All You Need to Know About National Debt

What is the National Debt?

The United States national debt is a measure of the total obligations or amount owed by the United States Federal Government versus the amount of securities held. The National Debt is tabulated by the United States Treasury in two distinct components:

National Debt by the Public: This figure represents all federal securities held by institutions or individuals outside of the United States Federal Government.Intragovernmental Holdings: This figure represents all United States Treasury Securities held in accounts which are formally administered by the Untied States Government, such as the OASI Trust fund, which is administered by the Social Security Administration.

These two subcomponents, when combined, yield the National Debt figure. As of May, 2011, the Total National Debt owed by the United States Federal Government was approximately $14.3 trillion dollars. The National Debt is not to be confused with the trade deficit, which is the difference between the country’s net imports and net exports. Furthermore, all state and local government securities, issued by local governments, are not part of the National Debt.

The annual National Debt refers to the cash difference between all government receipts and spending of the United States Federal Government. The National Debt therefore increases or decreases as a result of the unified budget deficit or surplus. That being said, there is certain spending efforts that add to the gross debt but are excluded from the deficit.

Throughout history the National Debt has fluctuated greatly. Currently the debt is the highest it’s ever been; the United States is spending billions per month on defense and has their wars financed through interest loans from China. In decades prior, the United States operated with a budget surplus, meaning the nation was not indebted to other countries.

History of the National Debt

The United States, since its inception, has possessed a public debt. The National Debt first incurred during the American Revolutionary War and under the Articles of Confederation, the first National Debt was estimated at over $75 million dollars. Over the next 20 years, there were 14 surpluses to only two deficits. Following this time of prosperity, the United States Federal Government experienced another blow to the National Debt when financing for the War of 1812 exceeded the nation’s security holdings.

The second dramatic growth spurt of the National Debt occurred as a result of the Civil War—the National Debt ballooned from $65 million in 1860 to over $2.7 billion following the war. IN the following 50 years, however, the United States returned to the practice of running surpluses during times of peace. During this juncture, over 55% of the nation’s national debt was paid off.

The next period of major growth in the National Debt came during World War II—after the war the National Debt rose to over $25.5 billion. Similar to the previous cycles, the end of World War II was met with 11 straight surpluses. The buildup and involvement in World War II plus various social programs during the Roosevelt and Truman Administration caused a sixteen-fold increase in the gross public debt from $16 billion in 1930 to $260 billion in 1950.

Following the World War II period, the growth of the National debt mirrored the rate of inflation, where it tripled in size from $260 billion in 1950 to roughly $1 trillion in 1980. Following this era, the national public debt rose and fell between 1992 and 2000 and then increased under George W. Bush to $10.7 trillion by December of 2008. Under President Barack Obama, the debt increased from $10.7 trillion to $14.2 trillion by February 2011.