Federal debt held by the public as a percentage of gross domestic product, from 1790 to 2013, projected to 2038.
The history of the United States public debt started with federal government debt incurred during the American Revolutionary War by the first U.S treasurer, Michael Hillegas, after its formation in 1789.
The United States has continuously had a fluctuating 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, the United States public debt as a share of GDP has 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.
Debt as a share of GDP has consistently increased since then, except during the terms of presidents Jimmy Carter and Bill Clinton.
Public debt rose during the 1980s, as President Reagan cut tax rates and increased military spending.
Public debt rose sharply in the wake of the 2007–08 financial crisis and the resulting significant tax revenue declines and spending increases.
Except for about a year during 1835–1836, the United States has continuously had a fluctuating public debt since its Constitution went into effect on March 4, 1789.
On the founding of the United States, the financial affairs of the new federation were in disarray, exacerbated by an economic crisis in urban commercial centers. In 1790, Secretary of the Treasury Alexander Hamilton pushed for Congress to pass a financial plan, called the First Report on the Public Credit, a controversial part of which involved the federal government assuming state debts incurred during the Revolutionary War. Northern states had accumulated a huge amount of debt during the war, amounting to $21.5 million, and wanted the federal government to assume their burden.
The Southern states, which had lower or no debts, whose citizens would effectively pay a portion of this debt if the federal government assumed it, were disinclined to accept the proposal.
Hamilton proposed that the federal Treasury take over and pay off all the debt that states had incurred to pay for the American Revolution.
The Southern states extracted a major concession from Hamilton in the recalculation of their debt under the fiscal plan. For example, in the case of Virginia, a zero-sum arrangement was contrived, in which Virginia paid $3.4 million to the federal government, and received exactly that amount in federal compensation. The revision of Virginia’s debt, coupled with Potomac residence issue, ultimately netted it over $13 million. Another result of federal assumption of state debts was to give the federal government much more power by placing the country’s most serious financial obligation in the hands of the federal government rather than the state governments.
There was a sharp increase in the debt as a result of the War of 1812.
On January 1, 1835, president Andrew Jackson paid off the entire national debt, the only time in U.S. history that has been accomplished.
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.
Debt increased again during World War I (1914–1918), reaching $25.5 billion at its conclusion.
Approximately $17 billion in debt was raised through the selling of Liberty Bonds to the general public to finance the U.S.’s military effort.
Debt held by the public was $15.05 billion or 16.5% of GDP in 1930.
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. 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.
Truman led to the largest increase in public debt.
Public debt rose over 100% of GDP to pay for the mobilization before and during the war.
Public debt was $251.43 billion or 112% of GDP at the conclusion of the war in 1945 and was $260 billion in 1950.
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 under the presidency of Harry S.
Unlike previous wars, the Korean War (1950–53) was largely financed by taxation and did not lead to an increase in the public debt.
Beginning in the mid-1970s and afterwards, U.S. national debt began to increase faster than GDP.
The public debt reached a post-World War II low of 24.6% in 1974. In that year, the Congressional Budget and Impoundment Control Act of 1974 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. National debt held by the public increased from its postwar low of 24.6% of GDP in 1974 to 26.2% in 1980.
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.) and increased military spending, while congressional Democrats blocked cuts to social programs. As a result, debt as a share of GDP increased from 26.2% in 1980 to 40.9% in 1988, and it continued to rise during the presidency of George H.
US Federal Debt as Percent of GDP since World War II, with presidential terms marked.
Debt held by the public reached a high of 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 1990s boom. 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. The surpluses led to a decline in the public debt from about 43% of GDP in 1998 to about 33% by 2001.
In the early 21st century, debt held by the public 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.
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 of 2007–08 and related significant revenue declines and spending increases, debt held by the public increased to $11.917 trillion by the end of July 2013, under the presidency of Barack Obama.
On August 5, 2011, the United States debt-ceiling crisis of 2011, the credit rating agency Standard & Poor’s downgraded the rating of the federal government from AAA to AA+.
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 dollars while the lower graph shows the U.S. public debt as a percentage of GDP.
Truman) all reduced public debt as a share of GDP, while the last four Republican Presidents (George W.
Bradford DeLong, observed 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). David Stockman, former director of the Office of Management and Budget, blamed the “ideological tax-cutters” of the Reagan administration for the increase of national debt during the 1980s. Former Treasury official Bruce Bartlett attributed the increase in the national debt since the 1980s to the policy of “starve the beast”. While noting that George H.W. Bush’s budget deal in 1990 was one of the reasons for improvement of the fiscal situation in 1990s, Bartlett was highly critical of George W.
Public debt is the cumulative result of budget deficits; that is, government spending exceeding revenues.
From fiscal years 2001 to 2009, spending increased by 6.5% of gross domestic product (from 18.2% to 24.7%) while taxes declined by 4.7% of GDP (from 19.5% to 14.8%).
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, the Congressional Budget Office 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.
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 rate 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. The national debt increased by $1.9 trillion during FY2009, versus the $1.0 trillion increase during 2008.
Gross federal debt
This table lists the U.S. federal debt as a percentage of gross domestic product, or GDP, each year since World War II. The gross federal debt shown below reached 102.7% of GDP at the end of 2012, the most recent figure available; it was the highest percentage since 1945 and the first yearly percentage figure to go over 100% since then.
(The gross federal debt in the table includes intra-government debt – that is, money owed by one branch of the federal government to another.
Change in debt-to-GDP ratio
(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
U.S. debt from 1940 to 2011.
Federal spending, federal debt and GDP
The table below shows annual federal spending, gross federal debt and gross domestic product for specific fiscal years. The government fiscal year runs from October 1 of the previous calendar year to September 30 of the year shown.
United States public debt
United States National Debt Tracker, including interactive historical graphs and relationship to GDP.
“United States Deficit & Debt During Presidents from 1969–2019”.