The United States has been in debt since its very beginning. The debts accrued during the American Revolutionary War had already reached over $75 million by January 1, 1791. Over the subsequent 45 years, the debt continued to rise until 1835. It then significantly decreased due to the sale of federally owned lands and reductions in the federal budget. However, an economic depression soon followed, causing the debt to climb back into the millions. During the American Civil War, the debt experienced a staggering increase of over 4,000%, growing from $65 million in 1860 to $1 billion in 1863, and nearly $3 billion shortly after the war ended in 1865. Throughout the 20th century, the debt steadily grew, reaching approximately $22 billion after the country financed its participation in World War I.
Recent events that triggered substantial increases in the debt include the wars in Afghanistan and Iraq, the Great Recession of 2008, and the COVID-19 pandemic. From fiscal year 2019 to fiscal year 2021, government spending increased by roughly 50%, largely due to the COVID-19 pandemic response. Tax cuts, stimulus programs, increased government spending, and decreased tax revenue due to widespread unemployment are the main factors contributing to sharp increases in the national debt.
Understanding how much is America’s debt requires looking beyond the raw numbers. Comparing a country’s debt to its gross domestic product (GDP) offers valuable insights into its ability to manage its financial obligations. This ratio provides a more accurate reflection of a country’s fiscal health than the absolute national debt figure, as it illustrates the debt burden relative to the country’s total economic output and, consequently, its capacity to repay it. In 2013, the U.S. debt-to-GDP ratio exceeded 100%, with both debt and GDP approximating $16.7 trillion.
The U.S. national debt is a complex issue influenced by various historical events and economic policies. Analyzing the debt-to-GDP ratio provides a clearer understanding of the country’s financial position and its ability to meet its obligations.
