Wednesday, September 26, 2012

America the Land of Debt



                                                             
Over 1 million Americans file for bankruptcy every year.  Over 2.5 million homes were foreclosed in 2011. According to Credit.com, there are over 700 million credit cards in use in America more than any other country in the world.  Over 10 million Americans have no bank account.  The average credit score is between 672 and 692.  These statistics indicate that Americans love consuming debt. 

America’s love for debt started at the beginning of the establishment of the country and has continued for centuries.  America is the land of debt and that value has been passed down for generations.
The public debt started during the American Revolution.  In 1776, a committee of 10 members created what became the Treasury, and helped secure funding for the war borrowing money from France and the Netherlands.  On New Year’s Day 1783, the public debt was $43 million. 

On September 2, 1789, Congress established The Treasury Department, naming Alexander Hamilton, as Secretary.  Hamilton estimated the public debt was $77.1 million and called for the issuance of new federal bonds to cover the debt. 

Debts incurred during the American Revolutionary War were approximately $75.46 million New Year’s Day 1791. The First Bank of the United States opened in 1791 with a total capital of $10 million. In 1811, the debt was reduced to $45.2 million.  The debt increased from $45.2 million on January 1, 1812, to $119.2 million by September 30, 1815. However, the public debt was reduced zero by January 1835, under President Andrew Jackson.

The United States went to war with Mexico in May 1846, over Texas and California. The total cost of the war was estimated to be $64 million. By the end of 1849, public debt totaled $63.1 million.
The Civil War resulted in more debt.  The public debt was approximately $65 million in 1860, but exceeded $1 billion in 1863 and was $2.7 billion after the war. It is estimated that the Civil War cost $5.2 billion. The debt grew in the 1900’s and was approximately $22 billion due to involvement in World War I.  At the end of the war the debt grew to $260 billion. 

Due to stock market crash in 1929 the economy declined. By 1933, the budget deficit was nearly $3 billion, and the public debt rose above $22 billion. In 1940, the public debt was $50.7 billion.  It has been estimated that the total spent during World War II was $323 billion.  

Approximately $211 billion of the estimated $323 billion spent fighting the war was borrowed. There was a budget surplus each year from 1946 to 1949, but the total debt never fell below $250 billion. With the outbreak of unrest in Korea in June 1950, defense spending went from $17.7 billion to $40.4 billion in 1953.

Due to the war in Vietnam, the country’s deeper involvement from 1966 forward, in addition to the Johnson administration’s "Great Society" programs, the budget deficit increased to $25.2 billion.  Due to a tax increase, the budget for 1969 had a surplus of $3.2 billion, which was the last time the federal government’s was "in the black" until 1998. By 1970, the total debt rose to $382.6 billion.
In 1973, the budget deficit was $14.3 billion. Due to the sharp increase in the price of petroleum products due to the OPEC shortage in 1973, the deficit reached $59 billion by 1980.


Between 1980 and 1990, the debt more than tripled and rose above $780 billion due to the government borrowing money to fund military build-ups and new policies, such as "the war on drugs." Americans began relying more on credit cards, jumbo mortgages become common, and being "in debt" became the American dream.

The terrorist attacks in New York, Pennsylvania and Washington DC on September 11, 2001, reduced the economic progress that was made. To counter the effects of the economic slowdown and the increased spending on national security that followed the attacks, president, George W. Bush created tax cuts and refunds, but the deficit grew, and the public debt increased from $5.7 trillion in January 2001 to $10.7 trillion by December 2008, due to decreasing tax rates and two unpaid wars. In February 2009, Congress raised the debt limit to $12.1 trillion. This list of facts shows that country has been in a debt a long time and will probably continue to be in debt for eternity.

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