US National Debt by Year – Tracing the Growth of U.S. National Debt: Key Factors and Historical Insights
Key Takeaways
- As of December 2022, the U.S. national debt exceeded $31.42 trillion.
- The debt-to-GDP ratio provides insight into the nation’s capacity to manage its debt.
- Economic downturns, increased defense budgets, and tax reductions have significantly raised the debt-to-GDP ratio to unprecedented levels.
- Defaulting on the national debt would have severe global economic repercussions.
The Growth of U.S. National Debt
By the end of 2022, the U.S. national debt had surged to a record $31.42 trillion. This increase has been driven by various factors over time, including recessions, defense expenditures, and other programs that have expanded the debt. The national debt has now surpassed the annual economic output of the United States, as measured by the gross domestic product (GDP).
Understanding the National Debt by Year
Contextualizing National Debt
Analyzing a country’s national debt is most meaningful when viewed in context. During recessions, expansionary fiscal policies—such as increased spending and tax cuts—are often employed to rejuvenate the economy. If these measures successfully stimulate growth, they can help mitigate the debt. A growing economy generates more tax revenue, which can then be used to repay the debt.
Supply-side economics posits that tax cuts can spur enough growth to offset the revenue lost from the cuts, particularly if the tax rate is above 50% of income. However, if tax rates are already low, further cuts can exacerbate the national debt without sufficiently boosting growth to make up for the lost revenue.
Impact of Major Events
Significant events, such as wars and pandemics, can lead to increases in national debt. During times of national threat, such as after the September 11, 2001 attacks, the U.S. escalated military spending, which contributed to the national debt. From fiscal years 2001 to 2020, the War on Terror alone cost approximately $6.4 trillion, including allocations to the Department of Defense and the Veterans Administration.
Debt-to-GDP Ratio
Comparing national debt to the size of the economy, as measured by GDP, provides the debt-to-GDP ratio. This ratio is crucial because it helps investors assess the risk of default. The World Bank suggests that a debt-to-GDP ratio exceeding 77% for an extended period can hinder economic growth, with each percentage point above this threshold reducing growth by 0.017 percentage points.
The debt-to-GDP ratio also allows for comparisons between countries, offering insights into a nation’s likelihood of repaying its debt.
Historical Debt, GDP, and Key Events
The following table illustrates the national debt, GDP, and significant events from 1929 onward. The figures are taken at the end of the fourth quarter (unless noted otherwise) to align with the fiscal year’s end, providing a clear picture of how annual spending influences the debt relative to economic growth.
From 1947 to 1976, both debt and GDP are reported at the end of the second quarter due to the fiscal year ending on June 30 during that period. For the years 1929 through 1946, debt is recorded at the end of the second quarter, while GDP is reported annually, as quarterly data was unavailable.
As of the second quarter of 2022, the national debt stood at approximately $30.6 trillion. With a second-quarter GDP of $24.9 trillion, the debt-to-GDP ratio was about 123%.
| END OF FISCAL YEAR | DEBT (IN BILLIONS, ROUNDED) | DEBT-TO-GDP RATIO | MAJOR EVENTS BY PRESIDENTIAL TERM |
|---|---|---|---|
| 1929 | $17 | 16% | Market crash |
| 1930 | $16 | 17% | Smoot-Hawley reduced trade |
| 1931 | $17 | 22% | Dust Bowl drought raged |
| 1932 | $20 | 34% | Hoover raised taxes |
| 1933 | $23 | 40% | New Deal increased GDP and debt |
| 1934 | $27 | 40% | |
| 1935 | $29 | 39% | Social Security |
| 1936 | $34 | 40% | Tax hikes renewed depression |
| 1937 | $36 | 39% | Third New Deal |
| 1938 | $37 | 42% | Dust Bowl ended |
| 1939 | $40 | 51% | Depression ended |
| 1940 | $43 | 49% | FDR increased spending and raised taxes |
| 1941 | $49 | 44% | U.S. entered WWII |
| 1942 | $72 | 48% | Defense tripled |
| 1943 | $137 | 70% | |
| 1944 | $201 | 91% | Bretton Woods |
| 1945 | $259 | 114% | WWII ended |
| 1946 | $269 | 119% | Truman’s 1st term budgets and recession |
| 1947 | $258 | 103% | Cold War |
| 1948 | $252 | 92% | Recession |
| 1949 | $253 | 93% | Recession |
| 1950 | $257 | 86% | Korean War boosted growth and debt |
| 1951 | $255 | 74% | |
| 1952 | $259 | 71% | |
| 1953 | $266 | 68% | Recession when war ended |
| 1954 | $271 | 69% | Eisenhower’s budgets and Recession |
| 1955 | $274 | 64% | |
| 1956 | $273 | 61% | |
| 1957 | $271 | 57% | Recession |
| 1958 | $276 | 58% | Eisenhower’s 2nd term and recession |
| 1959 | $285 | 55% | Fed raised rates |
| 1960 | $286 | 54% | Recession |
| 1961 | $289 | 52% | Bay of Pigs |
| 1962 | $298 | 50% | JFK budgets and Cuban missile crisis |
| 1963 | $306 | 48% | U.S. aids Vietnam, JFK killed |
| 1964 | $312 | 46% | LBJ’s budgets and war on poverty |
| 1965 | $317 | 43% | U.S. entered Vietnam War |
| 1966 | $320 | 40% | |
| 1967 | $326 | 40% | |
| 1968 | $348 | 39% | |
| 1969 | $354 | 36% | Nixon took office |
| 1970 | $371 | 35% | Recession |
| 1971 | $398 | 35% | Wage-price controls |
| 1972 | $427 | 34% | Stagflation |
| 1973 | $458 | 33% | Nixon ended gold standard and OPEC oil embargo |
| 1974 | $475 | 31% | Watergate and budget process created |
| 1975 | $533 | 32% | Vietnam War ended |
| 1976 | $620 | 33% | Stagflation |
| 1977 | $699 | 34% | Stagflation |
| 1978 | $772 | 33% | Carter budgets and recession |
| 1979 | $827 | 32% | |
| 1980 | $908 | 32% | Volcker raised fed rate to 20% |
| 1981 | $998 | 31% | Reagan tax cut |
| 1982 | $1,142 | 34% | Reagan increased spending |
| 1983 | $1,377 | 37% | Jobless rate 10.8% |
| 1984 | $1,572 | 38% | Increased defense spending |
| 1985 | $1,823 | 41% | |
| 1986 | $2,125 | 46% | Reagan lowered taxes |
| 1987 | $2,350 | 48% | Market crash |
| 1988 | $2,602 | 50% | Fed raised rates |
| 1989 | $2,857 | 51% | S&L Crisis |
| 1990 | $3,233 | 54% | First Iraq War |
| 1991 | $3,665 | 58% | Recession |
| 1992 | $4,065 | 61% | |
| 1993 | $4,411 | 63% | Omnibus Budget Act |
| 1994 | $4,693 | 64% | Clinton budgets |
| 1995 | $4,974 | 64% | |
| 1996 | $5,225 | 64% | Welfare reform |
| 1997 | $5,413 | 63% | |
| 1998 | $5,526 | 60% | LTCM crisis and recession |
| 1999 | $5,656 | 58% | Glass-Steagall repealed |
| 2000 | $5,674 | 55% | Budget surplus |
| 2001 | $5,807 | 55% | 9/11 attacks and EGTRRA |
| 2002 | $6,228 | 57% | War on Terror |
| 2003 | $6,783 | 59% | JGTRRA and Iraq War |
| 2004 | $7,379 | 60% | Iraq War |
| 2005 | $7,933 | 61% | Bankruptcy Act and Hurricane Katrina. |
| 2006 | $8,507 | 61% | Bernanke chaired Fed |
| 2007 | $9,008 | 62% | Bank crisis |
| 2008 | $10,025 | 68% | Bank bailout and QE |
| 2009 | $11,910 | 82% | Bailout cost $250B ARRA added $242B |
| 2010 | $13,562 | 90% | ARRA added $400B, payroll tax holiday ended, Obama Tax cuts, ACA, Simpson-Bowles |
| 2011 | $14,790 | 95% | Debt crisis, recession and tax cuts reduced revenue |
| 2012 | $16,066 | 99% | Fiscal cliff |
| 2013 | $16,738 | 99% | Sequester, government shutdown |
| 2014 | $17,824 | 101% | QE ended, debt ceiling crisis |
| 2015 | $18,151 | 100% | Oil prices fell |
| 2016 | $19,573 | 105% | Brexit |
| 2017 | $20,245 | 104% | Congress raised the debt ceiling |
| 2018 | $21,516 | 105% | Trump tax cuts |
| 2019 | $22,719 | 107% | Trade wars |
| 2020 | $27,748 | 129% | COVID-19 and 2020 recession |
| 2021 | $29,617 | 124% | COVID-19 and American Rescue Plan Act |
| 2022 | $30,824 | 123% | Inflation Reduction Act and student loan forgiveness |
Frequently Asked Questions (FAQs)
Who Owns the National Debt?
The largest portion of the national debt is held by the public, which includes individuals, corporations, Federal Reserve banks, state and local governments, and foreign governments. A smaller portion, known as “intragovernmental debt,” is held by other federal agencies.
How Is the National Debt Calculated?
The national debt encompasses all outstanding government liabilities owed to the public or intragovernmental agencies. This includes Treasury bills, notes, and bonds, as well as Treasury inflation-protected securities (TIPS) and government account series.
When Did the National Debt Start?
The United States has carried a national debt since its inception in 1776, borrowing funds to finance the American Revolution.
Understanding the dynamics of the national debt, its historical context, and its implications helps in grasping the broader economic challenges and policies shaping the country’s fiscal landscape.
