6 Important Historical Moments in Our Nation's Debt
Here are some of the important moments affecting the nation's debt.
Sept. 6, 2012 — -- intro:
How the US reached $16 trillion in debt is a question for both political pundits and economists, but the answer may also be found in the history books.
On Tuesday, the Treasury Department said the national debt has passed the $16 trillion mark for the first time. That's more than $50,000 for every man, woman and child in the US.
Rep. Kevin Brady, R-Texas, vice chairman of the Joint Economic Committee and member of the House Committee on Ways and Means blamed the staggering amount, $16,015,769,788,215.80, to be exact, on President Obama.
"During less than four years under President Obama's leadership, the national debt has increased an astonishing $5.4 trillion," Brady said in a statement. "And yet the president persists in pushing his agenda of more spending and higher taxes on job creators that is crippling our economy."
"Under President Obama's stewardship, the national debt has grown by more than $4 billion per day, $170 million per hour, $2.8 million per minute and more than $47,000 per second," he said.
But the national debt didn't just happen in the past three years, and President Obama's supporters point out that he inherited much the increase in the debt.
"The fact of the matter is," Obama said earlier this year, "is that when we came into office, the deficit was $1.3 trillion -- $1.3 trillion. So when you say that suddenly I've got a monthly deficit that's higher than the annual deficit left by Republicans, that's factually just not true, and you know it's not true. And what is true is that we came in already with a $1.3 trillion deficit before I had passed any law. What is true is, we came in with $8 trillion worth of debt over the next decade."
Obama points out that he inherited an economy on the brink of collapse that needed more than $1 trillion in stimulus, two wars that were simply added to the national debt, a prescription drug program for seniors that wasn't paid for and the Bush-era tax cuts that were not matched by cuts in spending -- in other words, not paid for.
But debt has been carried by the US every year since 1790, according to the US Treasury Department. It didn't top $1 trillion until 1982. The growth since then has been breathtaking.
Here are six significant moments that have affected the national debt.
quicklist:category: 1917; War Spending title: Congress Places First Statutory Limit On Debtmedia: text:
Congress first placed a statutory limit on the national debt through the Second Liberty Bond Act in 1917, which helped pay for expenses related to World War I by allowing the Treasury to issue long-term "Liberty Bonds."
Later, spending on World War II helped the U.S. economy out of the Great Depression in the 1940s but also led the nation's debt to balloon to 108.6 percent of U.S. GDP in 1946, according to the Heritage Foundation. (By comparison the debt now stands at 104 percent of gross GDP, according to USdebtclock.org.
Decades passed and technology advanced, to the point where in 1961, President Dwight D. Eisenhower gave a speech warning against a military-industrial complex.
Today, defense expenditures totaled 20 percent of total federal spending in 2011, according to the CBO.
Alison Fraser, the conservative Heritage Foundation's director of economic policy studies, said it's misconception that defense today is at an all-time high in the U.S, saying it has decreased as a share of the economy first intentionally under President Clinton.
"That has created some real challenges for the Defense Department and branches of the military services engaged in conflict at the same time they are trying to modernize their technology," Fraser said.
quicklist:category: 1965title: Medicare and Medicaid Established media: 16782745text:
President Johnson signed H.R. 6675 to establish Medicare for the elderly and Medicaid for the poor.
Ron Haskins, senior fellow with the Brookings Center and former senior advisor to President George W. Bush for Welfare Policy, said this was the "single most important time" that contributed to the nation's growing debt.
With a 92-year-old mother, Haskins said he is not opposed to those programs but Congress did not account for two factors that would lead to the ballooning expense, which was $560 billion and $275 billion in 2011 for Medicare and Medicaid, respectively, according to the Congressional Budget Office.
But Haskins said Congress failed to properly project for both demographic changes, such as the Baby Boomer generation, and technological advances in health care.
Other entitlement programs like Social Security, first enacted in 1935, and the Children's Health Insurance Program, created in 1997 under President Clinton, would contribute to the nation's soaring debt.
By the way, USdebt.org reckons that the US has $120 trillion in unfunded liabilities from Medicare, Social Security and the prescription drug program, none of which is reflected in the current deficit.
quicklist:category: 1981title: Increase in Federal Debt Ceiling Past $1 Trillion media: 17163563text:
On Sept. 30, 1981, President Reagan, with budget director David Stockman, signed legislation raising the government's borrowing authority above $1 trillion for the first time, one day before the 1982 fiscal year began.
Haskins said Reagan's administration affected the national debt because the taxes cut at the time led to large deficits in the early 1980s.
"We learned to live with a new level of the deficit," Haskins said.
Reagan's supporters counter that the tax cuts he engineered led to a new era of prosperity, creating millions of jobs, pushing stocks higher and adding billions in new tax revenue.
quicklist:category: 2001, 2003title: Bush Tax Cutsmedia: 16985330text:
Haskins said cutting revenues through President George W. Bush's tax cuts while increasing spending did little to help the nation's debt.
Haskins said the $400 billion Medicare reform legislation for prescription drug benefits, the Medicare Prescription Drug Modernization Act, was another significant event that affected the nation's debt.
The Bush tax cuts expire at the end of this year. Economists estimate that the Bush-era tax cuts reducing revenues by $1.8 trillion between 2002 and 2009.
quicklist:category: 2007 title: Financial Crisis Leads to Stimulus, $832 Billion T.A.R.P.media: 17163675text:
The recession which began in Dec. 2007 was a significant turning point that dramatically led to lower tax revenue and increased spending.
"Most economists think that both the stimulus and TARP were necessary, and especially TARP was effective," Haskins said. "As a result of all that and combined with tax cuts passed during Bush administration – and the stalemate on tax increases, taxes are historically low."
The government has recouped much of what it spent on the Troubled Asset Relief Program, even making a $17.7 billion profit from the AIG bailout, which the Federal Reserve announced last month.
quicklist:category: Aug. 2, 2011title: President Raises Debt Limit, Averting Defaultmedia: 17165281text:
On Aug. 2, 2011, President Obama signed into law a deal that increased the $14.3 trillion legal debt limit, ending a months-long stalemate between the White House and Congress.
"The uncertainty surrounding the raising of the debt ceiling for both businesses and consumers has been unsettling, and just one more impediment to the full recovery that we need, and it was something we could have avoided entirely," President Obama said in a statement at the time.
Related Stories
ABC News Live