spending, increased taxes (in 1990, 1993 and 1997), and increased tax revenue resulting from the Dot-com bubble. The budget controls instituted in the 1990s successfully restrained fiscal action by the Congress and the President and together with economic growth contributed to the budget surpluses at the end of the decade.

In the early 21st century, debt relative to GDP rose again due in part to the Bush tax cuts and increased military spending caused by the wars in the Middle-East and a new entitlement Medicare D program. During the presidency of George W. Bush, debt held by the public increased from $3.339 trillion in September 2001 to $6.369 trillion by the end of 2008, In the aftermath of the Global Financial Crisis, and huge increases in spending, the debt held by the public increased to $11.12 trillion by the end of July 2012 under the presidency of Barack Obama.