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In the United States, national debt is money borrowed by the federal government of the United States. Debt burden is usually measured as a ratio of public debt to gross domestic product.

Debt as a share of the US economy peaked just after World War II, but then fell. In recent years sharp increases in deficits and the resulting increases in debt have led to heightened concern about the long-term sustainability of the federal government's fiscal policies.

Early history

The United States has had a public debt since its founding in 1791. Debts incurred during the American Revolutionary War and under the Articles of Confederation amounted to $75,463,476.52 on January 1, 1791. From 1796 to 1811 there were 14 budget surpluses and 2 deficits. There was a sharp increase in the debt as a result of the War of 1812. In the 20 years following that war, there were 18 surpluses and the US paid off 99.97% of its then debt.

Another sharp increase in the debt occurred as a result of the Civil War. The debt was just $65 million in 1860, but passed $1 billion in 1863 and reached $2.7 billion by the end of the war. During the following 47 years, there were 36 surpluses and 11 deficits. During this period 55% of the national debt was paid off.

The next period of major increase in the national debt took place during World War I, reaching $25.5 billion at its conclusion. It was followed by 11 consecutive surpluses and saw the debt reduced by 36%.

Social programs enacted during the Great Depression and the buildup and involvement in World War II during the F.D. Roosevelt and Truman presidencies in the 1930s and 1940s caused the largest increase – a sixteenfold increase in the gross public debt from $16 billion in 1930 to $260 billion in 1950. When Roosevelt took office in 1933, the national debt was almost $20 billion; a sum equal to 20 percent of the U.S. gross domestic product (GDP). During its first term, the Roosevelt administration ran large annual deficits between 2 and 5 percent of GDP. By 1936, the national debt had increased to $33.7 billion or approximately 40 percent of GDP. Gross debt relative to GDP rose to over 100% of GDP to pay for the mobilization before and during World War II.

After World War II

The debt burden fell rapidly after the end of World War II, as the US and the rest of the world experienced a post-war economic expansion. However, growth rates in the western countries began to slow in the mid-1960's. Beginning in the mid-1970s and afterwards, U.S. government debt began to increase faster than GDP.

During the 1990s, debt held by the public had risen to nearly 50% of GDP in the early 1990s, but fell to 39% of GDP by the end of the decade. The public debt burden fell due in part to decreased millitary spending after Cold War, 1990, 1993 and 1997 budget deals, gridlock between White House and Congress, and increased tax revenue resulting from the Dot-com bubble. The budget controls instituted in the 1990s successfully restrained fiscal action by the Congress and the President and together with economic growth contributed to the budget surpluses that materialized by the end of the decade. These surpluses led to a decline in the debt held by the public, and from fiscal years 1998 through 2001, the debt-to-GDP measure declined from about 43 percent to about 33 percent.

Debt relative to GDP rose due to recessions and policy decisions in the early 21st century. From 2000 to 2008 debt held by the public rose from 35% to 40%, and to 62% by the end of fiscal year 2010. During the presidency of George W. Bush, the gross public debt increased from $5.7 trillion in January 2001 to $10.7 trillion by December 2008, due in part to the Bush tax cuts and increased military spending caused by the wars in the Middle East. Under President Barack Obama, the debt increased from $10.7 trillion in 2008 to $14.2 trillion by February 2011, caused mainly by decreased tax revenue due to the late-2000s recession.

A Washington Post article takes a different view, claiming that data showed that the biggest contributor to the disappearance of projected surpluses was increased spending, which accounted for 36.5 percent of the decline in the nation’s fiscal position, followed by incorrect CBO estimates, which accounted for 28 percent. The Bush tax cuts (along with some Obama tax cuts) were responsible for just 24 percent.

Changes in debt by political affiliation

The President proposes the budget for the government to the US Congress. Congress may change the budget, but it rarely appropriates more than what the President requests.

Economist Mike Kimel notes that the five former Democratic Presidents (Bill Clinton, Jimmy Carter, Lyndon B. Johnson, John F. Kennedy, and Harry S. Truman) all reduced public debt as a share of GDP, while the last four Republican Presidents (George W. Bush, George H. W. Bush, Ronald Reagan, and Gerald Ford) all oversaw an increase in the country’s indebtedness. Economic historian J. Bradford DeLong, former Clinton Treasury Department official, observes a contrast not so much between Republicans and Democrats, but between Democrats and "old-style Republicans (Eisenhower and Nixon)" on one hand (decreasing debt), and "new-style Republicans" on the other (increasing debt). David Stockman, director of the Office of Management and Budget under President Ronald Reagan, as op-ed contributor to the New York Times, blamed the "ideological tax-cutters" of the Reagan administration for the increase of national debt during the 1980s.

CNN's Jack Cafferty and CBS's Mark Knoller have noted that the US national debt in nominal dollars has increased more rapidly under President Obama than under any other U.S. president, and that it had increased by $4 trillion since the beginning of his term of office.

2011 credit rating downgrade

On August 5, 2011, after Congress 2011 U.S. debt-ceiling crisis of the United States federal government, the credit rating agency Standard & Poor's downgraded the credit rating of the United States federal government from AAA to AA+. It was the first time the US had been downgraded since it was originally given a AAA rating on its debt by Moody's in 1917. According to the BBC, Standard & Poor's had "lost confidence" in the ability of the United States government to make decisions.

Together with the budget deficit, the political climate at the time was one of the reasons given by Standard & Poor's to revise the outlook on the US sovereign credit rating down to negative on April 18, 2011. Standard and Poor's downgraded the credit rating by one notch from AAA to AA+ on August 5, 2011, for the first time ever. The long-term outlook is negative and it could lower the rating further to AA within the next 2 years. The downgrade was met with severe criticism from the Obama administration, commentators, and other political figures. The US still has a AAA rating from other ratings agencies.

Causes of recent changes in debt

Public debt is the cumulative result of budget deficits; that is, government spending exceeding revenues.

2001 vs. 2009

According to the CBO, the U.S. last had a surplus during fiscal year (FY) 2001. From FY2001 to FY2009, at the height of the Global Financial Crisis, spending increased by 6.5% of GDP (from 18.2% of GDP to 24.7%) while taxes declined by 4.7% of GDP (from 19.5% of GDP to 14.8%). Spending increases (expressed as % of GDP) were in the following areas: Medicare & Medicaid (1.7%), defense (1.6%), income security such as unemployment benefits and food stamps (1.4%), social security (0.6%) and all other categories (1.2%). Revenue reductions were individual income taxes (−3.3%), payroll taxes (−0.5%), corporate income taxes (−0.5%) and other (−0.4%).

The 2009 spending level is the highest relative to GDP in 40 years, while the tax receipts are the lowest relative to GDP in 40 years. The next highest spending year was 1985 (22.8%) while the next lowest tax year was 2004 (16.1%).

2001 vs. 2012

The U.S. budget situation has deteriorated significantly since 2001, when the CBO forecast average annual surpluses of approximately $850 billion from 2009–2012. The average deficit forecast in each of those years as of June 2009 was approximately $1,215 billion. The New York Times analyzed this roughly $2 trillion "swing," separating the causes into four major categories along with their share:

• Recessions or the business cycle (37%);
• Policies enacted by President Bush (33%);
• Policies enacted by President Bush and supported or extended by President Obama (20%); and
• New policies from President Obama (10%).

CBO data is based only on current law, so policy proposals that have yet to be made law are not included in their analysis. The article states that "President Obama’s agenda ... is responsible for only a sliver of the deficits", but that he "...does not have a realistic plan for reducing the deficit...." Presidents do not, acting alone, have constitutional authority to levy taxes or spend money; all such proposals must originate in Congress, but the President has a veto over new laws, and his priorities influence Congressional action.

Peter Orszag, the OMB Director under President Obama, stated in a November 2009 that of the $9 trillion in deficits forecast for the 2010–2019 period, $5 trillion are due to programs from the prior administration, including tax cuts from 2001 and 2003 and the unfunded Medicare Part D. Another $3.5 trillion are due to the financial crisis, including reductions in future tax revenues and additional spending for the social safety net such as unemployment benefits. The remainder are stimulus and bailout programs related to the crisis.

The Pew Center reported in April 2011 the cause of a $12.7 trillion shift in the debt situation, from a 2001 CBO forecast of a cumulative $2.3 trillion surplus by 2011 versus the estimated $10.4 trillion public debt we actually face in 2011. The major drivers were:

• Revenue declines due to the recession, separate from the Bush tax cuts of 2001 and 2003: 28%
• Defense spending increases: 15%
• Bush tax cuts of 2001 and 2003: 13%
• Increases in net interest: 11%
• Other non-defense spending: 10%
• Other tax cuts: 8%
• Obama Stimulus: 6%
• Medicare Part D: 2%
• Other reasons: 7%

2008 vs. 2009

In October 2009, the Congressional Budget Office (CBO) gave the reasons for the higher budget deficit in 2009 ($1,410 billion, i.e. $1.41 trillion) over that of 2008 ($460 billion). The major changes included: declines in tax receipt of $320 billion due to the effects of the recession and another $100 billion due to tax cuts in the stimulus bill (the American Recovery and Reinvestment Act or ARRA); $245 billion for the Troubled Asset Relief Program (TARP) and other bailout efforts; $100 billion in additional spending for ARRA; and another $185 billion due to increases in primary budget categories such as Medicare, Medicaid, unemployment insurance, Social Security, and Defense – including the war effort in Afghanistan and Iraq. This was the highest budget deficit relative to GDP (9.9%) since 1945. The national debt increased by $1.9 trillion during FY2009, versus the $1.0 trillion increase during 2008.

The Obama Administration also made four significant accounting changes to more accurately report the total spending by the federal government. The four changes were:

1. accounting for the wars in Iraq and Afghanistan (”overseas military contingencies”) in the budget rather than through the use of supplemental appropriations;
2. assuming the Alternative Minimum Tax will be indexed for inflation;
3. accounting for the full costs of Medicare reimbursements; and
4. anticipating the inevitable expenditures for natural disaster relief.

According to administration officials, these changes will make the debt over ten years look $2.7 trillion larger than it would otherwise appear.

Historical debt levels

Gross federal debt

This table lists the gross U.S. federal debt as a percentage of GDP by number Congress since World War II. The current gross federal debt as a percentage of GDP (83.4% at the end of 2009) is currently the highest it has been since the late 1940s. The debt briefly reached over 100% of GDP in the aftermath of World War II.

(Source: CBO Historical Budget Page and Whitehouse FY 2012 Budget - Table 7.1 Federal Debt at the End of Year PDF, Excel, Senate.gov)

Notes:

• For net jobs changes over the corresponding periods, see: Jobs created during U.S. presidential terms.

Publicly held debt

Publicly held debt is the gross debt minus intra-governmental obligations (such as the money that the government owes to the two Social Security Trust Funds, the Old-Age, Survivors, and Disability Insurance program, and the Social Security Disability Insurance program).

Federal spending, federal debt, and GDP

The table below shows the annual federal spending, gross federal debt, and gross domestic product specific fiscal years. The government fiscal year runs from October 1 (of the previous calendar year) to September 30, budgets are enacted before the November general elections.

Note: The values for the years 2009, and 2010 represent estimates from the source material.

See also

• United States federal budget
• Starve the beast (policy)

Notes

1. Federal Debt: Answers to Frequently Asked Questions, U.S. Government Accountability Office.
2. "Making dollars and sense of the U.S. government debt" (PDF). Retrieved Summer 18, 2010. {{cite web}}: Check date values in: |accessdate= (help)
3. The End of Growth, (September 2011) ISBN 978-0865716957
4. http://www.factcheck.org/2008/02/the-budget-and-deficit-under-clinton/
5. http://www.washingtonpost.com/blogs/fact-checker/post/fact-checking-the-nbc-florida-debate/2012/01/23/gIQAEJCiMQ_blog.html
6. http://www.washingtonpost.com/blogs/fact-checker/post/barbara-boxers-gross-rewriting-of-history/2011/06/30/AGFGVqsH_blog.html
7. Federal Debt: Answers to Frequently Asked Questions: An Upadate - U.S. Government Accountability Office
8. "CBO Historical Tables – 1970 to 2010" (PDF). Retrieved May 18, 2011.
9. United States Department of the Treasury, Bureau of the Public Debt (December 2010). "The debt to the penny and who holds it". TreasuryDirect. Retrieved March 2, 2011.
10. "Economic Downturn and Bush Policies Continue to Drive Large Projected Deficits". cbpp.org. Center on Budget and Policy Priorities. 2011-5-10. Retrieved 28 December 2011. {{cite web}}: Check date values in: |date= (help); Cite has empty unknown parameter: |1= (help); Unknown parameter |authors= ignored (help)
11. ^ Tritch, Teresa (2011-7-23). "How the Deficit Got This Big - NYTimes.com". The New York Times. New York: NYTC. ISSN 0362-4331. Retrieved 28 December 2011. {{cite news}}: Check date values in: |date= (help)
12. "Monthly Statement of the Public Debt of the United States- February 28, 2011" (PDF). Treasury Department. Retrieved May 18, 2011.
13. Krugman, Paul (2011-10-18). "Even More On The Origins of the Deficit". Conscience of a Liberal. Retrieved 28 December 2011.
14. Kassler, Glenn (2011-12-06). "My So Called Adulthood". Washington Post. Retrieved 2012-01-20.
15. Fisher, Louis (Nov. - Dec. 1990). "Federal Budget Doldrums: The Vacuum in Presidential Leadership". Public Administration Review. 50 (6): 693–700. doi:10.2307/976984. JSTOR 976984. {{cite journal}}: Check date values in: |date= (help)
16. Kimel, Mike (2007-12-04). "The Republican Party and the National Debt". angrybearblog.com. Retrieved 15 April 2011.
17. Brad DeLong (2009-11-20). "Comparing Debt-to-GDP Ratios with Presidential Terms". Seeking Alpha. Retrieved 2010-08-09. contrast between the Democrats and the old-style Republicans (Eisenhower and Nixon) on the one hand and the new-style Republicans on the other is quite striking.
18. Brad DeLong (2008-05-01). "Short-Term Costs of Long-Run Fiscal Stupidity - Grasping Reality with Both Hands". Delong.typepad.com. Retrieved 2010-08-09.
19. Stockman, David (2010-07-31). "Four Deformations of the Apocalypse". New York Times. nytimes.com. Retrieved 2010-08-09.
20. "National debt has increased $4 trillion under Obama". CBS News. 22 August 2011. Retrieved 25 August 2011.
21. "Tea Party effect on 2012 elections?". CNN. 23 August 2011. Retrieved 25 August 2011.
22. "S&P, in historical move, downgrades U.S. credit rating". Xinhua. August 6, 2011. Retrieved August 8, 2011.
23. "'No credible plan to cut US debt'". BBC. August 6, 2011. Retrieved August 8, 2011.
24. "U.S. credit outlook cut by S&P on deficit concerns". New York. Reuters. April 18, 2011. Retrieved April 18, 2011. "Because the U.S. has, relative to its AAA peers, what we consider to be very large budget deficits and rising government indebtedness, and the path to addressing these is not clear to us, we have revised our outlook on the long-term rating to negative from stable," S&P said in a release.
25. "U.S. Loses AAA Credit Rating as S&P Slams Debt, Politics". 08/05/2011. {{cite web}}: Check date values in: |date= (help)
26. "S&P cuts US debt rating to double A plus". August6, 2011. {{cite web}}: Check date values in: |date= (help)
27. Klein, Ezra (2011-02-24). "Five thoughts on the potential S&P downgrade". The Washington Post. Retrieved 2011-08-07.
28. "S&P and the USA". Krugman.blogs.nytimes.com. August 5, 2011. Retrieved 2011-08-07.
29. http://www.cbo.gov/ftpdocs/108xx/doc10871/HistoricalTables.pdf
30. Leonhardt, David (June 9, 2009). "NYT – Americas Sea of Red Ink Was Years in the Making". The New York Times. Retrieved May 18, 2011.
31. "Bruce Bartlett-Who Cares About the President's Budget? February 5, 2010". Forbes. February 5, 2010. Retrieved May 18, 2011.
32. "Charlie Rose Show-Peter Orszag Interview-November 3, 2009". Retrieved May 18, 2011.
33. "Pew Charitable Trusts-The Great Debt Shift-April 2011" (PDF). Retrieved May 18, 2011.
34. "CBO Monthly Budget Review-October 2009" (PDF). Retrieved May 18, 2011.
35. "Bureau of the Public Debt/Treasury Direct-Debt changes from September 30, 2008 to September 30, 2009". Treasurydirect.gov. Retrieved May 18, 2011.
36. Calmes, Jackie (February 20, 2009). "Obama Bans Gimmicks, and Deficit Will Rise". The New York Times. Retrieved May 26, 2010.
37. The gross federal debt includes intra-government debt, i.e. money owed by one branch of the federal government to another. When this amount is subtracted the remaining quantity is known as the public debt.
38. Budget FY2007
39. Frontline - Ten Trillion and Counting: Defining the Debt
40. Budget FY 2009
41. Budget FY2009. Addendum: Composite Deflator, page 26. Divide current dollars by this number to produce value in (constant) FY2000 dollars.
42. Budget FY2009. Outlays in current dollars, page 26.
43. Budget FY2009. Outlays in current dollars, page 26, divided by Inflation Adjustor.
44. Budget FY 2009. Gross Federal Debt in current dollars, page 127.
45. Budget FY 2009. Gross Federal Debt in current dollars, page 127, divided by Inflation Adjustor.
46. Budget FY2009. GDP (Gross Domestic Product) in current dollars, page 194.
47. Budget FY2009. GDP (Gross Domestic Product) in current dollars, page 194, divided by Inflation Adjustor.

References

• Budget of the United States Government, Fiscal Year 2007.
• Budget of the United States Government, Fiscal Year 2009.
• Budget of the United States Government, Fiscal Year 2012.

External links

• Another tabulation of Federal deficits (not debt) by Presidential term
• Another tabulation of Federal debt (not deficit) by Presidential term since 1976: per capita, per capita income, and as percentage of GDP
• Stephen Bloch. "U.S. Federal Deficits and Presidents". home.adelphi.edu. Retrieved 9 August 2010.
• Brad DeLong (2009-11-20). "Comparing Debt-to-GDP Ratios with Presidential Terms". Seeking Alpha. Retrieved 2010-08-09.
• Brad DeLong (2008-05-01). "Short-Term Costs of Long-Run Fiscal Stupidity - Grasping Reality with Both Hands". Delong.typepad.com. Retrieved 2010-08-09.
• Scott Willeke (2010-03-02). "United States Deficit & Debt During Presidents from 1969-2019". Blog.scott.willeke.com. Retrieved 2010-08-09.
• Steve Stoft. "U.S. National Debt Graph: What the Press Won't Tell You". Zfacts.com. Retrieved 2010-08-09.</ref>

• Economy of the United States
• United States public debt
• Government finances in the United States
• United States presidential administrations