On January 8, 1835, President Andrew Jackson achieves his goal of entirely paying off the United States’ national debt. It was the only time in U.S. history that the national debt stood at zero, and it precipitated one of the worst financial crises in American history.
The elimination of the national debt was both a personal issue for Jackson and the culmination of a political project as old as the nation itself. Since the time of the Revolution, American politicians had argued over the wisdom of the nation carrying debt. After independence, the federal government agreed to take on individual states’ war debts as part of the unification of the former colonies. Federalists, those who favored a stronger central government, established a national bank and argued that debt could be a useful way of fueling the new country’s economy. Their opponents, most notably Thomas Jefferson, felt that these policies favored Northeastern elites at the expense of rural Americans and saw the debt as a source of national shame.
Jackson, a populist whose Democratic Party grew out of Jefferson’s Democratic-Republican Party, had a personal aversion to debt stemming from a land deal that had gone sour for him in his days as a speculator. Campaigning for re-election in 1832, Jackson vetoed the re-charter of the national bank and called the debt “a moral failing” and “black magic.” Jackson vetoed a number of spending bills throughout his tenure, putting an end to projects that would have expanded nationwide infrastructure. He further paid down the debt by selling off vast amounts of government land in the West, and was able to settle the debt entirely in 1835.
Jackson’s triumph contained the seeds of the economy’s undoing. The selling-off of federal lands had led to a real estate bubble, and the destruction of the national bank led to reckless spending and borrowing. Combined with other elements of Jackson’s fiscal policy as well as downturns in foreign economies, these problems led to the Panic of 1837. A bank run and the subsequent depression tanked the U.S. economy and forced the federal government to begin borrowing again.
The U.S. has been in debt ever since. The debt skyrocketed during the Civil War but was nearly paid off by the early 20th Century, only to balloon again with the onset of World War I. Numerous presidents and politicians have decried the debt and even pledged to do away with it, with conservatives and libertarians frequently echoing Jackson. Nevertheless, with the debt now surpassing $22 trillion, it is unlikely that the events of 1835 will be repeated in the foreseeable future.