The national debt is money owed by the federal government. It is
indirectly considered a debt of the citizens, since citizens must ultimately pay it off.
It consists of government bonds, bank
loans, and according to some measures, unfunded
liabilities such as pension plan payments and goods
and services the government has contracted for but not
yet paid.
Historically, for the first 130 years of our nation we
possessed little to virtually no debt. The debt began
to rise in 1918 as a result of US involvement in
World War I, though the debt decreased in
the years that followed. Following the depression, the
debt began an upward slope, due in part to Roosevelt's
"New Deal." Beginning in 1942, the debt tripled in
just three years as a result of World War II, and at
the end of the war, it dropped.
The national debt increased somewhat during Vietnam, but only really took off during the Reagan-Bush years.
Reagan's rapidly spiraling debt was continued through
Bush Sr.'s Administration, rising to over 5 trillion
dollars. President Clinton managed to turn the debt growth around by eliminating deficit spending,
and actually reduced the debt slightly. President G.W. Bush then created the greatest deficits
in history, and has escalated the debt to well over 7 trillion Dollars.
Our first chart shows the total amount of the debt since WWII, with each presidency marked.
The right way to look at the national debt is to compare how big it is relative to GDP (Gross Domestic Product).
That's the equivalent of comparing your personal debt to your annual income -- with a high annual income, you can supoprt a larger personal debt.
If your annual income increases, say, at 2% per year, and your personal debt only increases by that same rate, you're pretty much staying at the same level of debt, even though the total dollar amount of debt increase.
Our second chart shows the national debt since WWII as a percentage of GDP.
That measurement scale means that the 100% line is where, if every person working in America were to devote all of their resources to paying off the national debt, it would take one full year to do it (with no money going to the workers or to anything else).
The national debt is currently about 67% of GDP, so if every American dedicated their entire salary to paying it off, it wuold take 8 months (67% of a year).
The national debt peaked at 120% of GDP in 1946 due
to the war effort, but Roosevelt, Truman, Ike,
Kennedy, LBJ, Nixon and Carter all did their part to
bring the national debt back to pre-war levels. By
the beginning of 1981, the national debt had fallen to
32.5% of GDP.
To put that in personal terms, for a person with the average US income of $38,000, that's the equivalent of about $12,000 of personal debt -- sizable but not unimaginable.
Then, Reagan took office and the
national debt took off. It rose non-stop for 12 years
to 66.3% at the end of Bush's term, erasing 25 years
of progress in paying down the national debt.
To put that size debt in the same personal terms, that same average American earning $38,000 would have an equivalent personal debt of just over $25,000.
Clinton turned around the debt growth in just three years and
then reduced the debt from 67% to 57% in his last five
years, resulting in the well-known and large budget surplus prominent in the 2000 election.
Bush wasted no time in reversing this trend (primarily via his large tax cut)
and is now forecasting that he will achieve the
highest ratio of debt to GDP in 50 years, if re-elected. The current projections top 70% for next year's budget.
