History of National Debt

Significance

There have been budgets to cover domestic and foreign policies and programs. There have been wars and greater involvement of government in regulating business, health care, retirement funding, banking and international diplomacy.
The national debt can be expanded due to the "Necessary and Proper" Clause of the U.S. Constitution. Government uses this clause to do what it deems appropriate to run the government.
In the "A Call for Stewardship" by the U.S. Government Accounting Office:
"...U.S. Government...evolved to reflect changing circumstances... in 1797, there were four cabinet-level departments...and five cabinet-level officials... Today, there are nearly 30 major federal departments and agencies...federal workforce... now totals in the millions."

Of course, there are situations that take into consideration different opportunities. One such time was the Louisiana Purchase in 1804. This added national debt virtually doubled the size of the country. The debt for this was $11.25 million.

Thomas Jefferson wanted to pay off the national debt from the Revolutionary War once the Constitution was in place and taxes were possible. However, Alexander Hamilton pointed out that by keeping the debt, the country's credibility would increase as the nation prospered and production increased. The increased production would mean greater revenues for the government.
As part of the compromise to do so, an agreement was reached that resulted in the national capital being built in present-day Washington D.C. Hamilton's view was followed and it proved beneficial. The debt was covered by bonds.

The size of the national debt is to be covered by a debt ceiling that is approved by Congress. The allowable national debt has been progressively increased by Congress. As of 2008 the national debt can go up to $10.6 trillion. This increase was due to what was deemed a necessary help for the housing industry.
In 1791 the national debt was about $75 million. This was about 18 dollars per person at the time. In comparison the national debt on Sept. 30, 2008, was about $32,895 dollars per person.

The budget ceiling is only part of what is considered in looking at the national budget. How well the economy is doing determines the amount of income for the government. When the economy is doing well, its income increases.
How government views debt is also important. President Andrew Jackson worked at bringing down the national debt at a time of prosperity to $18,000.
Historically the national debt has been due to many factors. How the government handled the debt, whether keeping it or working to eliminate it, varied due to historical circumstances. The well-being of the economy throughout history has been a major influence on the national debt.