Was the U.S. ever debt free? (2024)

Was the U.S. ever debt free?

By January of 1835, for the first and only time, all of the government's interest-bearing debt was paid off. Congress distributed the surplus to the states (many of which were heavily in debt). The Jackson administration ended with the country almost completely out of debt!

Under current policy, the United States has about 20 years for corrective action after which no amount of future tax increases or spending cuts could avoid the government defaulting on its debt whether explicitly or implicitly (i.e., debt monetization producing significant inflation).

However, President Andrew Jackson shrank that debt to zero in 1835. It was the only time in U.S. history when the country was free of debt.

The terms “national deficit”, “federal deficit” and “U.S. deficit” have the same meaning and are used interchangeably by the U.S. Treasury. A surplus occurs when the government collects more money than it spends. The last surplus for the federal government was in 2001.

The U.S. has carried debt since its inception. Debts incurred during the American Revolutionary War amounted to over $75 million by January 1, 1791. Over the next 45 years, the debt continued to grow until 1835 when it notably shrank due to the sale of federally-owned lands and cuts to the federal budget.

Having no more debt means, that the government does not have to pay interest anymore. This can mean, that there is more money free to spend on other things like infrastructure or welfare.

1 Foreign governments hold a large portion of the public debt, while the rest is owned by U.S. banks and investors, the Federal Reserve, state and local governments, mutual funds, pensions funds, insurance companies, and holders of savings bonds.

1837: Andrew Jackson

(In 1835, the $17.9 million budget surplus was greater than the total government expenses for that year.) By January of 1835, for the first and only time, all of the government's interest-bearing debt was paid off.

Has the US ever had a balanced budget?

To balance the federal budget, government revenue must meet or exceed government spending. That's happened only twice in the past half-century: President Lyndon Johnson did it in 1969, and President Bill Clinton from 1998 to 2001.

One of the main culprits is consistently overspending. When the federal government spends more than its budget, it creates a deficit. In the fiscal year of 2023, it spent about $381 billion more than it collected in revenues. To pay that deficit, the government borrows money.

United States

The Colorado Taxpayer Bill of Rights (the TABOR amendment) also bans surpluses and requires the state to refund taxpayers in event of a budget surplus. The last time that the budget was balanced or had a surplus was the 2001 United States federal budget.

At the end of September 2023, domestic creditors held 77 percent of the outstanding debt held by the public. Foreign creditors held the remaining 23 percent.

The government borrows money to pay obligations by issuing Treasury bonds, notes, bills, and other marketable securities.

Though trust funds are in place to support Social Security payments to recipients in the event of a debt default, they could be depleted if the United States enters into a debt default.

The case of debts arising from World War II is somewhat less complicated. At this time only four countries, discussed below, owe the U.S. government debts of any size arising from World War II programs to aid our allies. Other countries have paid their debts in full.

The United States pays interest on approximately $850 billion in debt held by the People's Republic of China.

How much is United States worth?

The financial position of the United States includes assets of at least $269 trillion (1576% of GDP) and debts of $145.8 trillion (852% of GDP) to produce a net worth of at least $123.8 trillion (723% of GDP).

Jerome Kerviel, The Most Indebted Person In The World, Owes $6.3 Billion To Former Employer, Societe Generale. In a hyper-competitive world where everyone strives to be the biggest, boldest and most famous, no one covets Jerome Kerviel record-breaking achievement.

China is one of the United States's largest creditors, owning about $859.4 billion in U.S. debt. 1 However, it does not own the most U.S. debt of any foreign country.

[2] A report by the credit rating agency S&P Global in 2022 estimated that 79 per cent of corporate debt in China was owed by SOEs (the IMF does not break down the proportion of debt owed by SOEs).

The average debt an American owes is $104,215 across mortgage loans, home equity lines of credit, auto loans, credit card debt, student loan debt, and other debts like personal loans. Data from Experian breaks down the average debt a consumer holds based on type, age, credit score, and state.