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Early Years: The \u2018Price of Liberty\u2019<\/p>\n
According to historical data from the U.S. Treasury, America first recorded a national debt in the late 18th century, when the first Treasury secretary, Alexander Hamilton, consolidated the nation\u2019s arrears through the Funding Act of 1790.<\/p>\n
The $71 million obligation\u2014equivalent to around $2.6 billion today\u2014came from borrowing to fund the Revolutionary War\u2014primarily from France and Dutch lenders\u2014as well as debts assumed by the government from individual states.<\/p>\n
Hamilton famously called the newly formed country’s revolutionary debt “the price of liberty,\u201d and said that a national debt, \u201cif not excessive, will be to us a national blessing.\u201d<\/p>\n
The next milestone came in 1835, when President Andrew Jackson, believing that indebtedness was a fundamental threat to freedom, pushed for the national debt to be paid down to zero\u2014the only time in its history that the country has been debt-free.<\/p>\n
Soon after, borrowing resumed, and the long-run pattern that has since defined America’s fiscal history took hold.<\/p>\n<\/p>\n
Wars and Debt Jumps<\/p>\n
The American Civil War transformed federal finance, with the national debt surpassing $1 billion in 1863 and reaching close to $3 billion by the time it ended in April 1865, having stood at only around $65 million in 1860.<\/p>\n
By the turn into the 20th century, the national debt remained in the low billions, but following the familiar trend of past and future waves, America\u2019s entry into World War I<\/a> in 1917 triggered another sharp increase.<\/p>\n A $10 billion jump\u2014 relatively modest by modern standards\u2014came in the five years after the Wall Street crash of 1929, but the next big catalyst again proved to be America\u2019s involvement in a global conflict. Explosive growth driven by immense World War II spending pushed the national debt from $43 billion in 1940 to more than $250 billion by 1945.<\/p>\n The period immediately after the war also became the first time debt surpassed 100 percent of the nation’s gross domestic product (GDP)\u2014a mark achieved only twice more<\/a>\u2014with the ratio peaking at around 119 percent in 1946.<\/p>\n Into the Trillions<\/p>\n According to the Treasury, debt growth after World War II<\/a> closely matched the rate of inflation and fell as a percentage of GDP until the 1980s thanks to \u201cstrong economic growth during most of the period.\u201d<\/p>\n But America\u2019s outstanding balance continued to tick up over the decades and first crossed the trillion-dollar mark in 1981 under President Ronald Reagan, who said it served as a wake-up call for those overseeing the nation\u2019s finances.<\/p>\n “One trillion dollars of debt,” the president said in a televised address. “If we as a nation needed a warning, let that be it.”<\/p>\n While it took the U.S. nearly 200 years to reach $1 trillion, it doubled the figure in only three years. And despite expectations that Reagan\u2019s presidency would usher in an age of fiscal discipline, the debt had nearly tripled by the time he left office in January 1989.<\/p>\n Thanks in part to the federal budget being balanced in the late 1990s\u2014a success variously credited to President Bill Clinton and House Speaker Newt Gingrich\u2014debt growth slowed notably during this period but again rose following 9\/11 and the ensuing Middle East \u201cforever wars.\u201d<\/p>\n<\/p>\n The prolonged military campaigns in Iraq<\/a> and Afghanistan<\/a> were primarily financed through deficit spending\u2014directly contributing to the national debt\u2014as the dot-com crash took some wind out of the sails of the U.S. economy<\/a>.<\/p>\n When the financial crisis hit in 2008, collapsing tax revenues and emergency spending accelerated that trend, pushing debt past $10 trillion for the first time\u2014a milestone that marked the start of a much faster era for debt growth.<\/p>\n The next 18 years saw Democrat and Republican presidents run large deficits, turning what were previously episodic debt spikes into a more continuous, structural trend.<\/p>\n The COVID-19 pandemic marked the most dramatic jump, adding a record $4.2 trillion in 2020 as emergency spending was used to prop up a collapsing economy.<\/p>\n It took America nearly two centuries to reach $1 trillion, only three decades to hit $10 trillion and just 14 years more for the national debt to swell to $30 trillion.<\/p>\n And at its current pace, the country is on track to owe $40 trillion by September of this year.<\/p>\n How Does U.S. Debt Compare to Other Nations?<\/p>\n America\u2019s $39 trillion debt far outsizes any other nation, the next closest being China at an estimated $19 trillion.<\/p>\n Its unique advantages\u2014the dollar\u2019s status as the world\u2019s main reserve currency and the perception of U.S. treasuries as among the safest assets in global finance\u2014mean it can borrow more for longer without facing immediate pressures.<\/p>\n But relative to the size and might of its economy, the U.S. has a smaller outstanding balance than many of its industrialized peers.<\/p>\n<\/p>\n The country\u2019s national debt is currently around 126 percent of its GDP, according to the International Monetary Fund. The global financial institution forecasts that U.S. GDP will reach $32.4 trillion this year, up from around $31 trillion in 2025.<\/p>\n Among advanced economies, this puts the U.S. behind Italy (138 percent) and Japan (204 percent), and on par with the United Kingdom, Canada and China.<\/p>\n How Much of a Problem Is America\u2019s $39 Trillion National Debt?<\/p>\n The national debt has long been a bugbear of the fiscally hawkish on Capitol Hill, with Republican lawmakers over the years railing against the \u201cirresponsible\u201d spending of successive administrations and warning that it has put America on an unsustainable economic path.<\/p>\n \u201cWe continue to hit new record highs for our national debt, exacerbating an already economic threat our nation faces,\u201d Arizona Republican Representative David Schweikert, U.S. Congress Joint Economic Committee, said in February<\/a>.<\/p>\n But economists are split on whether\u2014or by how much\u2014the amount owed by the U.S. could derail the economy.<\/p>\n \u201cThere is of course no particular significance, economic or otherwise, in any particular figure,\u201d Jonathan Portes, professor of economics and public policy at King\u2019s College London, told Newsweek. \u201cNotably, Japan\u2019s national debt, in relation to the size of its economy, has been more than twice that of the U.S. for decades, and this has not proved unsustainable, not provoked a crisis, nor even been Japan\u2019s most serious economic problem for that period.\u201d<\/p>\n However, Portes said that while not yet \u201cunsustainable,\u201d the growth in debt relative to GDP will at some point \u201cprovoke a crisis.\u201d<\/p>\n \u201cWe are likely to be quite a way away from that point, but crises of confidence are of their nature unpredictable, so it is impossible to say just how far,\u201d he said.<\/p>\n Steve Hanke, a professor of applied economics at Johns Hopkins University and a member of the Board of Directors at the Federal Fiscal Sustainability Foundation, said: \u201cThe $39 trillion in national debt is an economic burden because it must be serviced.\u201d <\/p>\n Hanke, who served on Reagan’s Council of Economic Advisers, noted that around one-fifth of federal taxes currently go toward paying interest on the debt.<\/p>\n \u201cSo, current taxpayers are required to pay through the nose for debts incurred before many of them were old enough to vote,\u201d he told Newsweek.<\/p>\n![\"The](\"https:\/\/www.newsbeep.com\/us\/wp-content\/uploads\/2026\/07\/GettyImages-1383552338.jpg\"\/)
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