From $71 million to $39 trillion—U.S. national debt’s 250-year climb

America’s national debt has always reflected the trajectory of the nation itself—one rising as the other, at least economically, wavers—but rarely has that story been as stark as it is today.

From a mere $71 million in the country’s early days to now more than $39 trillion on the eve of its semiquincentennial, the scale of U.S. borrowing has expanded exponentially and to a level almost beyond comprehension over two and a half centuries.

This 55,000-percent rise has been punctuated by wars, financial collapses and global shocks, before settling into periods of relative stability, only to climb again. And the history of U.S. debt displays a familiar pattern: spending in times of need and expansion, enabled by the country’s economic strength and its increasingly central position in the global financial system.

But as concern rises among lawmakers as well as the public, and more of Uncle Sam’s budget goes toward paying interest on a ballooning balance sheet, questions are mounting over how long this economic strength can postpone an economic crisis.

Early Years: The ‘Price of Liberty’

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’s arrears through the Funding Act of 1790.

The $71 million obligation—equivalent to around $2.6 billion today—came from borrowing to fund the Revolutionary War—primarily from France and Dutch lenders—as well as debts assumed by the government from individual states.

Hamilton famously called the newly formed country’s revolutionary debt “the price of liberty,” and said that a national debt, “if not excessive, will be to us a national blessing.”

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—the only time in its history that the country has been debt-free.

Soon after, borrowing resumed, and the long-run pattern that has since defined America’s fiscal history took hold.

Wars and Debt Jumps

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.

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’s entry into World War I in 1917 triggered another sharp increase.

A $10 billion jump— relatively modest by modern standards—came in the five years after the Wall Street crash of 1929, but the next big catalyst again proved to be America’s 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.

The period immediately after the war also became the first time debt surpassed 100 percent of the nation’s gross domestic product (GDP)—a mark achieved only twice more—with the ratio peaking at around 119 percent in 1946.

Into the Trillions

According to the Treasury, debt growth after World War II closely matched the rate of inflation and fell as a percentage of GDP until the 1980s thanks to “strong economic growth during most of the period.”

But America’s 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’s finances.

“One trillion dollars of debt,” the president said in a televised address. “If we as a nation needed a warning, let that be it.”

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’s presidency would usher in an age of fiscal discipline, the debt had nearly tripled by the time he left office in January 1989.

Thanks in part to the federal budget being balanced in the late 1990s—a success variously credited to President Bill Clinton and House Speaker Newt Gingrich—debt growth slowed notably during this period but again rose following 9/11 and the ensuing Middle East “forever wars.”

The prolonged military campaigns in Iraq and Afghanistan were primarily financed through deficit spending—directly contributing to the national debt—as the dot-com crash took some wind out of the sails of the U.S. economy.

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—a milestone that marked the start of a much faster era for debt growth.

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.

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.

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.

And at its current pace, the country is on track to owe $40 trillion by September of this year.

How Does U.S. Debt Compare to Other Nations?

America’s $39 trillion debt far outsizes any other nation, the next closest being China at an estimated $19 trillion.

Its unique advantages—the dollar’s status as the world’s main reserve currency and the perception of U.S. treasuries as among the safest assets in global finance—mean it can borrow more for longer without facing immediate pressures.

But relative to the size and might of its economy, the U.S. has a smaller outstanding balance than many of its industrialized peers.

The country’s 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.

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.

How Much of a Problem Is America’s $39 Trillion National Debt?

The national debt has long been a bugbear of the fiscally hawkish on Capitol Hill, with Republican lawmakers over the years railing against the “irresponsible” spending of successive administrations and warning that it has put America on an unsustainable economic path.

“We continue to hit new record highs for our national debt, exacerbating an already economic threat our nation faces,” Arizona Republican Representative David Schweikert, U.S. Congress Joint Economic Committee, said in February.

But economists are split on whether—or by how much—the amount owed by the U.S. could derail the economy.

“There is of course no particular significance, economic or otherwise, in any particular figure,” Jonathan Portes, professor of economics and public policy at King’s College London, told Newsweek. “Notably, Japan’s 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’s most serious economic problem for that period.”

However, Portes said that while not yet “unsustainable,” the growth in debt relative to GDP will at some point “provoke a crisis.”

“We 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,” he said.

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: “The $39 trillion in national debt is an economic burden because it must be serviced.”

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.

“So, current taxpayers are required to pay through the nose for debts incurred before many of them were old enough to vote,” he told Newsweek.

And economist Doug Elmendorf, a professor of public policy at Harvard University’s Kennedy School, likewise warned that this was pushing up interest rates on all kinds of borrowing, from mortgages to car loans.

Elmendorf believes this could in the future trigger a “fiscal crisis,” at which point “interest rates would spike upward.”

However, he told Newsweek that this does not appear imminent, given interest rates on federal borrowing are similar to 2007 and that demand for federal debt “has apparently increased as much as supply.”

“Will that continue indefinitely given current policies? No,” he said. “When will it stop continuing? Economists don’t know.”