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The National Debt

February 2, 2017

First of all, we must distinguish between the Federal deficit and the national debt.  The deficit is money the U.S. government borrows in any given year.  The debt is the accumulation of all these borrowings.

The national debt was just under $65 million in 1860.  Then the Civil War happened, and the debt peaked at almost $2.8 billion in 1866.  To U.S. citizens in the 21st century who are burdened with trillion dollar deficits and who rightly complain that the debt has doubled in the last eight years, figures such as $65 million and $2.8 billion may seem relatively insignificant, but they are not.  The national debt did not double or triple or even quadruple between 1860 and 1866.  It was multiplied 43 times!

Ulysses S. Grant, the top General for the victorious Union Army, was inaugurated President on March 4, 1869.  The previous Administration had gotten the debt down to $2.6 billion, but Grant did not think that was good enough.  By the end of May 1869 the debt was reduced another $12 million, and during Grant’s eight years as President the national debt was reduced by 14%.  Most historians do not appreciate the magnitude of this accomplishment.  Some don’t even mention it.

The last time the national debt shrank was 1957.  Even though 1956 was also a debt lowering year, the debt did not shrink overall during Eisenhower’s two terms.

1947, 1948, and 1951 were debt shrinking years, but Truman did not shrink the debt overall during almost two terms as President.

The last President to reduce the national debt overall was Calvin Coolidge.  From 1923 through 1928 he reduced the national debt by 24%.  Every year of his Presidency the national debt was lowered.  For this accomplishment Coolidge sometimes receives faint praise.  Usually none.

Now, what about those few years during the Clinton Administration when there were budget surpluses?  Didn’t those surpluses reduce the national debt?  The short answer is no, and the long answer reveals the tricks of government accounting.

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