Wednesday, December 24, 2008

U.S. Public Debt Since 1940 - Adjusted for Inflation

Here is the U.S. public debt since 1940 adjusted for inflation:

Adjusting the public debt for inflation provides a good account of federal government borrowing. The public debt increased in the 1940s to finance World War II. The public debt remained fairly constant from the late 1940s through 1981. This means the U.S. was reasonably responsible with its finances, collecting sufficient revenues to pay for government services. There is a slight increase in the 1970s. With the exception of a few years in the late 1990s, the U.S. government has increased its debt every year since 1981. Revenues have been insufficient to cover expenditures because government revenues have been reduced by tax cuts, but government spending has continued to increase. Most analysts attribute the reduction in the public debt in the late 1990s to the Congressional adoption of pay-as-you-go (PAYGO) rules. PAYGO required increases in discretionary spending to be accompanied by either tax increases or equivalent reductions in other government spending. After the election of President George W. Bush in 2000, the PAYGO rules were allowed to lapse in the House of Representatives and watered down in the Senate to facilitate the passage of tax cuts and the Medicare prescription drug plan, which former U.S. Comptroller General David Walker called "...probably the most fiscally irresponsible piece of legislation since the 1960s... because we promise way more than we can afford to keep." There was a subsequent dramatic increase in the U.S. public debt.

See also the "U.S. Public Debt Since 1940" and "U.S. Public Debt as a Percentage of Gross Domestic Product (GDP)".


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