The United States has been in debt since its very beginning. Starting with debts from the American Revolutionary War, which totaled over $75 million by January 1, 1791, the nation’s financial story has been intertwined with borrowing. For the subsequent 45 years, this figure generally increased, until a notable decrease in 1835, thanks to the sale of federal lands and government budget cuts. However, this period of reduction was short-lived, as an economic depression soon led to another rise in debt, once again reaching millions.
The American Civil War caused an enormous surge in debt, growing by over 4,000%. From $65 million in 1860, it dramatically increased to $1 billion by 1863, and then to almost $3 billion shortly after the war concluded in 1865. Into the 20th century, the debt continued its upward trend, reaching approximately $22 billion after the U.S. financed its involvement in World War I.
More recently, significant events have triggered substantial increases in the national debt. These include the wars in Afghanistan and Iraq, the Great Recession of 2008, and the COVID-19 pandemic. Notably, from Fiscal Year 2019 to 2021, government spending saw an approximate 50% increase, largely as a response to the COVID-19 pandemic. Factors such as tax cuts, economic stimulus programs, increased government expenditure, and reduced tax revenue due to widespread unemployment are generally the main drivers behind these sharp increases in national debt.
To better understand the scale of a country’s debt, it’s helpful to compare it to its Gross Domestic Product (GDP). This comparison gives us the debt-to-GDP ratio, considered a more effective measure of a country’s financial health than just the raw debt number. It illustrates the burden of the debt in relation to the country’s total economic output and its capacity to repay. The U.S. debt-to-GDP ratio exceeded 100% in 2013, when both the debt and the GDP were around $16.7 trillion.
Understanding how much the US national debt amounts to requires looking beyond just the numbers and considering its historical context and relative economic strength. The debt-to-GDP ratio provides a crucial perspective on the nation’s fiscal situation and its ability to manage its financial obligations.
