The major cause of debt for countries has always included war debt. But now it includes government investment in infrastructure and welfare.
In the US, the Revolutionary War Debt was owed to France and was paid off in 1835. Debts incurred during the American Revolutionary War amounted to $75,463,476.52 by January 1, 1791. Over the following 45 years, the debt grew. Notably, the public debt actually shrank to zero by January 1835, under President Andrew Jackson.
The War of 1812 was financed mainly through the use of borrowed funds. Total public debt increased from $45.2 million on January 1, 1812, to $119.2 million as of September 30, 1815.
The United States went to war with Mexico in May, 1846, over the annexation of Texas and California. The total cost of the war was estimated to be $64 million, and Congress authorized the issuing of additional debt to meet these obligations. It is this concept that would later become the basis for the Savings Bond program. By the end of 1849, public debt totaled $63.1 million.
Public debt in 1860 totaled $64.8 million (the annual budget of the federal government at the time was $63.1 million). But this small debt would look completely insignificant compared to the amount of money the government would owe at the end of the Civil War.
It is estimated that the Civil War cost the nation $5.2 billion in direct expenditures. As the war dragged on, the federal government was forced to completely overhaul its financial organization to cope with this as-yet-unheard-of amount. Enormous leaps in the methods and amount of public financing took place during the war years, including:
The American Civil War resulted in dramatic debt growth. The debt was just $65 million in 1860, but passed $1 billion in 1863 and had reached $2.7 billion following the war. By the end of 1865, interest-bearing public debt stood at $2.2 billion, but the union had been preserved.
The debt grew steadily into the Twentieth Century and was roughly $22 billion as the country paid for involvement in World War I. By the end of 1919, total debt exceeded $25 billion, but the war was won and a great burden of debt had been accepted and managed without causing substantial disruption to the economy.
In 1935, the 15% Social Security tax began to flow into government coffers and that gave Congress the cash to overspend. That gave Roosevelt the cash he needed to build infrastructure during the Great Depression of 1929 and support Europe with military equipment after 1939.
The buildup to World War II brought the debt up another order of magnitude from $51 billion in 1940 to $260 billion following the war.
There was a budget surplus each year from 1946 to 1949, but the total debt never fell below $250 billion.
With the outbreak of hostilities in Korea in June, 1950, defense spending jumped from $17.7 billion to $40.4 billion in 1953, and the Treasury again became concerned with the problem of financing a war effort.
But the war in Vietnam, and the country’s deeper intervention from 1966 onward, as well as the Johnson administration’s "Great Society" programs, raised the budget deficit to $25.2 billion, the most it had been since World War II. With a tax increase, the budget for 1969 actually showed a surplus of $3.2 billion, marking the last time the federal government’s finances would be "in the black" until 1998. (By 1970, total debt would rise to $382.6 billion, increasing $92 billion over the decade.)
President Nixon inherited the expensive Vietnam War, as well as Johnson’s "Great Society" programs. Deficits rose through the early '70s to levels previously unheard-of except during World War II. In 1973, the budget deficit was $14.3 billion.
Then, with the sharp rise in the price of petroleum products due to the OPEC-engineered shortage of 1973, inflation increased dramatically. In 1975, mortgage rates moved from 4% to 6%. Monetary policy was tightened to fight inflation, but interest rates hit new highs and the deficit reached $59 billion by 1980. By 1980 total federal debt stood at $914 billion, an increase of $532 billion since 1970.
In 1980, President Reagan began working on Tax Cuts to reignite investment and grow GDP. By 1984, these tax cuts were in place and resulted in high private sector growth and added revenue. The top income tax bracket moved from 70% to 30%. Inflation continued to rise. In 1983, mortgage rates were 13%. In 1985, mortgage rates were 10% and in 1987 dropped to 7%.
Between
1980 and 1990, Reagan increased military spending to end the Cold War.
Electronics and Telecommunications were due for upgrades. The PC was introduced
in 1983 and Cell Phones were being designed. This added to the US economy and
increased productivity.
The National Debt remained under $5 trillion.
In 1990 President George HW Bush led a coalition of countries to free Kuwait from their invasion by Iraq and won the Gulf War. The National Debt remained under $5 trillion.
In 2000, Islamic Terrorists hijacked airliners and crashed into the Twin Towers in New York and into the Pentagon in DC.
In 2000, President George W Bush started the Afghan War in 2001 and the Iraq War in 2003. He allowed mortgages to be granted to unqualified buyers and caused the Financial Meltdown in 2008, where mortgages were cut up and sold as assets. These mortgages failed and the banks need a bailout. The National Debt increased to $10 trillion.
In 2009, President Barak Obama pushed “green energy” and the National Debt increased to $20 trillion.
In 2016, President Donald Trump increased oil and natural gas production, cut taxes, began building a border wall. Gasoline prices dropped from $4/gal to $2/gal. US Household incomes increased by $6000/yr.
In 2020, President Joe Biden pushed green energy and increased the Federal Budget from $4 trillion to $6 trillion. The National Debt soared to $35 trillion.
Norb Leahy, Dunwoody GA Tea Party Leader
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