US Federal Debt Since 1900

Federal debt began the 20th century at less than 10 percent of GDP. It jerked above 30 percent as a result of World War I and then declined in the 1920s to 16.3 percent by 1929. Federal debt started to increase after the Crash of 1929, and rose above 40 percent in the depths of the Great Depression.

Federal debt exploded during World War II to over 120 percent of GDP, and then began a decline that bottomed out at 32 percent of GDP in 1974. Federal debt almost doubled in the 1980s, reaching 60 percent of GDP in 1990 and peaking at 66 percent of GDP in 1996, before declining to 56 percent in 2001. Federal debt started increasing again in the 2000s, reaching 70 percent of GDP in 2008. Then it exploded in the aftermath of the Crash of 2008, reaching 102 percent of GDP in 2011.

Federal debt has breached 100 percent of GDP twice since 1900: during World War II and in the aftermath of the Crash of 2008.

US Federal Interest Since 1900

Federal interest payments began the 20th century at less than 0.2 percent of GDP. But the debt incurred in World War One caused the debt to explode to over 1.3 percent of GDP in 1921, and debt interest cost about one percent of GDP through the middle of World War II. Interest expense peaked at 1.7 percent of GDP in 1946 and settled down to about 1.1 to 1.2 percent of GDP until the 1970s.

Federal Interest payments cost 1.39 percent of GDP in 1974 and continued climbing, as the Federal Reserve increased interest rates, reaching 1.51 percent of GDP in 1978, 2.14 percent of GDP in 1981 before peaking at 3.16 percent of GDP in 1991. With a recession in 1990 and spending cuts in the 1990s, interest expense declined to 1.31 percent of GDP by 2004. Then it increased briefly before credit was relaxed in the Great Recession of 2008-09. Interest expense held steady at about 1.3 percent of GDP for the mid 2010s, rising to 1.75 percent GDP in 2019 before declining modestly during the COVID pandemic of 2020-2021.

US Federal Debt since the Founding

The United States federal government began with a substantial debt, the cost of the Revolutionary War. Under Alexander Hamilton’s funding system the debt was paid off by 1840. Government debt has typically peaked after wars. It breached 30 percent of GDP after the Revolutionary War, the Civil War, and World War I. It breached 100 percent of GDP in World War II. Government debt also breached 100 percent of GDP in the aftermath of the financial crisis of 2008.

Gross Federal Debt vs. Net Debt

The US federal government differentiates between Gross Debt issued by the US Treasury and Net Debt held by the public. The numbers on Gross Debt are published by the US Treasury here.

Numbers on various categories of federal debt, including Gross Debt, debt held by federal government accounts, debt held by the public, and debt held by the Federal Reserve System, are published every year by the Office of Management and Budget in the Federal Budget in the Historical Tables as Table 7.1 — Federal Debt at the End of the Year. The table starts in 1940. You can find the latest Table 7.1 in here.

The chart above shows three categories of federal debt.

1. Monetized debt (blue), i.e., federal debt bought by the Federal Reserve System

2. Debt held by the federal government (red) e.g., as IOUs for Social Security

3. Other debt (green), i.e., debt in public hands, including foreign governments.