Tracing Public Debt Through History

The cliché expression, "The only constant in life is change," proves true in the analysis of the debt levels of American society throughout the past couple of centuries. Chronologically coinciding with shifts in political leadership and major international events, America's public debt has risen exponentially over the past couple of centuries.

The Bureau of Public Debt (BPD) currently estimates the total outstanding debt of the United States to be $6.9 trillion. $4 trillion of that can be attributed to debt held by the public, while the remaining $2.9 trillion is categorized as intra-governmental holdings.

What exactly constitutes 'public debt'? The BPD answers that public debt is "all Federal debt held by individuals, corporations, state or local governments, foreign governments, and other entities outside of the United States Government." Treasury bills, notes, bonds, as well as State and Local Government series, and foreign and domestic series, are all included in this category.

Intra-governmental holdings include "Government Account Series securities held by Government trust funds, revolving funds, and special funds; and Federal Financing Bank securities. A small amount of marketable securities are held by government accounts," according to the BPD.

While the debt ditch has currently reached unprecedented depths, the Bureau can trace its beginning back to $75 million in 1791, the year the Bill of Rights was ratified and added to the Constitution. The history of the public debt offers interesting historical insight as to the development of the current high balance.

The debt figures increased steadily until their peak in 1804 at $86 million followed by a gradual yet significant decline over an eight-year period to $45 million in 1812. Also that year, under the leadership of former President James Madison, the United States declared war on Britain at the start of the War of 1812.

After a rapid four-year spike, the public debt plunged to the record low in 1835 of $33,733.05 following the presidencies of James Monroe and John Adams, and during Andrew Jackson's second term. Since that time, figures have consistently increased at a steady rate, though between 1916 and 1919, the latter half of the First World War, the debt rose at an exponential rate, jumping from $3.6 billion to $5.7 billion to $14.5 billion to $27.4 billion respectively. Ironically, this spike in public debt is complimented by the start of the "Roaring 20's" on the historical timeline.

During this roaring decade, the debt steadily declined from $25.9 billion in 1920 to a low of $16.2 billion in 1930, shortly following the Black Tuesday crash of 1929. From 1930 forward the debt increased gradually until the next national crisis.

The economy witnessed another major spike in public debt during the Second World War, specifically 1941 to 1944, ranging from $48 billion to $201 billion. Never again would the public debt dip below the triple-digit mark.

Beginning at $290.2 billion, the debt increased, on average, $32 billion per year from 1960 to 1980. During the subsequent twenty years, 1981 to 2000, the debt estimates rocketed to approximate increases of $237.2 billion per year.

Beginning with an increase of $432 billion from 1990 to 1991, the debt's growth began to slow during former President Bush's final three years in office. By the time Clinton took office in 1993, the increases were down to $281 billion per year. Under the Clinton administration the increases in the debt continued to become smaller. In fact, from 1999 to 2000 the debt only increased $18 billion, the lowest increment since $10 billion between 1968 and 1969.

By: Kate Ellis

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