Economics of History Activity: The National Debt

Since the beginning of the United States, the country has always had a national debt. The national debt means the total amount of money owed by the United States to others. The debt grows when the nation runs a budget deficit—that is, when the nation spends more money than it receives in revenue. Deficits often happen when there is an unusual event, such as a war or an economic downturn. When the nation’s revenue is greater than its spending, the nation has a surplus. Not counting periods of war or economic upheaval, the federal budget showed a budget surplus for much of the nation’s first 200 years. In recent times, deficits have been common.

The Civil War and the Spanish-American War produced budget deficits and contributed to a growing national debt. However, the country paid this debt off by the early twentieth century. The Great Depression and World War II produced large expenditures that caused the federal debt to grow again. The amount of the national debt has continued to grow ever since.