The History and Growth of the U.S. National Debt

Governments ideally balance deficits during economic downturns with surpluses during prosperous times. In practice, the U.S. federal government has consistently run deficits. This has contributed to the national debt reaching nearly $40 trillion. To understand this, let’s revisit significant financial milestones starting from 1962.

1960s

In the 1960s, most federal spending was discretionary. Entitlement spending like Social Security was relatively minor.

In 1966, Medicare and Medicaid began paying benefits, marking a shift towards increased entitlement spending.

1970s

Between 1973 and 1975, a recession caused the deficit to spike.

1980s

During the 1980s, defense buildup and lower tax rates contributed to higher deficits. This period saw significant discretionary spending.

1990s

In 1992, defense spending decreased after the Cold War ended. By 1998, the government achieved a surplus due to strong economic growth, high revenue, and spending restraint.

Early 2000s

Around 2002, a recession, tax cuts, and expenses from wars initiated after the September 11 attacks led to renewed deficits.

Great Recession Era

From 2009 to 2011, the Great Recession caused deficits to soar.

Mid-2010s

In 2015, as the economy recovered and discretionary spending was controlled, the deficit dropped to a recent low.

2020s

The COVID-19 pandemic, along with emergency stimulus spending, resulted in record deficits in 2020.

By 2026, deficits remain elevated due to increasing entitlement obligations and interest payments. The debt is projected to reach 101 percent of GDP by 2026.