The United States National Debt -- 233 years in the making
In the beginning 1776-1800
(a million is defined as one thousand thousand)
“But with respect to future debt; would it not be wise and just for that nation to declare in the constitution they are forming that neither the legislature, nor the nation itself can validly contract more debt, than they may pay within their own age, or within the term of 19 years.” – Thomas Jefferson
“No pecuniary consideration is more urgent, than the regular redemption and discharge of the public debt: on none can delay be more injurious, or an economy of time more valuable.” -- George Washington
1783 – A peace treaty ends the Revolutionary War.
1788 – Constitution ratified. What were the thoughts of the leaders of the day on debt?
“Avoiding likewise the accumulation of debt, not only by shunning occasions of expense, but by vigorous exertions in time of peace to discharge the debts which unavoidable wars have occasioned, not ungenerously throwing upon posterity the burthen which rightfully is ours.” --George Washington
“Funding I consider as limited, rightfully, to a redemption of the debt within the lives of a majority of the generation contracting it; every generation coming equally, to the free possession of the earth he made for their subsistence, unincumbered by their predecessors, who, like them, were but tenants for life.” -- Thomas Jefferson
1791 - The fledgling United States has had public debt since its inception, and debts incurred to pay the cost of the Revolutionary War, including $191,608.81 borrowed from New York Banks under the Article of Confederation to meet the governments first payroll, led to the first fiscal report of the National Debt on January 1, 1791 and the sum was $75,463,476.52 (some exact accounting here – right down to the pennies.) The population of the U.S. was 3,929,214, giving a per capita rate of debt of $19.205 (hist) – a staggering debt load for the young nation.
"So low and hopeless are the finances of the United States, that, the year before last Congress was obliged to borrow money even, to pay the interest of the principal which we had borrowed before. This wretched resource of turning interest into principal, is the most humiliating and disgraceful measure that a nation could take, and approximates with rapidity to absolute ruin..." -- William Richardson Davie
The optimism of youth and time of growth 1803-1850
1803 – Oct 1803 - In his message to Congress in October, 1803, President Jefferson announced that the Louisiana Purchase would add nearly $13,000,000 to the national debt, most of which would be payable after fifteen years; before which time the existing national debt would be retired. Yet so diligent was the nation in paying debts, this massive increase only upped the total public debt to $80,727,120.88.
1812-1814 – The war of 1812-1814 required further expenditures, and yet under President James Madison, the national debt increased only to $99,833,00.15. This President was renowned for his parsimony, and distrust of bankers. In spite of his frugality, when he left office in 1817 the debt had reached $123,491,905.16, to be settled by a population of 9,638,453 or a per capita burden of $12,812.41.
“History records that the money changers have used every form of abuse, intrigue, deceit, and violent means possible to maintain their control over governments by controlling the money and its issuance.” --- James Madison, (1751-1836), Father of the Constitution for the USA, 4th US President 1809-1817
When President Andrew Jackson (1829-1837) entered the White House, the national debt, which had reached $124 million following the War of 1812, had already been reduced to $48 million. To get it to zero he was perfectly willing to forego anything not “direly necessary.” One Kentucky congressman, after a trip to the White House to beg Jackson to sign one such bill, reported to his allies that "nothing less than a voice from Heaven would prevent the old man from vetoing the Bill, and [I doubt] whether that would!"
At the end of 1834, Jackson reported in the State of the Union message that the country would be debt free as of Jan. 1, 1835, with a Treasury balance of $440,000. Government revenues that year would be twice expenses. He sat down to dinner that night, after writing the following in a letter to a friend.
"How gratifying the effect of presenting to the world the sublime spectacle of a Republic of more than 12 million happy people, in the 54th year of her existence . . free from debt and with all . . . [her] immense resources unfettered!"
“I am one of those who do not believe that a national debt is a national blessing, but rather a curse to a republic; inasmuch as it is calculated to raise around the administration a moneyed aristocracy dangerous to the liberties of the country.” -- Andrew Jackson, (President, 1809-1817)
It didn't last long, to be sure. The great prosperity of the early 1830s broke in the summer of 1836 when a bubble in land speculation, fueled by easy credit, abruptly ended. (Does this not sound depressingly familiar?)
“Gentlemen, I have had men watching you for a long time and I am convinced that you have used the funds of the bank to speculate in the breadstuffs of the country. When you won, you divided the profits amongst you, and when you lost, you charged it to the bank. You tell me that if I take the deposits from the bank and annul its charter, I shall ruin ten thousand families. That may be true, gentlemen, but that is your sin! Should I let you go on, you will ruin fifty thousand families, and that would be my sin! You are a den of vipers and thieves.” – Andrew Jackson, President 1809-1817
The end of Jackson’s presidency ushered in a recession (or contraction as it was known then) that lasted six years. One Wall Street type of the time said, “The fortunes we made so much about in the days of speculation, have melted like the snow before the sun.” Federal revenues fell by half and the national debt was back to stay –- forever.
Research into copies of old newspaper articles, editorials and pamphlets from the period show a tremendous concern over the fiscal performance of the Van Buren administration, who now incorporated a national debt as policy. This stood (1842) at $13,594,480.73, to be serviced by a population of 17,063,353 or a per person burden of $.79. And for this debt, the journalists and pundits of the day crucified the man. (One wonders what they’d think of the mess we’re in today.) Of course, the previous year 1841, the debt had stood at $5,250,875.54, so perhaps they did object to 200+% increase in one year.
Over the next decade, a time of rapid expansion and growth into the west, the war for Texas, the building of great railroads, the national debt declined, in spite of this spending. By 1850 it was $63,452,773.55, and the population 23,191,876.
Young adulthood and conflict 1860-1929
(a billion is one thousand million)
In 1860, the national debt was $64,842,287.88 in a country of 31,443,321 inhabitants -- a fiscally healthy, nation. However, that was about to change – irrevocably. Abraham Lincoln was sworn in as President in 1861, and the southern states organized into the Confederacy. The national debt at July 31, 1861 had jumped to $90,580,873.72. On the same date in 1863, the year of Lincoln’s Emancipation proclamation, the public was now liable for $1,119,772,138.63 and the Civil War, (or War Between the States as some say it should be called) is eating money faster than it can be found.
By the end of the war in 1865, the national debt was now $2,680,647,809.74 (July 31, 1866) and Lincoln was assassinated.
“The government should create, issue, and circulate all the currency and credits needed to satisfy the spending power of the government and the buying power of consumers. By adoption of these principles, the taxpayers will be saved immense sums of interest. Money will cease to be master and become the servant of humanity.” – Abraham Lincoln
Andrew Johnson became the seventeenth president (1865-1869) and added another $7,200,000 to the debt when he authorized the purchase of Alaska in 1867.The program of "Reconstruction" (more like destruction according to southerners I've spoken with) also chewed away government funds. When he left office in 1869, the debt sat at $2,588,452,213.94
For the next fifteen years, while the nation concentrated on expansion and organization, the debt remained reasonably static, and the new century dawned on a nation of 76,212,168 persons with public obligations of $1,617,372,419.53 or a per capita debt of $21.22. (1900)
The twentieth century’s first decade was known as the golden age, at time of affluence for many, elegance for those who could afford it, and the emergence of new methods of manufacture.
All this came to an abrupt end with WWI in 1914 (although America did not enter the conflict until 1917, and stayed to the end of the conflict in 1918.) However, American industry geared up to supply those forces actively involved in the war.
This is reflect in the sudden jumps in the debt from $ 3,609,244,262.16 in 1916 to $14,592,161,414.00 in 1918 and $27,390,113,120 in 1919. The population in 1920 was 106,021,537 ( ratio of $26 per person – tough!)
The 1920’s roared in, and America was in a party mood. A time of affluence followed the war, and great wealth accumulated to the upper classes, fortunes made in speculation, a gambling philosophy which drove stocks upwards with little concrete basis -- until the stock market collapse of 1929. The national debt sat at $16,931,088,484.10.
The Volstead Act, ushering in Prohibition, resulted in speakeasies, bath-tub gin, an illicit trade in alcohol creating new millionaires on both sides of the border with Canada, gangsters and a reduction in government revenues with the loss of taxes on alcoholic beverages, and an increase in expenses (new laws require new compliance officers.)
The third decade saw a dramatic change in philosophy when it came to economics and government.
Before the Great Depression, balancing the budget and paying down the debt were considered second only to the defense of the country as an obligation of the federal government. Before 1930, the government ran surpluses in two years out of three. In 1865, the vast debt run up in the Civil War amounted to about 30% of GDP; by 1916 it was less than a tenth of that.
Maturity and a change in values (1930-1980)
What was this change? Up to the 1930’s, the government believed in a free market, with no government involvement, a laissez-faire (leave it alone) approach to the economy.
This hands off policy changed during the 1930’s to a belief that government can take actions during changing economic conditions that may alleviate the adverse effect of a downturn, thus avoiding worker lay-offs and unsold goods building up. These theories were collected and organized by the British economist, Keynes. http://en.wikipedi/wiki/Keynesian_economics (In case anyone’s curious to know more.) Among these theories is government’s new favorite – deficit spending. Here is a link to an excellent explanation of these theories http://www.u-s-history.com/pages/h1982.html
An understanding of this change in policy and thinking is important to explain the change in government actions and expenditures. Beginning in the 1930’s, in response to the dire difficulties of the Great Depression, the government injected money into the economy as a stimulus. (And yes, even FDR referred to it as a stimulus, so today’s administration did not invent the word.)
Franklin Delano Roosevelt took office in 1933, just four short years after the crash of ‘29, and the nation was already deep into the depression. His initial response and attempted stimulus involved his public works programs such as hydro dams (named after his predecessor, Hoover)
“Blessed are the young, for they shall inherit the national debt”--Herbert Hoover, President, 1929-1933
1935 saw the implementation of Social Security and the burgeoning of the government offices and government workers (an almost 200% increase) and the public debt climbed slowly upward, from $16,185,309,831.43 in 1930 to $40,439,532,411.11 in 1939.
Detractors of his actions say his forays into deficit spending might have assisted had he not been so timid. Although, one can certainly understand his reluctance to spend money not in the national coffers – had he injected huge amounts of capital without economic improvement, the nation would be very much worse off. He gave up the attempt in 1937 and the economy took a steep nose dive.
FDR went into office with a national debt for 1933 of $22,538,672,560 and in 1941 at the beginning of his second term, the debt rose to $42,967,531,037.
“The real truth of the matter is, as you and I know, that a financial element in the large centers has owned the government of the U.S. since the days of Andrew Jackson. History depicts Andrew Jackson as the last truly honorable and incorruptible American president.” -- Franklin D. Roosevelt, President 1905-1909)
Germany invaded Poland in 1939, and by December of 1941 (following Pearl Harbor) the U.S. was at war. War may have lifted the nation out of the doldrums of the depression years, but it was expensive. U.S. industrial might produced much of the equipment and machinery required by the total Allied forces, (Britain's industry having been targeted for destruction by German bombing raids during the Blitz. The lend/lease policies put in place to finance this surge in production left huge debts on the devastated British economy, much of it forgiven and never recouped. The debt of 1941 $42,967,531,037.00 grew to a massive $258,682,187,409.00 by the war’s end in 1945 (per capita rate of $1,819.59 for the 142,164,569 Americans) and H. Truman became president.
Returning American troops found this wartime industrial surge ready and waiting for peacetime applications. The United States became the world's greatest manufacturing nation, and the country, despite the financial effects of the war, entered a time of prosperity.
The Truman years saw the end of the Second World War, the completion and success of the Manhattan Project, the rebuilding of former foes through the Marshall Plan, and two years of the Korean War, and yet despite this massive spending, his administration was able to reduce the national debt, albeit slightly. President Truman took office in 1945 with a national debt of $258,682,187,409.93 and left office following his second term in 1952 leaving a debt of $259,105,178,785.43.
As though the world had not enough of war, "along came Korea."
The Korean conflict of 1950 to 1953 cost the U.S. $30 billion (historical dollars), or expressed in today’s dollars, $320 billion. During the last 18 months of the Truman administration, the US defense budget had quadrupled; and Eisenhower resolved to reduce military spending by brandishing the United States' nuclear superiority while continuing to fight the Cold War effectively.
In 1953, Dwight D. Eisenhower was sworn in as President. His administration is best remembered for the plan and commencement of the Interstate system, for the desegregation of schools, for the arms race of the cold war, and as one source informs me, for ordering the slaughter of squirrels wreaking havoc on the White House lawn. His first term began with a national debt of $275,168,120,129.39 and his second term ended in 1960 at $290,216,815,241.68, an increase of $15,048,695,112.00 or .05%, the rate considered “acceptable” for inflation. For each of the 189,323,031 residents of the country, this amounted to $1,532 per individual.
Although a life-long soldier, he had strong views on the economic waste of war, and spoke often on the follies of an economy based on arms:
"Every gun that is made, every warship launched, every rocket fired signifies, in the final sense,a theft from those who hunger and are not fed, those who are cold and are not clothed. This world in arms is not spending money alone. It is spending the sweat of its laborers, the genius of its scientists, the hopes of its children...This is not a way of life at all, in any true sense. Under the cloud of threatening war, it is humanity hanging from a cross of iron." --Dwight D. Eisenhower
America had a love affair with her new President, John F. Kennedy, and his inauguration in 1961 was believed to herald the beginning of a new age for the country, however his short presidency was not without challenges. The Cuban missile crisis of 1962 brought the nation to the brink of war, the civil rights movement meant domestic unrest and the space race all conspired to increase the 1963 national debt to $309,346,845,059 a 7% increase.
"Most Americans have no real understanding of the operation of the international money lenders. The accounts of the Federal Reserve System have never been audited. It operates outside of the control of Congress and manipulates the credit of the United States." -- Barry Goldwater (1909-1998) US Senator
Following Kennedy’s assassination L.B. Johnson became president, and the Vietnam War began. Johnson left office in 1969 and the national debt was now $368,225,581,254.41 or $1,726.31 per person.
The Vietnam War cost American taxpayers about $150 billion (historic). Over 2 million men and women served during the war and about 58,000 were killed as a result of the war. Many soldiers came home disabled for life, some lost limbs and some were poisoned by chemicals like Agent Orange. Others returned from the war addicted to drugs and many suffered mental problems as a result of their participation in the war.
The Vietnam War was a very costly war, socially, economically, and politically. Coming out of Vietnam the country suffered financial loss. After President Johnson had spent so much on a war that many considered lost, he offered up no way to pay for the war. In WWII America gained by increased productivity during war time and increased education in post war America. These elements were not present during Vietnam to help boost the American economy. America went into a recession and was effected by many other factors including crisis in the middle east which increased the price of oil greatly.
Richard Nixon took office in 1969, and his presidency was besieged with problems from the beginning. Domestic unrest kept pace with the escalation of the Vietnam war, and the racial struggles of the day. His administration was fraught with controversy: violence against dissenters; the killing of four students at Kent State by the National Guard; the brutality of the police against demonstrators in Chicago; the passing of the War Powers Act in 1973 in response to the Vietnam War in an effort to keep anything like it from happening again -- while escalating the war and secretly bombing Cambodia and Laos (and lying about it) -- which sparked even greater civil disobedience; Watergate and the resulting scandals; and lastly the OPEC cut in oil production.
He responded with a trip to China, opening relations with that country for the first time since the Communist revolution.
He left office an inch from impeachment, and probably the most unpopular president ever (including G. W. Bush.) "I am not a crook," he repeated at resignation.
The public debt as he resigned in 1974 and left office was $469,898,039,554.70, and Gerald Ford assumed the office.
"A billion here, a billion there, sooner or later it adds up to real money." -- Everett Dirksen (1896-1969) U.S. Congressman and Senator
President Ford served for two years and oversaw America’s withdrawal from Vietnam, April 30, 1975. We will never know how much this 10 year active conflict actually cost, or its impact on the national debt, but some of this is reflected in the increase of the debt to $653,544,000,000.00, (even the roundness of these figures brings suspicion as to their veracity) an increase of 183,645,960,446 or 40% over two years.
President J Carter inherits this obligation in 1977, and despite his increases in taxation and reductions in government spending, he leaves office in 1980, and a national debt of $930,210,000,000.00 (whatever happened to the accounting to the penny?) or $3,932.53 for each and every one of the 236,542,199 Americans.
During the Carter’s administration the economy was going through some very difficult times. The Federal Reserve Board tightened the money supply and the economy began a recession. Unemployment rate rose to over 10 percent, the highest since World War II.
Oil prices skyrocketed causing high gas prices and in turn resulting in inflation. This may be due in part to the Iranian revolution destabilizing the area. Many will remember the U.S. embassy hostage situation. However this unrest surely highlighted America's dependence on foreign oil. President Carter announced the Carter Doctrine which declared that any interference with US interests in the Persian Gulf would be considered as an attack on US vital interests.
Congress passed a series of laws that removed most of the regulatory shields around aviation, trucking and railroads in an effort to increase competition and lower prices.This coupled with rising fuel prices led to business failures.
Inflation so devastated the economy by the 1980 election that interest rates rose to 20 percent. Ronald Reagan then defeated Carter by a wide margin promoting less government involvement and tax cuts to stimulate the economy.
The spread of the waistline at middle age1980-2009
(a trillion is one million million)
It was 1981 and Ronald Reagan became president, bringing with him a cadre of economic advisors and a new theory called ‘reaganomics’; the cornerstones of which were reduction of taxes, removal of regulations, and non-interference by government. This was supposed to increase investments by the wealthy, which in turn would stimulate jobs and more consumer dollars. He referred to this as “trickle down economics,” that is increase the wealth of the wealthy, and the benefits will eventually reach the working Joe. I’ve heard this also described as, “Whatever falls off my feast table is yours.”
Officially, it is termed supply side economic policy. For an explanation go to: http://www.econlib.org/library/Enc/SupplySideEconomics.html
In 1982, Reagan de-regulated the savings and loan industry, which would prove to be ironic later on. He reduced taxes and military spending, but despite his best efforts, and with the stock market crash in 1987, his two terms which started with less than 930 million dollars debt, ended with a national debt of 2.6 trillion dollars in 1988. Or to be exact, $2,602,337,712,041.16, or $10,058.90 per capita for a population of 258,709,873.
"When a conservative says it is bad for the government to spend more than it takes in, he is simply showing the same common sense that tells him to come in out of the rain.” – Ronald Reagan, President 1981-1988
It only got worse.
George H. Bush became president in 1989 and served one term. In 1991 the savings and loan businesses, de-regulated by Reagan collapsed, taking with it the fortunes of millions of Americans, and adding $150 million to the national debt. He also believed in supply side economics, yet increased some taxes in 1992. He left the 1992 national debt at 4 trillion dollars or $4,064,620,655,521.66. This is now $15,711.11 for every man, woman and child in the country.
One might be tempted to consider the cost of the Persian Gulf War as part of the $1.5 trillion to the debt, but of the $60 billion spent, around $40 billion were repaid by Saudi Arabia. The costs of fighting the oil well fires set by the retreating Iraqi troops has apparently never been tabulate.
Bill Clinton took the oval office in 1993, and immediately returned to a balanced budget policy eschewing the theories of his two predecessors and set about reducing the annual deficit with hopes of reducing this debt. He increased taxes and reduced government spending, and by 1998, tax revenues exceeded expenditures. For three consecutive years, President Clinton was able to pay down the principle of the national debt. However, interest accrued faster than the nation can pay, and when he left office in 2000 the national debt sat at 5.7 trillion dollars, or $5,674,209,886,86 or $19,470.00 per capita.
“It took the national debt two hundred years to reach $1 trillion. Supply Side Economics quadrupled the national debt to over $4 trillion in twelve years (1980-1992) under the Republicans. Bill Clinton actually paid down the national debt. How did he do it? He raised taxes. It produced the longest sustained economic expansion in U.S. History” -- ED SCHULTZ, Straight Talk from the Heartland
In 2001, George W. Bush started the first of two terms in office. He returned to supply side policies and cut taxes. The terrorist attacks of 9/11 brought about two wars on two fronts – Iraq and Afghanistan. In the last weeks of his presidency, he approved a $1.4 trillion dollar bail out following the sub-prime lending fiasco.
“President Bush promised that he would "retire nearly $1 trillion in debt over the next four years. ... the largest debt reduction ever achieved by any nation at any time." Greenspan: Adjustments to our Spending Commitments Needed
"The degree of uncertainty about whether future resources will be adequate to meet our current statutory obligations to the coming generations of retirees is daunting.*" Alan Greenspan Feb. 25, 2004
"Listen, government has got plenty of money, and it needs to stay focused and principled. We need to be wise with the taxpayer's money. But it turns out, when you're trying to keep your economy going, the best way to do so is not through government spending, but it's through the spending of thousands of individuals across our economic spectrum. “ -- George W. Bush, Jan. 29, 2004
President George W. Bush left office in Jan 2009, and a national debt of $10.7 trillion dollars, or $10,024,724,896,912.49 (September 30, 2008) or $36,333 per capita and he did issue hundreds of billions of dollars in TARP funds before leaving office.
In January of 2009, Barack Obama was inaugurated as President.
“I found this national debt, doubled, wrapped in a big bow waiting for me as I stepped into the Oval Office. “ -- Barack Obama
In his first eleven months in the office, the national debt has increased to $12,135,510,445,387.63 or $39,466.40 for every American.
But if you're feeling panicky, think back to 1797 and the staggering debt the new nation faced. The problem is, the leaders then considered repayment of the debt a necessity, second to nothing. They knew, even then, that perpetual unpaid debt eats all revenues in interest payments, and when interest goes unpaid, it becomes principle, and therefore compounded. It is this continual compounding of interest that creates debt increase before the government even spends a penny.
Note: All quoted figures on the national debt are from the Treasury Department of the United States.
Updates coming soon
As this article has drawn a large number of readers, I feel it is necessary to update for the years 2009 - 2012. This will be in the form of a separate article linked to this one covering the "Obama years."
Look for The US National Debt -- 236 years in the making: the Obama years, to come very soon.
- The Real Wealth Redistribution
A look at what TARP, TALF and other programs have done.
- What we all need to understand about Social Security
What has really happened to your social security -- $2.5 trillion dollars of your money MIA.
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