Second of a Series
America was 200 years accumulating a national debt of a half-trillion dollars. Now, just six years later, the debt is approaching $1 trillion – albeit today’s inflation devaluated dollars ”aren’t what they used to be.”
The colonial government issued $2 million in paper money in 1775, initial step toward financing the Revolutionary War.
That and further obligations eventually were paid off. But new generations brought new debts, with the curve sweeping sharply upward in recent decades.
In 1975, Treasury records show, the federal debt moved from $475 to $534 billion, breaking the half-trillion-dollar barrier. Next November or December it is projected to reach $1 trillion despite the new Reagan regime’s commitment to reverse the deficit spending tide.
How does a well-resourced nation like the U. S. find itself with so awesome a debt, now requiring annual interest payments approaching $100 billion?
Obviously the Founding Fathers didn’t intend debt as a “business as usual” pattern. In 1790 the first Congress under the Constitution charted a program for repaying the $76 million incurred by the central government and the colonies during the Revolution.
That same year. James Madison wrote in a letter to Henry Lee: “… a public debt is a public curse … ”
And in 1796, George Washington counseled in his farewell address: ” …cherish public credit … use it as sparingly as possible … avoiding likewise the accumulation of debt in time of peace to discharge the debts which unavoidable wars may have occasioned, not ungenerously throwing upon posterity the burden which we ourselves ought to bear.”
By 1835, under President Andrew Jackson, all obligations had been paid – the government was debt-free. Indeed tariffs and proceeds from sale of public lands had built a small surplus. The Civil War (1861-65) changed the picture for the nation of 33 million people. Spending in four years exceeded federal outlays for the entire previous period of national independence.
Yet with the revenues generated, including an income tax, the debt was held to $2.7 billion – a huge sum in those days.
Successive administrations cut the debt to $1.12 billion by 1890. The level was at $1.23 billion in 1916, but World War I involvement boomed it to $25.5 billion in 1919.
Eleven years of budget surpluses whittled the national obligation to $16.2 billion (132 per capita) by 1930. Until that time, a conscientious effort evidently was made toward retiring the debt. Then a turning point: The economic depression of the thirties followed by World War II started the nation on a red ink spending course which has seen only eight balanced budgets in 51 years.
It was in 1920 that British economist John Maynard Keynes advanced his concepts of broad government spending to promote jobs and high level national income. Keynesian economics apparently were put to work in this country in President Franklin D. Roosevelt’s “New Deal” to counter the depression. The national debt went to $43 billion by 1940.
World War II accelerated spending and pushed the federal debt to $269 billion in 1946 ($1,911 per capita). Twenty years later the U. S. was well into the Vietnam War with a debt level of $316 billion that climbed to $458 billion in 1973, the year that war ended.
It had taken 173 years – from the founding of the Republic in 1789 to 1962 – for federal spending to reach a yearly total of $100 billion. Not even in World War II did we spend that much in a single year.
The spending base was broadening now, however. Commitments expanded for social-welfare programs, grants to states and localities by a generous Congress, defense, and interest on the debt.
Government outlays soared past $200 billion in 1971. $300 billion in 1975, $400 billion in 1977, and $500 billion in 1980. Spending of $662 billion is projected for fiscal 1981 and the Reagan administration is hoping to reduce the Carter regime’s budget of $739 billion for fiscal 1982 to a ceiling of $695.3 billion.
Annual deficits, meanwhile, pushed the debt all the way to $935 billion as of Jan. 30, 1981, according to Treasury figures quoted in the Congressional Record. That amounted to about $4,125 per capita.
Inflation, which has shrunken the dollar’s value, has accounted in part for the astronomical figures. The Consumer Index of November 1900 showed the 1967 dollar was worth only 39.7 cents at that time.
The budget last was balanced in 1969 in the Richard Nixon presidency. The seven other balanced budgets in the half century included three under Dwight Eisenhower and four under Harry S. Truman.
Next: Congressional view on debt.