Early History 17761900

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Early History 1776-1900

• By 1783, the United States had borrowed over 8
  million from France and 250,000 from Spain to
  finance the Revolutionary War.

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Early History 1776-1900

• During the period 1790-1812 the U.S. often
  incurred debt but typically repaid it quickly.

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Early History 1776-1900

• The War of 1812 caused a massive increase in
  national debt and, by 1816, the national debt was
  over 129 million.

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Early History 1776-1900

• 1835-36 Debt Free! The U.S. was completely
  out of debt by 1835.
  
• The Mexican-American War (1846-48) caused a
  four-fold increase in the debt.

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Early History 1776-1900

• By the end of the Civil War (1861-65), the North
  owed over 2.6 billion, nearly half of its
  national income.

• After the South lost, Confederate currency and
  bonds had no value.

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The Twentieth Century

• The Spanish-American War (1898) also increased
  the national debt.
  
• World War I raised the debt from 3 to 41 of the
  national income.

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The Twentieth Century

• National debt declined during the 1920s but rose
  again during the Great Depression.

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World War II

• The greatest increase in national debt occurred
  during World War II.
  
• Rather than raise taxes, the government rationed
  consumer goods.
  
• U.S. War Bond purchases raised the debt from 45
  of GDP to over 125 in 1946.

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The 1980s

• During the 1980s, the national debt rose by
  nearly 2 trillion.
  
• The increase was not war-related but as a result
  of recessions, a military buildup, and massive
  tax cuts.

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The 1990s

• The early 1990s continued the same trend.
• Discretionary federal spending increased sharply
  in the first two years of the Bush administration.

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The 1990s

• The 1988-92 period saw the national debt
  increased by another trillion dollars.
  
• There was some success in reducing the structural
  deficit in 1993.

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1990s

• Budget deficits for 1993-96 have pushed the
  national debt to over 5 trillion.

• By 2002, the accumulated debt was 5.6 trillion,
  which works out to nearly 20,000 of debt for
  every American citizen.

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Historical View of the Debt/GDP Ratio