Drawing Lessons from the Other Grand Bargains
Posted at 11:45 a.m. on Nov. 15, 2012
Kenneth Ackerman looks back at the only other times in US history when the country racked up as much debt as it has now and explains how we emerged from beneath piles of debt.
“To finance the Civil War, President Abraham Lincoln’s Treasury Department borrowed heavily. Public debt exploded between 1861 and 1866 to more than $2.75 billion from $90 million… To regain solvency, four things had to happen. First, the government paid down the debt… Second, Congress kept up revenues with high taxes, in the form of protective import tariffs… Third, the economy grew… Finally, the country showed patience in sticking with this plan over two decades and under three presidents.”
“Like the Civil War, World War II also forced the government to borrow heavily. The debt grew to more than $270 billion in 1946 from $50 billion in 1940… Again, the first step for bouncing back was to control debt… At the same time, taxes were set at levels sufficient to pay for, among other things, the Cold War, the interstate highway system and continuing New Deal programs… And once again, the economy soared… Finally, patience. Over 15 years, presidents as diverse as Harry Truman, Dwight Eisenhower and John F. Kennedy all stuck to the plan.”