The story of US debt from 1790 to 2011 Part 3

Credit where Credit is Due.  We came across an outstanding article by Matt Phillips from 2012 that does a magnificent job of showing the history of US Debt from 1790 to today.

The complete article can be found here

http://qz.com/26062/one-chart-that-tells-the-story-of-us-debt-from-1790-to-2011/

The Depression

This is really the start of the very familiar political arguments about the role of government spending and economic growth. The chart above shows the relationship between debt and growth. As the size, scope and role of government changed drastically under Franklin D. Roosevelt and his New Deal, the US posted its biggest-ever peacetime debt increase. The debt jumped by 150% from 1930 to 1939, when it was at around $40.44 billion (about $673 billion in today’s money.) At the same time, the economy—the bottom of the formula—collapsed, as did government revenues, which suffered from lower economic activity. The result? A new debt-to-GDP record of 44% in 1934. And this was all before Pearl Harbor.

World War II

The debt-to-GDP ratio hit its all-time record of 113% by war’s end. Debt was at$241.86 billion in 1946, about $2.87 trillion in current dollars. Unlike after World War I, the US never really tried to pay down much of the debt it incurred during World War II. Still the debt shrank in significance as the US economy grew. It would take the debt-to-GDP ratio until 1962 just to get back to where the US was before the war. And with some fits and starts the debt load declined until hitting its recent low in 1974 at 24%, when the debt outstanding held by the public was$343.7 billion ($1.61 trillion, in current dollars.) 

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