The United States began its history debtors, owing more than $ 70 million on the French and Dutch after the war for independence in 1783. However, first, the actual budget deficit in the Federal register was not completed before the end of this decade.
History of budget deficits
In September 1789, Alexander Hamilton became Secretary of the Treasury, together, discuss the conditions with the Bank of new York and the Bank of North America to borrow $19,608.81 for the solution of problems of budget deficits in the United States.
The beginning of deficit financing
Hamilton was a staunch supporter of large, powerful Federal government unlike his rival, Thomas Jefferson. He believed that the budget deficit may help the young country to establish itself and actively wished to issue bonds, secured by revenues from tariffs. Hamilton’s plan was based on bonds issued by the Bank of England after its founding in 1694 that allowed Britain to collect more money than the French during their conflicts.
The us government is able to borrow from this point onwards, and after the war of 1812, the total government debt exceeded $ 115 million.
When the debt was actually repaid
Andrew Jackson, the seventh President of the United States believes that the budget deficit was immoral and carrying debt has weakened the nation. By 1835, less than six years after taking office, Jackson paid off the entire national debt by reducing government spending and the sale of Federal lands. This is the only time in U.S. history that the country’s total debt was fully repaid.
The great Depression and funding wars
Until 1930 almost all of the budget deficits run by the us government were the result of wars. Created a civil war, huge deficits on the current account, which left the people of the more than $ 2.5 billion after 1865. The nature of debt has changed after the great depression and the rise of Keynesian Economics.
The extent to which the British economist John Maynard Keynes under the influence of public spending in the 20th century can hardly be overestimated. While Hoover and Roosevelt administration extended the public works schemes and experimented with the budget deficit in the face of the great Depression Keynes, which provided the macroeconomic justification for running large budget deficits to stimulate aggregate demand and fight the recession.
The US ran substantial budget deficits during the great depression and the Second world war. In 1940-e years, spending on the military effort has created the largest deficit as a percentage of gross domestic product, or GDP, in American history. Took place in 1950-ies of more restrained spending policies and more or less lasted until the beginning of the war in Vietnam and the great society of Lyndon Johnson.
Modern Budget Expenditures
Since 1970, the Federal government has a deficit for each fiscal year for all but four years, from 1998 to 2001. The effect of these accumulated budget deficits discussed by political scientists and economists, but their origins are much less controversial.
Since the days of Alexander Hamilton, the US government turned to budget deficits as a means to Finance wars, growing Federal influence and the provision of public services without having to raise taxes or cut existing programs.