“It’s time to clean up this mess.” Famous last words heard from the mouths of
many different politicians when talking about the national debt and the budget deficit.
Our debt is currently $4.41 trillion and we have a budget deficit of around $300 billion
and growing. Our government now estimates that by the year 2002 the debt will be
$6.507 Trillion. While our politicians talk of balancing the budget , not one of them has
proposed a feasible plan to start paying down the debt.
In the early days of our government debt was considered to be a last resort. In
1790, when Alexander Hamilton, as secretary of the Treasury, made his first report on the
national debt of the United States, he estimated it at close to $70 million. After
alternately rising and falling, the debt stood at only $4 million, or 21 cents per capita, in
1840. That was the lowest point ever reached by the public debt of the U.S. After 1840 it
rose to a peak, in the last year of the Civil War, of almost $2.68 billion and a per capita
figure of $75.01. The only justification for debt of any significant amount was a war. By
1900 this had been reduced to under $1 Billion. By 1919, the end of World War I, the
debt had climbed to $25.5 Billion. In each of the following years the debt was reduced,
and by 1930 stood at $18.1 Billion. With the collapse of Wall Street in 1929, the country
(debt history: 1850 to 1950)
fell into the Great Depression, which lasted until 1940. At that time the debt had climbed
to $51 Billion. By the end of World War II the debt was $269 Billion.
Again the government worked to reduce the debt, and by 1949 it was $252.7
Billion. At that point the Korean War started, sending the debt to $274 Billion by 1955.
Since then, there has been no serious effort to pay down the debt. The main point to be
made was that on three separate occasions a major debt reduction effort had been made,
but in the past 55 years in spite of much arm-waving there have been no similar results.
The U.S. debt is divided into two major kinds of loans, marketable and
nonmarketable. The former provides about 52 percent of the total and is made up of
bills, notes, and bonds that can be traded; the latter includes U.S. savings bonds,
foreign-government-owned securities, and government account securities that are
redeemable but not tradable. Maturity of this debt ranges from less than a year to over
20 years, with the average maturity about 3 years. More than half of the debt, however,
is short term, maturing in less than a year. A ceiling is placed on U.S. federal debt, and
Congress must enact new legislation to raise the ceiling. Between 1981 and 1990 the
ceiling was raised from about $1.08 trillion to about $4.15 trillion.
Unfortunately at the end of 1995 we reached the ceiling again, and Congress
refused to raise it. They felt that it had become too much, and there was a government
shutdown for a few days in November. Not only was this an inconvenience to many
people, it also accounted for an estimated $63 million a day in lost productivity, and
almost double that in lost tax revenue.
Due to the threat of this, Clinton has a plan to balance the budget by 2005. This
plan includes a projected $1.1 trillion spending cut over the next ten years, slow the
growth of spending on Medicare and Medicaid, trim social and farm programs, close a
number of corporate tax loopholes and retain the package of middle-class tax cuts he
proposed earlier. He also specified that programs such as Social Security, education, and
training would be immune from such cuts. He did warn though, “Make no mistake-- in
other areas, there will be big cuts, and they will hurt. This was June of 1995, and at the
end of Fiscal Year 1996, the national debt growth was $80 billion higher than previous
projections, with a final debt increase of $331 billion.

Where does this money go? This happens to be the most popular question asked,
yet the one nobody has a definite answer to. Out of all of the places the government
spends money, more than 50% goes to three main areas: defense, Social Security, and
Medicare and Medicaid, all of which combined account for between $750 and $900
billion per year. In the case of national