The United States has been in debt since its founding. The debt accumulated during the American Revolutionary War reached over $75 million by January 1, 1791. Over the subsequent 45 years, the debt continued its upward trajectory until 1835, when it 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 rise again into the millions.
The American Civil War led to a massive increase in the national debt, growing by over 4,000%. It surged 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 increased, reaching approximately $22 billion after the nation financed its participation in World War I.
Major recent events that have 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 approximately 50%, primarily due to the COVID-19 pandemic. Tax cuts, stimulus programs, increased government spending, and decreased tax revenue due to widespread unemployment generally contribute to sharp increases in the national debt.
A more insightful way to assess a country’s financial health is by comparing its debt to its gross domestic product (GDP). This ratio provides a better understanding of a country’s ability to manage its debt because it reflects the burden of debt relative to the country’s total economic output and, consequently, its repayment capacity. The U.S. debt-to-GDP ratio exceeded 100% in 2013 when both debt and GDP were approximately $16.7 trillion.
In conclusion, understanding how much the US is in debt requires looking at both the absolute debt figure and the debt-to-GDP ratio. While the national debt represents the total amount owed, the debt-to-GDP ratio provides a better perspective on the country’s ability to manage and repay its obligations within its economic capacity. Fluctuations in the debt are often linked to significant historical events, economic policies, and global crises.
