Federal Debt: Answers to Frequently Asked Questions
The federal government has carried debt throughout virtually all of U.S. history. As part of Alexander Hamilton's plan for strengthening the financial credit of the post-Constitution nation, the federal government assumed the debt incurred during the Revolutionary War and the period under the Articles of Confederation.
Since that time, federal debt as a share of the nation's income has varied. Historically, the nation has run up deficits during wars and recessions, but then debt has subsequently declined. For example, debt as a share of the economy peaked just after World War II, but then fell. In recent years, however, sharp increases in deficits and the resulting increases in debt have led to heightened concern about the long-term sustainability of the federal government's fiscal policies.
Distribution of Federal Debt Held by Government Accounts (End of Fiscal Year 2010)
Source: Congressional Budget Office and Office of Management and Budget.
Notes: Data from 1797 through 1969 available through CBO, Long-Term Budget Outlook June 2009 (see Additional Data). Data from 1970 through 2011 from OMB, Budget of the United States Government for Fiscal Year 2013–Historical Tables. For 1797-1969, year refers to calendar year. From 1970-2011, year refers to fiscal year. For the years prior to 1929, CBO notes they estimated GDP from several sources.
Discussion and debate about fiscal (spending and tax) policy and about debt can benefit from consistent understanding of basic terms and definitions. This section provides a broad range of information about federal debt including its relationship to the budget, ownership of the debt, debt management, and key policy considerations. In some cases, information may be presented differently on the consolidated financial statements of the United States government because of different reporting methods. The consolidated financial statements and guide to it can be found at http://www.gao.gov/financial/fy2011financialreport.html.
For easy reference, key terms are underlined with a dashed line; place your cursor over the word to view the definition.