The United States was in debt after the Revolutionary War, and it was debated whether or not the country should just default on their debt and start fresh. That would have been catastrophic for the new country, so the government decided to consolidate the $75 million debt between the states.
Another war in 1812 didn’t help in paying down the debt like the country was trying to do. The debate was about how quickly the country could pay down the debt, but not if the country should completely pay off the debt. The problem was, as it is today, a question of spending. It wasn’t until Andrew Jackson became president when the debate about the debt was decided. He decided it needed to be paid off.
Jackson deplored debt. He had a few bad land deals as a land speculator in Tennessee prior to being president that soured him on having any type of debt. He brought this same feeling into the Oval office. Jackson disliked the debt and the banks, and the citizens of the U.S. agreed with his feelings.
Jackson set himself on doing something that had never been done before. He started by selling off wide swaths of Western lands that the government owned since that area of the country was experiencing a real-estate bubble. He also slashed spending and squashed any spending bills that came across his desk. In the six years after he took office, Jackson reduced the debt from around $58 million to nothing. 1835 was the year the United States was debt-free and the government even had a surplus.
So the government, for the first time in its existence, had extra money to spend. There was no national bank to store the excess money because Jackson had done away with it, so the surplus couldn’t be placed there. It was decided that the money would be given back to the states to be split between them. Like a kid getting a big, fat check from grandma at birthday time, the states went on a spending spree and began printing money–lots of money.
Jackson tried to stop the runaway train, but it was too late. The states were buying up land, and even though Jackson required land deals to be made in gold or silver, it did nothing to stop the juggernaut of spending. What ensued was a long depression, and the government found themselves borrowing money, again.
The glory days of a debt-free America lasted one whole year, and it has never happened again. The current U.S. debt is about $18.1 trillion dollars and rising with no signs of slowing. We’re not in 1835 anymore.