The United States began its history indebted, owing more than $75 million by 1791 after the Revolutionary War and the process of setting up the new country. This debt came from running fiscal deficits to fund the war and birth of the country. The Continental Congress during the war lacked the power to raise money through taxation.

A History of Budget Deficits

In September 1789, Alexander Hamilton, then-Secretary of the Treasury, negotiated terms with the Bank of New York and the Bank of North America to borrow $19,608.81 to address shortfalls within the 澳洲幸运5官方开奖结果体彩网:U.S. budget.

Hamilton was a strong proponent of a large, powerful federal government, unlike his rival, Thomas Jefferson. He believed that running budget deficits and government borrowing could help the young country establish itself as long as it wasn't excessive. Hamilton put through a plan to issue 澳洲幸运5官方开奖结果体彩网:government bonds backed by revenue from tariffs and other taxes. Hamilton's plan was based on the bonds issued by the Bank of England after its founding in 1694, which allowed Britain to raise more money than the French during their conflicts.

The American government felt empowered to borrow from that point forward, and after the War of 1812, the total government debt exceeded $119 million.

When the Debt Was Actually Paid Off

Andrew Jackson, the seventh president of the U.S., felt that running deficits was immoral and carrying debt weakened the nation. By 1835, less than six years after assuming office, Jackson paid off the entire national debt by curtailing government spending and selling off federal lands. This is the only time in U.S history that the country's total debt was completely paid off.

The Great Depression and Financing Wars

Before 1930, nearly all of the budget deficits run by the American government were the result of wars. The Civil War created huge current account deficits that left the nation owing $2.6 billion after 1865. The nature of debts changed after the Great Depression and the rise of 澳洲幸运5官方开奖结果体彩网:Keynesian economics.

The extent to which British economist John Maynard Keynes influenced government spending in the 20th century can hardly be overstated. While both the Hoover and Roosevelt administrations extended public works projects and experimented with fiscal deficits in the face of the Great Depression, it was Keynes who provided the macroeconomic justification for running large budget deficits to stimulate aggregate demand and fight recessions.

The U.S. ran severe budget deficits during the 澳洲幸运5官方开奖结果体彩网:Great Depression and World War II. During the 1940s, spending on the war effort created the largest deficits as a percentage of total gross domestic product, or GDP, in American history. A more restrained spending policy took place during the 1950s and more or less continued until the outset of the Vietnam War and Lyndon Johnson's Great Society.

Modern Deficit Spending

Since 1970, the federal government has run deficits during every fiscal yea🌄r for all but four years, from 1998 to 2001. Political analyst❀s and economists debate the effect of these cumulative budget shortfalls, but their origins are much less controversial.

The federal deficit truly started to grow during the financial crisis of 2007 to 2008 as the government bailed out banks and other companies, and engaged in 澳洲幸运5官方开奖结果体彩网:quantitative easing. In 2009, the deficit started to shrink, almost reaching 2007 levels, before increa🐷sing✤ again in 2016.

The federal deficit took a hit again during the COVID-19 pandemic with the numerous government aid packages, which resulted in the highest levels of the federal deficit. Since its record high in 2020, the deficit has started to shrink in 2021 and 2022 despite remaining historically high. In 2023, it once again grew relative to the previous year. The deficit remains historically high, which has been a contentious point for policymakers. A quick look at data shows just how large current deficits are relative to previous levels.

The Bottom Line

Ever since the time of Alexander Hamilton, the U.S. government has turned to deficit spending as a means of financing wars, growing federal influence, and providing public services without having to raise taxes or cut existing programs. The country's debt has significantly ballooned since 2015, and has continued to grow larger each year, exceeding $35 trillion in 2024. Though the deficit has shrunk since then, it still remains historically large.