The United States has been in debt since its very beginning. Starting with debts from the American Revolutionary War, which totaled over $75 million in 1791, the nation’s financial story has been intertwined with borrowing. While there was a brief period in 1835 where the debt shrank due to land sales and budget cuts, economic downturns quickly led to its resurgence. The Civil War dramatically increased the debt by over 4,000%, from $65 million in 1860 to nearly $3 billion by 1865. This growth continued into the 20th century, reaching approximately $22 billion after World War I.
Significant increases in the U.S. debt have been triggered by more recent events. The wars in Afghanistan and Iraq, the Great Recession of 2008, and the COVID-19 pandemic all led to substantial spikes. Notably, from fiscal year 2019 to 2021, federal spending rose by about 50% largely due to the pandemic response. Tax reductions, economic stimulus packages, increased government expenditure, and decreased tax revenues during periods of high unemployment are primary factors contributing to sharp increases in the national debt.
To understand the scale of a country’s debt, it’s useful to compare it to its Gross Domestic Product (GDP). This debt-to-GDP ratio provides a better understanding of a country’s ability to manage its debt. It illustrates the burden of the debt relative to the country’s economic output and capacity to repay. The U.S. debt-to-GDP ratio exceeded 100% in 2013 when both the debt and GDP were around $16.7 trillion. This metric remains a critical indicator of the nation’s fiscal health.
Visualizing the sheer size of the national debt can be challenging. Figures in the trillions are difficult to grasp. Understanding the history and context, along with using metrics like the debt-to-GDP ratio, offers a more insightful perspective on just how much debt the U.S. has accumulated and the factors that have contributed to its growth over time.
