THE BEGINNING OF U.S. DEBT

U.S. Treasury

Even before the United States was founded in 1776 debt existed. Paying for the American Revolutionary War (1775 - 1783) was the start of the country's debt. Some of the founding fathers formed a group and borrowed money from France and the Netherlands to pay for the war.

To manage the new country's money, the Department of Finance was created in 1781. The next year, Government debt was reported to the public for the first time.

The U.S. debt in 1783 totaled $43 million. That year, Congress was given the power to raise taxes to cover the Government's costs. However, the taxes did not bring in enough money. The debt continued to grow as the Government grew and provided more services to the people.

The U.S. Treasury Department was created in 1789 to help the country borrow money and manage the debt. Alexander Hamilton was the first Secretary of the Treasury and one of the country's founding fathers. He felt getting into a reasonable amount of debt would help the country get its feet on the ground.

He said, "A national debt, if it is not excessive, will be to us a national blessing." By 1791, he estimated the federal government's debt to be $77.1 million. To help raise money, federal bonds were issued by the Government.

History at a Glance

The 1990s and 2000s

At the beginning of the 1990s, the U.S. economy was still fairly strong. Continued growth in the stock market helped increase the amount of money some people had to spend. It also increased the amount of taxes the Government collected. However, the debt continued to grow.

Starting in 1998, the Government worked to balance its budget. That means it spent no more money than it collected from taxes and other fees. For a short time the amount of debt did not increase a great deal.

But after 2000, changes in Government spending caused the debt to grow again. After the September 11, 2001 terrorist attacks the economy stalled and for a brief time tax receipts slowed. The debt continued to increase due to spending on homeland security, the Iraq war, and programs such as Medicare.

Toward the end of 2007, the U.S., along with many other countries around the world, was in a recession or general slowdown in the economy. To try to encourage the economy to grow again, the Government created and paid for many new programs. It also gave back some of the taxes people had paid. The goal was to get people to spend more money to help the economy grow. The cost of these programs caused the Government’s debt to increase. By 2010, the debt had reached more than $12 trillion.

The United States currently has a public debt in excess of $18 trillion.

History at a Glance

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