US Public Debt, 1900-1980

"If this thing blows up, the Feds will be the least of our problems."
--Kid Twist (The Sting)

Last time we examined US Public Debt from 1790 till 1900. The turn of the 20th century brought big changes in debt policy by the Federal government.

We previously observed that the steady pay down in Civil War debt reversed itself in the last few years of the 19th century. This reversal corresponded to the nascent days of the Progressive era (President McKinley followed by Theodore Roosevelt). The uptrend continued in the early 1900s, although the magnitude is masked somewhat on the graph above due to the chart scaling.

World War I saw a massive increase in Public Debt. Then began the steady post war paydown process once again--the final time, in fact, that we'll observe post war debt extinguishment.

The Great Depression followed in the 1930s. FDRs New Deal policies required what was up until that time the largest non-war increase in public debt ever seen in the US. Public debt during this period increased from about $18 billion to just under $50 billion.

Then came World War II. Because we keep changing the y-axix scale on each successive chart to fit the magnitude of debt, the above graph does not do justice to the leap in debt as a result of the War. Public Debt jumped over five fold, from a prewar $50 billion to a postwar level of about $275 billion.

Unlike previous postwar periods, however, Public Debt did not subsequently decline. Instead, it marched higher in pretty much straight line fashion until around 1970. The 1970s were defined by a more geometric increase such that, but 1980, we were closing in on $1 trillion in Public Debt. This represents nearly 4 times the debt level coming out of WWII.

We see, then, that debt patterns during the early to mid 20th century period differed significantly from the first century of post ratification US history. Unlike the previous century where the dominant pattern was level or down, the 20th century Public Debt pattern was decisively up. Approximately $2 billion in debt in 1900 morphed into $908 billion in 1980. That's a 45,000% increase for those keeping score.

We can also conclude that the pattern of debt paydown following war time ended with World War II.

But it was peace time debt expansion, a pattern that began in earnest during the 1930s and went geometric by the 1970s, that really put Public Debt into hyper drive.

Were we to generalize about the two periods, we might attach a 'frugal' or 'thrifty' label to 19th century debt management policy by the Federal government, while the 20th century period examined thus far seems to merit an 'exorbitant' label.

This does have me wondering how we'll accurately label the debt management policies of the Federal government in our final period of study...

Next time we'll examine the most recent period encompassing the go-go 1980s till present day.