Thursday, July 28, 2011

When was the last time the US was debt-free?

Most of you probably know the answer is Andrew Jackson's presidency! I found an article on it and why it didn't last long (a year). So how did Jackson do it?
...let's figure out how Andrew Jackson did the impossible.

It helps to remember that debt was always a choice for America. After the revolution, the founding fathers debated whether or not to just wipe clean all those financial promises made during the war.


Deciding to default "would have ruined our credit and would have left the economy on a very agricultural, subsistence basis," says Robert E. Wright, a professor at Augustana College in South Dakota.

So the U.S. agreed early on to consolidate the debts of all the states — $75 million.

During the good times, the country tried to pay down the debt. Then there would be another war, and the debt would go up again. The politicians never liked the debt.

"What the battle was really about was how quickly to pay off the national debt, not whether to pay it off or not," Wright says.


But, just like today, it wasn't easy for politicians to slash spending — until Andrew Jackson came along.

"For Andrew Jackson, politics was very personal," says H.W. Brands, an Andrew Jackson biographer at the University of Texas. "He hated not just the federal debt. He hated debt at all."

Before he was president, Jackson was a land speculator in Tennessee. He learned to hate debt when a land deal went bad and left him with massive debt and some worthless paper notes.

So when Jackson ran for president, he knew his enemy: banks and the national debt. He called it the national curse. People ate it up.

In Jackson's mind, debt was "a moral failing," Brands says. "And the idea you could somehow acquire stuff through debt almost seemed like black magic."

So Jackson decided to pay off the debt.


To do that, he took advantage of a huge real-estate bubble that was raging in the Western U.S. The federal government owned a lot of Western land — and Jackson started selling it off.


He was also ruthless on the budget. He blocked every spending bill he could.

"He vetoed, for example, programs to build national highways," Brands says. "He considered these to be unconstitutional in the first place, but bad policy in the second place."

When Jackson took office, the national debt was about $58 million. Six years later, it was all gone. Paid off. And the government was actually running a surplus, taking in more money than it was spending.

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