History of the United States public debt

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US federal debt held by the public as a percentage of GDP, from 1790 to 2013, projected to 2038.

The history of the United States public debt started with debt incurred during the American Revolutionary War by the federal government of the United States, after its formation in 1789. The United States has continuously held public debt since then, except for about a year during 1835–1836. To allow comparisons over the years, public debt is often expressed as a ratio to gross domestic product (GDP). Historically, US public debt as a share of GDP increased during wars and recessions, and subsequently declined.

The United States public debt as a percentage of GDP reached its highest level during Harry Truman's first presidential term, during and after World War II. Public debt as a percentage of GDP fell rapidly in the post-World War II period, and reached a low in 1973 under President Richard Nixon. The debt has consistently increased since then, except during the presidencies of Jimmy Carter and Bill Clinton. Public debt as a share of GDP rose sharply in the late 2000s, in the wake of the Great Recession.

Early history[edit]

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 United States 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).[1][2]

Another sharp increase in the debt occurred as a result of the Civil War. The debt was just $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% by the end of the 1920s.[3]

Warren G. Harding was elected president in 1920 and believed the federal government should be fiscally managed in a way similar to private sector businesses. He had campaigned in 1920 on the slogan, "Less government in business and more business in government."[4] Under Harding, federal spending declined from $6.3 billion in 1920 to $5 billion in 1921 and $3.3 billion in 1922. Over the course of the 1920s, the national debt was reduced by one third.[5] The decrease was even greater when the growth in GDP and inflation is taken into account.

Debt held by the public was $15.05 billion or 16.5% of GDP in 1930. When Roosevelt took office in 1933, the public debt was almost $20 billion, 20% of GDP. Decreased tax revenues and spending on social programs during the Great Depression increased the debt and by 1936, the public debt had increased to $33.7 billion, approximately 40% of GDP.[6] During its first term, the Roosevelt administration ran large annual deficits of between 2 and 5% of GDP. 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 presidencies of Franklin D. Roosevelt and Harry S. Truman led to the largest increase in public debt. Public debt rose over 100% of GDP to pay for the mobilization before and during World War II. Public debt was $251.43 billion or 112% of GDP at the conclusion of the War in 1945 and was $260 billion in 1950.

After World War II[edit]

U.S. federal debt held by the public as a percentage of GDP, from 1940 to 2012.

The public debt fell rapidly after the end of World War II, as the US and the rest of the world experienced a post-war economic expansion. Unlike previous wars, the Korean War (1950-53) was largely financed by taxation and did not lead to an increase in the public debt.[7]

Growth rates in Western countries began to slow in the mid-1960s. Beginning in the mid-1970s and afterwards, U.S. national debt began to increase faster than GDP.[8][9]

The public debt reached a post-WWII low of 24.6% in 1974.[3][10] In 1974, Congressional Budget Act reformed the budget process to allow Congress to challenge the president's budget more easily and as a consequence deficits became increasingly difficult to control.[11] National debt held by the public increased from its post-World War II low of 24.6% of GDP in 1974 to 26.2% in 1980.[12]

Debt held by the public relative to GDP rose rapidly again in the 1980s. President Ronald Reagan's economic policies lowered tax rates (Reagan slashed the top income tax rate from 70% to 28%, although bills passed in 1982 and 1984 later partially reversed those tax cuts.)[11][13] and increased military spending, while congressional Democrats held fast against attempts to reverse spending on social programs.[11][13] [9][14] As a result, debt as a share of GDP increased from 26.2% in 1980 to 40.9% in 1988,[12] and continued to rise during the presidency of George H. W. Bush, reaching 48.3% of GDP in 1992.[3][15]

Public debt 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.[3][10][16][17][18] 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.[19] The surpluses led to a decline in the public debt from about 43% of GDP in 1998 to about 33% by 2001.[20]

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,[21][22] In the aftermath of the Global Financial Crisis and related significant revenue declines and spending increases, the debt held by the public increased to $11.917 trillion by the end of July 2013 under the presidency of Barack Obama.[21][23]

Debt relative to GDP rose due to recessions and policy decisions in the early 21st century. From 2000 to 2008 public debt rose from 35% of GDP to 40%, and to 62% by 2010.[24] During the presidency of George W. Bush, the gross public debt increased from $5.7 trillion in January 2001 to $10.7 trillion by December 2008,[21] due to decreasing tax rates and two wars. Federal spending under President George W. Bush remained at around 40% of GDP during his two terms in office. Public debt increased in the aftermath of the global financial crisis and the late-2000s recession. Public debt increased to 63% of GDP by 2010, mainly due to decreased tax revenue, and the stimulus and tax cuts enacted by President Barack Obama.[25] By February 2012, public debt had increased to $15.5 trillion.[26]

Changes in debt by political affiliation[edit]

Time series of U.S. public debt overlaid with party affiliation of the President. The upper graph shows the U.S. public debt in trillions of USD while the lower graph shows the U.S. public debt as a percentage of GDP. (Data are from the 2009 U.S. Budget.)
US Federal Debt as Percent of GDP since World War II

The President proposes the budget for the government to the US Congress. Congress may change the budget, but it rarely appropriates more than what the President requests.[27]

Economist Mike Kimel notes that the former Democratic Presidents (Bill Clinton, Jimmy Carter, Lyndon B. Johnson, John F. Kennedy, and Harry S. Truman) all reduced public debt as a share of GDP while the last four Republican Presidents (George W. Bush, George H. W. Bush, Ronald Reagan, and Gerald Ford) all oversaw an increase in the country's indebtedness.[28] Economic historian J. Bradford DeLong, former Clinton Treasury Department official, observes a contrast not so much between Republicans and Democrats, but between Democrats and "old-style Republicans (Eisenhower and Nixon)" on one hand (decreasing debt), and "new-style Republicans" on the other (increasing debt).[29][30] David Stockman, director of the Office of Management and Budget under President Ronald Reagan, as op-ed contributor to the New York Times, blamed the "ideological tax-cutters" of the Reagan administration for the increase of national debt during the 1980s.[31] Bruce Bartlett, former domestic policy adviser to President Ronald Reagan and Treasury official under President George H.W. Bush, attributes the increase in the national debt since the 1980s to the policy of "starve the beast".[32][33] While noting that George H.W. Bush's budget deal was one of the reasons for improvement of the fiscal situation in 1990s and ultimately for budget surplus, Bartlett is highly critical of George W. Bush for creating budget deficits by reducing taxes and increasing spending.[34][35]

On the other hand, especially in recent decades, Congress has been very active in restraining government expenditures which may not reflect the inclination or objective of the incumbent president. The standoff between Congress and the president in relation to the debt ceiling and expenditures has resulted in a number of financial crisis.

2011 credit rating downgrade[edit]

On August 5, 2011, after Congress 2011 U.S. debt-ceiling crisis of the United States federal government, the credit rating agency Standard & Poor's downgraded the credit rating of the United States federal government from AAA to AA+. It was the first time the US had been downgraded since it was originally given a AAA rating on its debt by Moody's in 1917.[36] According to the BBC, Standard & Poor's had "lost confidence" in the ability of the United States government to make decisions.[37]

Together with the budget deficit, the political climate at the time was one of the reasons given by Standard & Poor's to revise the outlook on the US sovereign credit rating down to negative on April 18, 2011.[38] Standard and Poor's downgraded the credit rating by one notch from AAA to AA+ on August 5, 2011, for the first time ever. The long-term outlook is negative and it could lower the rating further to AA within the next 2 years.[39][40] The downgrade was met with severe criticism from the Obama administration, commentators, and other political figures.[41][42] The US still has a AAA rating from other ratings agencies.

Causes of recent changes in debt[edit]

Public debt is the cumulative result of budget deficits; that is, government spending exceeding revenues.

2001 vs. 2009[edit]

Causes of change in Federal spending as % GDP 2001–2009 from CBO Data

According to the CBO, the U.S. last had a surplus during fiscal year (FY) 2001. From FY2001 to FY2009, at the height of the Global Financial Crisis, spending increased by 6.5% of GDP (from 18.2% of GDP to 24.7%) while taxes declined by 4.7% of GDP (from 19.5% of GDP to 14.8%). Spending increases (expressed as % of GDP) were in the following areas: Medicare & Medicaid (1.7%), defense (1.6%), income security such as unemployment benefits and food stamps (1.4%), social security (0.6%) and all other categories (1.2%). Revenue reductions were individual income taxes (−3.3%), payroll taxes (−0.5%), corporate income taxes (−0.5%) and other (−0.4%).

The 2009 spending level is the highest relative to GDP in 40 years, while the tax receipts are the lowest relative to GDP in 40 years. The next highest spending year was 1985 (22.8%) while the next lowest tax year was 2004 (16.1%).[43]

2001 vs. 2011[edit]

Cause of change between CBO's 2001 projection of a $5.6 trillion surplus between 2002–2012 and the $6.1 trillion debt increase that actually occurred.

In June 2012, CBO summarized the cause of change between its January 2001 estimate of a $5.6 trillion cumulative surplus between 2002 and 2011 and the actual $6.1 trillion cumulative deficit that occurred, an unfavorable "turnaround" or debt increase of $11.7 trillion. Tax cuts and slower-than-expected growth reduced revenues by $6.1 trillion and spending was $5.6 trillion higher. Of this total, the CBO attributes 72% to legislated tax cuts and spending increases and 27% to economic and technical factors. Of the latter, 56% occurred from 2009 to 2011.[44][45]

The difference between the projected and actual debt in 2011 can be largely attributed to:

The U.S. budget situation has deteriorated significantly since 2001, when the CBO forecast average annual surpluses of approximately $850 billion from 2009–2012. The average deficit forecast in each of those years as of June 2009 was approximately $1,215 billion. The New York Times analyzed this roughly $2 trillion "swing", separating the causes into four major categories along with their share:

Several other articles and experts explained the causes of change in the debt position.[46][47][48]

2008 vs. 2009[edit]

In October 2009, the Congressional Budget Office (CBO) gave the reasons for the higher budget deficit in 2009 ($1,410 billion, i.e. $1.41 trillion) over that of 2008 ($460 billion). The major changes included: declines in tax receipt of $320 billion due to the effects of the recession and another $100 billion due to tax cuts in the stimulus bill (the American Recovery and Reinvestment Act or ARRA); $245 billion for the Troubled Asset Relief Program (TARP) and other bailout efforts; $100 billion in additional spending for ARRA; and another $185 billion due to increases in primary budget categories such as Medicare, Medicaid, unemployment insurance, Social Security, and Defense – including the war effort in Afghanistan and Iraq. This was the highest budget deficit relative to GDP (9.9%) since 1945.[49] The national debt increased by $1.9 trillion during FY2009, versus the $1.0 trillion increase during 2008.[50]

The Obama Administration also made four significant accounting changes to more accurately report the total spending by the federal government. The four changes were:

  1. accounting for the wars in Iraq and Afghanistan ("overseas military contingencies") in the budget rather than through the use of supplemental appropriations;
  2. assuming the Alternative Minimum Tax will be indexed for inflation;
  3. accounting for the full costs of Medicare reimbursements; and
  4. anticipating the inevitable expenditures for natural disaster relief.

According to administration officials, these changes will make the debt over ten years look $2.7 trillion larger than it would otherwise appear.[51]

Historical debt levels[edit]

Gross federal debt[edit]

This table lists the gross U.S. federal debt[52] as a percentage of GDP by number Congress since World War II.[53] The current gross federal debt as a percentage of GDP (102.7% at the end of 2012) is currently the highest it has been since the late 1940s. The debt has reached over 100% of GDP for the first time since the aftermath of World War II.

Congress SessionYearsPresidentStart debt/GDPEnd debt/GDPIncrease debt
(in Billions of $)
Increase debt/GDP
(in percentage points)
79801945–1949Roosevelt, Truman117.5%93.1%-8-24.4%
87881961–1965Kennedy, Johnson55.2%46.9%+30-8.3%
93941973–1977Nixon, Ford35.6%35.8%+177+0.2%
1011021989–1993Bush Sr.53.1%66.1%+1,483+13.0%

(Source: CBO Historical Budget Page and Whitehouse FY 2012 Budget – Table 7.1 Federal Debt at the End of Year PDF, Excel, Senate.gov)


Publicly held debt[edit]

U.S. debt from 1940 to 2011. Red lines indicate the "debt held by the public" and black lines indicate the total national debt or gross public debt. The difference is the "intragovernmental debt", which includes obligations to government programs such as Social Security. The top panel shows debt deflated to 2010 dollars; the second panel shows debt as a percentage of GDP.

Publicly held debt is the gross debt minus intra-governmental obligations (such as the money that the government owes to the two Social Security Trust Funds, the Old-Age, Survivors, and Disability Insurance program, and the Social Security Disability Insurance program).[54]

Federal spending, federal debt, and GDP[edit]

The table below shows the annual federal spending, gross federal debt, and gross domestic product specific fiscal years.[55] The government fiscal year runs from October 1 (of the previous calendar year) to September 30; budgets are enacted before the November general elections.

Fiscal YearFederal SpendingFederal DebtGross Domestic ProductInflation Adjustor[56]
Billions[57]Adjusted[58]IncreaseBillions[59]Adjusted[60]Percentage IncreaseBillions[61]Adjusted[62]Increase

Note: The values for the years 2009, and 2010 represent estimates from the source material.

See also[edit]


  1. ^ "Bureau of the Public Debt: The 19th Century". Retrieved July 15, 2012. 
  2. ^ "PolitiFact: Fla. senator says Jan. 8, 1835, is the only day U.S. has been debt free". Retrieved July 15, 2011. 
  3. ^ a b c d "Historical Data on the Federal Debt". Congressional Budget Office. August 5, 2010. Retrieved August 25, 2012. 
  4. ^ "Warren G. Harding US President — 1921–23". Retrieved 01-25-2011. 
  5. ^ Thomas E. Woods, Jr. (10/08/09). "Depression of 1920". Retrieved May 13, 2010. 
  6. ^ "Making dollars and sense of the U.S. government debt" (PDF). Retrieved Summer 18, 2010. 
  7. ^ CRS Report for Congress
  8. ^ The End of Growth, (September 2011) ISBN 978-0-86571-695-7
  9. ^ a b Cooper, Story, Michael, Louise (July 27, 2011). "Q. and A. on the Debt Ceiling". New York Times. Retrieved 2011-12-26. 
  10. ^ a b "Federal Debt Held by the Public as a Share of GDP (1797–2010)" (PDF). Government Accountability Office. Retrieved April 16, 2012. 
  11. ^ a b c Dennis S. Ippolito. Why Budgets Matter: Budget Policy and American Politics. Penn State Press, 2004. ISBN 978-0-271-02260-4. p. 185-186
  12. ^ a b "Congressional Budget Office – Historical Data on the Federal Debt". cbo.gov. 2010. Retrieved January 3, 2012. 
  13. ^ a b Sahadi, Jeanne (September 12, 2010). "Taxes: What people forget about Reagan". CNN Money. Retrieved 2011-08-30. 
  14. ^ Dennis S. Ippolito. Why Budgets Matter: Budget Policy and American Politics. Penn State Press, 2004. ISBN 978-0-271-02260-4. pp. 185–86
  15. ^ "Congressional Budget Office – Historical Data on the Federal Debt". cbo.gov. 2010. Retrieved January 3, 2012. 
  16. ^ FactCheck.org : The Budget and Deficit Under Clinton
  17. ^ Kessler, Glenn (January 24, 2012). "Fact checking the NBC Florida debate". The Washington Post. 
  18. ^ Kessler, Glenn (July 1, 2011). "Barbara Boxer's blatant rewriting of history". The Washington Post. 
  19. ^ Federal Debt: Answers to Frequently Asked Questions: An UpadateU.S. Government Accountability Office
  20. ^ Federal Debt: Answers to Frequently Asked Questions: An UpadateU.S. Government Accountability Office
  21. ^ a b c United States Department of the Treasury, Bureau of the Public Debt (December 2010). "The debt to the penny and who holds it". TreasuryDirect. Retrieved August 26, 2012.
  22. ^ "CBO Historical Tables – 1970 to 2010" (PDF). Retrieved May 18, 2011. 
  23. ^ Democracy in America (July 27, 2011). "There never was a surplus". The Economist. Retrieved January 1, 2012. 
  24. ^ "CBO Historical Tables – 1970 to 2010" (PDF). Retrieved May 18, 2011. 
  25. ^ Tritch, Teresa (July 23, 2011). "How the Deficit Got This Big - NYTimes.com". The New York Times. ISSN 0362-4331. Retrieved December 28, 2011. 
  26. ^ "Monthly Statement of the Public Debt of the United States- February 29, 2012" (PDF). Treasury Department. Retrieved March 14, 2012. 
  27. ^ Fisher, Louis (Nov. – Dec. 1990). "Federal Budget Doldrums: The Vacuum in Presidential Leadership". Public Administration Review 50 (6): 693–700. doi:10.2307/976984. JSTOR 976984. 
  28. ^ Kimel, Mike (December 4, 2007). "The Republican Party and the National Debt". angrybearblog.com. Retrieved April 15, 2011. 
  29. ^ Brad DeLong (November 20, 2009). "Comparing Debt-to-GDP Ratios with Presidential Terms". Seeking Alpha. Retrieved 2010-08-09. "contrast between the Democrats and the old-style Republicans (Eisenhower and Nixon) on the one hand and the new-style Republicans on the other is quite striking." 
  30. ^ Brad DeLong (May 1, 2008). "Short-Term Costs of Long-Run Fiscal Stupidity – Grasping Reality with Both Hands". Delong.typepad.com. Retrieved 2010-08-09. 
  31. ^ Stockman, David (July 31, 2010). "Four Deformations of the Apocalypse". New York Times (nytimes.com). Retrieved 2010-08-09. 
  32. ^ Bartlett, Bruce (May 7, 2011). "Tax Cuts And 'Starving The Beast'". Forbes.com. Retrieved October 22, 2011. 
  33. ^ Bartlett, Bruce (November 26, 2010). "Starve the Beast: Just Bull, not Good Economics". The Fiscal Times. Retrieved 2011-10-22. 
  34. ^ Bartlett, Bruce (April 9, 2009). "We Need A Party of Fiscal Responsibility". Forbes.com. Retrieved 2012-03-14. 
  35. ^ Bartlett, Bruce (June 25, 2010). "A Budget Deal That Did Reduce the Deficit". The Fiscal Times. Retrieved 2012-03-14. 
  36. ^ "S&P, in historical move, downgrades U.S. credit rating". Xinhua. August 6, 2011. Retrieved August 8, 2011. 
  37. ^ "'No credible plan to cut US debt'". BBC. August 6, 2011. Retrieved August 8, 2011. 
  38. ^ "U.S. credit outlook cut by S&P on deficit concerns". New York. Reuters. April 18, 2011. Retrieved April 18, 2011. ""Because the U.S. has, relative to its AAA peers, what we consider to be very large budget deficits and rising government indebtedness, and the path to addressing these is not clear to us, we have revised our outlook on the long-term rating to negative from stable", S&P said in a release." 
  39. ^ Detrixhe, John (August 5, 2011). "U.S. Loses AAA Credit Rating as S&P Slams Debt, Politics". Bloomberg. 
  40. ^ "S&P cuts US debt rating to double A plus". August 6, 2011. 
  41. ^ Klein, Ezra (February 24, 2011). "Five thoughts on the potential S&P downgrade". The Washington Post. Retrieved 2011-08-07. 
  42. ^ "S&P and the USA". Krugman.blogs.nytimes.com. August 5, 2011. Retrieved 2011-08-07. 
  43. ^ http://www.cbo.gov/ftpdocs/108xx/doc10871/HistoricalTables.pdf
  44. ^ NYT-Bruce Bartlett-The Fiscal Legacy of George W. Bush-June 2012
  45. ^ a b CBO-Changes in CBO's Baseline Projections Since 2001
  46. ^ Leonhardt, David (June 9, 2009). "NYT – Americas Sea of Red Ink Was Years in the Making". The New York Times. Retrieved May 18, 2011. 
  47. ^ "Charlie Rose Show-Peter Orszag Interview-November 3, 2009". Retrieved May 18, 2011. 
  48. ^ "Pew Charitable Trusts-The Great Debt Shift-April 2011" (PDF). Retrieved May 18, 2011. 
  49. ^ "CBO Monthly Budget Review-October 2009" (PDF). Retrieved May 18, 2011. 
  50. ^ "Bureau of the Public Debt/Treasury Direct-Debt changes from September 30, 2008 to September 30, 2009". Treasurydirect.gov. Retrieved May 18, 2011. 
  51. ^ Calmes, Jackie (February 20, 2009). "Obama Bans Gimmicks, and Deficit Will Rise". The New York Times. Retrieved May 26, 2010. 
  52. ^ The gross federal debt includes intra-government debt, i.e. money owed by one branch of the federal government to another. When this amount is subtracted the remaining quantity is known as the public debt.
  53. ^ Budget FY2007
  54. ^ Frontline – Ten Trillion and Counting: Defining the Debt
  55. ^ Budget FY 2009
  56. ^ Budget FY2009. Addendum: Composite Deflator, page 26. Divide current dollars by this number to produce value in (constant) FY2000 dollars.
  57. ^ Budget FY2009. Outlays in current dollars, page 26.
  58. ^ Budget FY2009. Outlays in current dollars, page 26, divided by Inflation Adjustor.
  59. ^ Budget FY 2009. Gross Federal Debt in current dollars, page 127.
  60. ^ Budget FY 2009. Gross Federal Debt in current dollars, page 127, divided by Inflation Adjustor.
  61. ^ Budget FY2009. GDP (Gross Domestic Product) in current dollars, page 194.
  62. ^ Budget FY2009. GDP (Gross Domestic Product) in current dollars, page 194, divided by Inflation Adjustor.


External links[edit]