When Was the Last Time the U.S. Was Debt-Free?

Key takeaways

• The U.S. hasn’t been in debt since the 7th POTUS
• But the U.S. now has the world’s largest debt obligation
• It’s of concern as bond yields hit multi-year highs

Buckle up for a history lesson, folks. If you’re tired of hearing about politicians arguing over federal budgets and debt ceiling crises, you might be longing for simpler times when the U.S. didn’t have so much debt to fight over.

Unfortunately, that’s not the case for most major developed economies, and it’s worth remembering that a country’s debt doesn’t work like regular debt. So let’s take a look at exactly why the U.S. has such a debt crisis on its hands and when the last time the world’s largest economy was debt-free (if ever).

When was the last time the U.S. had no debt?

We’ll have to head back hundreds of years to find the answer to the last time the U.S. didn’t have any debt. The 7th U.S. president, Andrew Jackson, was determined to pay down the U.S. debt levels by cutting federal funds and being careful not to implement new policies that would raise debt.

That’s because President Jackson viewed debt as one big L for America. In fact, Jackson was such a hater of anything that left the U.S. dependent on anything else that he wrote in Notes on the State of Virginia, “Dependence begets subservience and venality, suffocates the germ of virtue, and prepares fit tools for the designs of ambition.”

President Jackson’s persistence paid off: the U.S. was debt-free for two years between 1835 and 1837. It was the first and last time a major country had no debt.

What is the U.S. debt load looking like?

Let’s head back to the present day. Wanna know how much debt the U.S. has? $33 trillion. Yes, you read that right. And yes, that’s the world’s largest national debt.

It’s kinda not as bad as it looks. Governments don’t necessarily need to pay off debt, they just need to service them by paying interest and repaying the principal when bonds are due. All a country has to do is ensure it produces enough in the economy to meet its debt obligations.

The concern at the moment concerns bond yields, which are hitting multi-year highs as fears around the U.S. economy persist. As bond yields rise, it becomes more expensive for the government to pay off its debt obligations.

The 10-year bond is hovering around 4.86%, which is close to the highest it’s been since the summer of 2007. On Wednesday this week, the 30-year Treasury bond yield rose above 5% for the first time since 2007.

The government’s debt has become the focus of recent political posturing, with the U.S. government nearly shutting down on October 1. Some politicians want to cut funding to pay it back, which is at the center of the ruckus.

The bottom line

The U.S. national debt levels are concerning, but in the short term, nobody needs to worry about the world’s largest economy being unable to pay back its debt obligations.