History of the National Debt

The high levels of the national debt threaten the future economic stability of the United States. To understand how we got into this mess, a review of the history of the national debt is necessary.

History

The history of the national debt begins even before our country did. The Revolutionary War was fought with borrowed money. We had a national debt level of just over $75 million in 1791. From there, the amount owed actually dropped as the government tended to run surpluses each year that were used to pay it down. The debt would never, in fact, be paid off because wars continued to occur that required borrowing. It should be noted, however, that over 99 percent of the debt was paid off after the War of 1812. The Civil War came along, unfortunately, and resulted in the debt exploding to $2.7 billion by its end. 55 percent of this was paid off before the next big jump came.

The next big jump was a small little dispute you’ve probably heard of. World War I was an expensive affair. By its end, the total debt of the United States was $25.5 billion. The economy recovered well and the government was able to pay the debt down by 36 percent due to a decade plus of annual surpluses. Things looked positive, but then went badly out of kilter.

Depression/World War II

The Great Depression hit and caused a world of hurt economically in the country. President Roosevelt responded with a hoard of public spending initiatives designed to get the economy moving again. This effectively got people back to work, but didn’t solve all the problems. It did rack up debt, which started to become an issue because then World War II started and that was an expensive affair. In total, the debt rose from $16 billion in 1929 to $260 billion by the end of the war. This figure grew slowly, but steadily to roughly $900 billion until the next big jump.

Reagan

President Reagan was elected in 1980 and brought a new economic approach to the federal government. His economic team espoused trickledown economics in which it was believed that cutting taxes would cause wealth generation that would trickle down to lower income individuals. The economy did grow massively, but so did spending. Reagan spent massive amounts of money on the military in an arms race that would eventually bankrupt the USSR.  His successor, George H.W. Bush, did the same. By the end of their run in 1992, the total national debt had grown to $3 trillion.

Clinton

Bill Clinton then served two terms as President of the United States. He raised taxes, cut some spending and had the fortune of serving during a very strong economic period. All total, the national debt actually leveled out and he left office with $3.4 trillion in debt and the government running an annual surplus. Circumstances would quickly change.

W. Bush/Obama

Presidents George W. Bush and Barrack H. Obama are often described as polar opposites. While this may be true on many issues, it is not on the national debt. Both have run the debt up at rates that are simply appalling. By the time George Bush left office, the debt stood at $10.7 trillion meaning he nearly tripled the debt in 8 years. President Obama has added another $4 trillion to this amount in just three years and appears to be well on his way to adding at least another $5 trillion to the bottom line should he be re-elected. While both have had to deal with the Great Recession, the jump in the debt level is staggering and very unhealthy to the long-term stability of the country.

Conclusion

A close review of the history of the national debt reveals an evolution that is worrying. Initially, we only ran up debts for unique events such as World Wars. Now, we run up debts annually part and parcel to just running the government. This policy cannot continue without a financial disaster that would make the Great Recession look like the good old days.

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