US National Debt by Year Compared to GDP and Major Events

Why the U.S. Debt Has Risen Dramatically Since 1929

The Treasury Building during The National Cherry Blossom Festival, Washington DC, USA
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The U.S. national debt hit a new high of more than $27 trillion in October 2020. That's greater than the annual economic output of the entire country.

Throughout the years, recessions have increased the debt because they have lowered tax revenue. At the same time, Congress has spent more to stimulate the economy. Military spending has also been a big contributor, as has spending on benefits such as Medicare. In 2020, spending to offset the effects of the COVID-19 pandemic also added to the debt.

Although investors aren't currently worried about a U.S. debt default, that could change once the pandemic ends. In that case, ways to reduce the debt, such as raising taxes or cutting spending, will need to be considered.

Key Takeaways

  • The U.S. national debt hit a new high of $27 trillion in October 2020.
  • The debt-to-GDP ratio gives insight into whether the U.S. has the ability to cover all of its debt.
  • A combination of recessions, defense budget growth, and tax cuts has raised the national debt-to-GDP ratio to record levels.
  • The U.S. cannot afford to default on its debt without major global economic consequences.

How to Look at Debt by Year

It's best to look at a country's national debt in context. During a recession, expansionary fiscal policy, such as spending and tax cuts, is often used to spur the economy back to health. If it boosts growth enough, it can reduce the debt. A growing economy produces more tax revenues to pay back the debt.

The theory of supply-side economics says the growth from tax cuts is enough to replace the tax revenue lost if the tax rate is above 50% of income. When tax rates are lower, the cuts worsen the national debt without boosting growth enough to replace lost revenue.

Major events, like wars and pandemics, can increase the national debt.

During national threats, the U.S. increases military spending. For example, the U.S. debt grew after the September 11, 2001 attacks as the country increased military spending to launch the War on Terror. Between fiscal years 2001 and 2020, those efforts cost $6.4 trillion, including increases to the Department of Defense and the Veterans Administration.

The national debt by year should be compared to the size of the economy as measured by the gross domestic product. That gives you the debt-to-GDP ratio. That ratio is important because investors worry about default when the debt-to-GDP ratio is greater than 77%—that's the tipping point.

The World Bank found that if the debt-to-GDP ratio exceeded 77% for an extended period of time, it slowed economic growth. Every percentage point of debt above this level costs the country 0.017 percentage points in economic growth.

You can also use the debt-to-GDP ratio to compare the national debt to other countries. It gives you an idea of how likely the country is to pay back its debt.

Debt by Year Compared to Nominal GDP and Events

In the table below, the national debt is compared to GDP and influential events since 1929. The debt and GDP are given as of the end of the third quarter (unless otherwise noted) in each year to coincide with the end of the fiscal year. That's the best way to accurately determine how spending in each fiscal year contributes to the debt and to compare it to economic growth.

From 1947-1976, debt and GDP are given at the end of the second quarter since, during that time, the fiscal year ended on June 30. For years 1929-1946, debt is reported at the end of the second quarter, while GDP is reported annually since quarterly figures are not available.

End of Fiscal Year Debt (in billions, rounded) Debt-to-GDP Ratio Major Events by Presidential Term
1929 $17 16% Market crash
1930 $16 17% Smoot-Hawley reduced trade
1931 $17 22% Dust Bowl drought raged
1932 $20 34% Hoover raised taxes
1933 $23 40% New Deal increased GDP & debt
1934 $27 40%  
1935 $29 39% Social Security
1936 $34 40% Tax hikes renewed depression
1937 $36 39% Third New Deal
1938 $37 42% Dust Bowl ended
1939 $40 43% Depression ended
1940 $43 42% FDR increased spending & raised taxes
1941 $49 38% U.S. entered WWII
1942 $72 43% Defense tripled
1943 $137 67%  
1944 $201 90% Bretton Woods
1945 $259 114% WWII ended
1946 $269 118% Truman's 1st term budgets & recession
1947 $258 103% Cold War
1948 $252 92% Recession
1949 $253 93% Recession
1950 $257 86% Korean War boosted growth and debt
1951 $255 74%  
1952 $259 71%  
1953 $266 68% Recession when war ended
1954 $271 69% Eisenhower's budgets & Recession
1955 $274 64%  
1956 $273 61%  
1957 $271 57% Recession
1958 $276 57% Eisenhower's 2nd term & recession
1959 $285 55% Fed raised rates
1960 $286 53% Recession
1961 $289 51% Bay of Pigs
1962 $298 49% JFK budgets & Cuban missile crisis
1963 $306 48% U.S. aids Vietnam, JFK killed
1964 $312 46% LBJ's budgets & war on poverty
1965 $317 43% U.S. entered Vietnam War
1966 $320 39%  
1967 $326 38%  
1968 $348 37%  
1969 $354 35% Nixon took office
1970 $371 35% Recession
1971 $398 34% Wage-price controls
1972 $427 33% Stagflation
1973 $458 32% Nixon ended gold standard & OPEC oil embargo
1974 $475 31% Watergate & budget process created
1975 $533 32% Vietnam War ended
1976 $620 33% Stagflation
1977 $699 34% Stagflation
1978 $772 33% Carter budgets & recession
1979 $827 31%  
1980 $908 32% Volcker raised fed rate to 20%
1981 $998 31% Reagan tax cut
1982 $1,142 34% Reagan increased spending
1983 $1,377 38% Jobless rate 10.8%
1984 $1,572 39% Increased defense spending
1985 $1,823 42%  
1986 $2,125 46% Reagan lowered taxes
1987 $2,350 48% Market crash
1988 $2,602 50% Fed raised rates
1989 $2,857 51% S&L Crisis
1990 $3,233 54% First Iraq War
1991 $3,665 60% Recession
1992 $4,065 62%  
1993 $4,411 64% Omnibus Budget Act
1994 $4,693 64% Clinton budgets
1995 $4,974 65%  
1996 $5,225 65% Welfare reform
1997 $5,413 63%  
1998 $5,526 61% LTCM crisis & recession
1999 $5,656 59% Glass-Steagall repealed
2000 $5,674 55% Budget surplus
2001 $5,807 55% 9/11 attacks & EGTRRA
2002 $6,228 57% War on Terror
2003 $6,783 59% JGTRRA & Iraq War
2004 $7,379 60% Iraq War
2005 $7,933 61% Bankruptcy Act & Katrina.
2006 $8,507 62% Bernanke chaired Fed
2007 $9,008 62% Bank crisis
2008 $10,025 68% Bank bailout & QE
2009 $11,910 82% Bailout cost $250B ARRA added $242B
2010 $13,562 91% ARRA added $400B, payroll tax holiday ended, Obama Tax cuts, ACA, Simpson-Bowles
2011 $14,790 95% Debt crisis, recession and tax cuts reduced revenue
2012 $16,066 99% Fiscal cliff
2013 $16,738 100% Sequester, government shutdown
2014 $17,824 102% QE ended, debt ceiling crisis
2015 $18,151 100% Oil prices fell
2016 $19,573 104% Brexit
2017 $20,245 104% Congress raised the debt ceiling
2018 $21,516 104% Trump tax cuts
2019 $22,719 106% Trade wars
2020 $26,477 (at end of Q2) 136% COVID-19 & CARES Act

Article Sources

  1. U.S. Department of the Treasury. “The Debt to the Penny.” Accessed Oct. 8, 2020.

  2. Bureau of Economic Analysis. "National Data: National Income and Product Accounts: Table 1.1.5 Gross Domestic Product." Accessed Oct. 8, 2020.

  3. Watson Institute for International & Public Affairs. "United States Budgetary Costs and Obligations of Post-9/11 Wars Through FY2020: $6.4 Trillion," Page 3. Accessed Oct. 8, 2020.

  4. World Bank Group. "Finding the Tipping Point -- When Sovereign Debt Turns Bad." Accessed Oct. 8, 2020.

  5. TreasuryDirect. “Historical Debt Outstanding - Annual.” Accessed Oct. 8, 2020.

  6. Bureau of Economic Analysis. “NIPA Tables, National Income and Product Accounts," Table 1.1.5. Gross Domestic Product. Accessed Oct. 8, 2020.