History Buff's Guide to the Presidents (24 page)

By 1865, the Union military machine was fully operational, arming, feeding, clothing, and paying the largest army on the planet to essentially destroy its own southern infrastructure. Fearing the war would continue for another year, Lincoln contemplated offering Southerners $400 million to cover Confederate debt, damages to public property, and the emancipation of all slaves in exchange for surrender. His cabinet rejected the idea in total.
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By war’s end, the price tag to the Union side alone was roughly $3.2 billion, most of it borrowed. After decades of Reconstruction, rebuilding, and veterans’ pensions, the cost tripled.
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During the Civil War, the federal and state governments had to train, feed, and equip two million Union soldiers. A private’s rifle cost sixteen dollars, his shoes were twenty dollars, his monthly pay was thirteen dollars, and the cost to bury him was two dollars.

The national debt was higher at the time of Abraham Lincoln’s assassination in 1865 than it was at the time of William McKinley’s assassination in 1901.

2
. WOODROW WILSON (2,500%)

NATIONAL DEBT IN 1913: $1 BILLION

NATIONAL DEBT IN 1921: $26 BILLION

Wilson had cause to avoid the Great War, aside from its horrific effusion of blood. As the Balkan crisis escalated into a Continental Armageddon, the empires were losing millions of able-bodied young men and were bleeding cash.

Along with “perfecting” new weapons such as combat aircraft, tanks, and poison gas, industrialization produced the tools of war in phenomenal bulk. In 1914, Britain made three hundred machine guns. Three years later, the Brits were manufacturing nearly eighty thousand annually. Artillery output went from ninety-one field pieces in 1914 to more than five thousand in 1917. Countries were spending 50 percent of their GDP and more on their military machines.
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Initially the United States benefited from the melee, providing loans and foodstuffs to the capital-hungry conflict. But when Imperial Germany initiated unrestricted submarine warfare on an already fragile Atlantic trade network in 1917, Wilson called for a declaration of war against the Central Powers. The decision spawned the creation of a four-million-man armed force and a flurry of federal spending never before seen in U.S. history.

To pay for it, the government reintroduced federal income taxes. The added revenues only covered 40 percent of costs. The rest had to be borrowed. Much of it came through “Liberty Loan” drives, offering bonds at around 4 percent interest.

The relatively successful bond drives fueled an industrial boom. Between 1914 and 1918, the nation’s steel production went up 235 percent, and shipbuilding increased over 1,000 percent. But the relative cost of fighting had also exploded. In the rifle-dominated Civil War, it took about one hundred pounds of spent ordnance to produce one battlefield fatality. In World War I, where heavy artillery ruled, it took four tons per KIA. The Allied Powers were killing by the millions, and each killed enemy cost an average of $36,485.
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Nine months after the war ended, the U.S. national debt peaked at an astounding $26,594,267,878.45. The government was hoping to recoup some of this by selling surplus grain and pork to the starving nations of Europe. Federal Food Administrator Herbert Hoover dismissed the idea, arguing that it was unethical and impractical to let food rot on the docks while waiting for countries to give money they did not have.
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The Wilson administration tried to keep the Allies afloat through massive bond drives.
National Archives

In addition to its own deficits, the United States had loaned billions of dollars to more than twenty different countries, many of which were unable or unwilling to pay. After many years of negotiating, the largest debtors agreed to yearly payments lasting several decades. Greece was set to pay off its loan by 1948; Germany by 1981; Finland, France, Estonia, and Great Britain by 1984; and Austria by 1990.

For one American economist, this was ideal. Predicting the Roaring Twenties would go on for some time, he argued “the United States will retire all its debt by about 1950…receipts from foreign debtors will run on to 1985 or to 1990. Therefore for a period of 35 to 40 years the future generations will enjoy a subsidy.” Indeed, those generations would live to see a great many subsidies, most through money borrowed rather than money lent.
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In the last four years of the Wilson presidency, the federal government spent more money than it had in the previous 128 years combined.

3
. FRANKLIN DELANO ROOSEVELT (1,326%)

NATIONAL DEBT IN 1933: $19 BILLION

NATIONAL DEBT IN 1946: $271 BILLION

FDR may have spent a bundle on the New Deal, but the price tag for World War II made the cost of his social programs look like chump change.

Oddly enough, Roosevelt ran as a fiscal conservative in the 1932 elections. “I accuse the present administration,” the Democrat said of Herbert Hoover, “of being the greatest spending administration in peacetime in all our history. It is an administration that has piled bureau on bureau, commission on commission.” Achieving a landslide victory, Roosevelt initially planned to reduce spending. He hired Congressman Lewis Douglas, a diehard financial tightwad, as his first budget director. For his treasury secretary, he chose Republican businessman William H. Woodin, followed soon after by the equally conservative diplomat Henry Morgenthau.
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As his administration began to experiment with employment and pension programs, his New Deal began to run in the red. Roosevelt accepted the deficits, but many of his contemporaries did not, including Douglas. By 1934, Douglas was out. In came more relief programs.

The plan was to recharge the economy rather than create a culture of dependency. Young men who worked in the Civilian Conservation Corps, preserving and reclaiming usable land, were required to send twenty-five dollars of their thirty-dollar weekly checks back to their families. Social Security was to be paid primarily by employers and their employees. Internal improvement programs like the Tennessee Valley Authority were meant to turn underdeveloped rural areas into revenue-producing towns and cities. During the 1936 presidential campaign, Roosevelt acknowledged the national debt had more than doubled, but he insisted, “There is much to show for it.” Gross domestic production had returned to pre-Crash levels, and joblessness had been reduced by nearly 30 percent.
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FDR signs the congressional declaration of war against Japan and consequently turns the federal debt into a mammoth and permanent fixture.

The opportunity to tame the debt, for Roosevelt or for any president to follow, effectively vanished with the outbreak of the costliest and deadliest war in world history. Hoping to stay neutral, then to simply supply friendly nations through L
END
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EASE
, the administration succumbed to full involvement in 1941, after the Japanese navy inflicted billions of dollars’ worth of damage upon bases in Oahu, the Philippines, Guam, and Wake Island. Federal spending went from 40 percent of GDP to a rapacious 120 percent, the highest rate ever in the nation’s existence. Citizens accustomed to paying 7 percent tax were soon paying 28 percent, and it was nowhere near enough to cover the cost. For the first time in its history, the government began deducting money directly from its citizens’ paychecks.
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By 1942, 73.2 percent of the federal budget was going to the war, and the country was pumping out more industrial goods than all of the Axis nations combined. In 1944, 86.6 percent of all government expenditures went into military operations, as the nation trained and outfitted fifteen million troops. Shipyards eventually produced ten major battleships, twenty-seven aircraft carriers, over one hundred escort carriers, more than four hundred cruisers and destroyers, and over sixty-six thousand smaller craft. Factories rolled out more than thirty thousand heavy bombers, over sixty thousand tanks, land mines and small arms by the millions, and bullets by the billions. In 1945, half of all industrial goods in the world were made in the United States, and most of it was military hardware. But to fuel the industrial giant, the country increased its debt 500 percent in four years. Technically, a part of the existing debt in 2012 still consists of money and interest owed since 1945.
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Lend-Lease, established in 1941, provided food, fuel, and munitions to forty Allied countries. By itself, the program eventually cost in excess of fifty billion dollars, a total 20 percent greater than the entire federal debt amassed by the United States in its first 150 years of existence. There was no repayment plan.

4
. RONALD REAGAN (188.4%)

NATIONAL DEBT IN 1981: $994.8 BILLION

NATIONAL DEBT IN 1989: $2.87 TRILLION

Upon taking office, Ronald Reagan removed the portraits of Thomas Jefferson and Harry Truman from the White House cabinet room. In their stead he placed an image of Dwight Eisenhower “because I beat him for $10 the first time we played golf,” Reagan said, and a painting of Calvin Coolidge because he reduced the debt.
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But Silent Cal did not have to contend with Social Security, Medicare, Medicaid, or many other social programs, which constituted nearly half the federal budget in 1981. Nor did Coolidge have much of a military to support, while Reagan inherited the largest military budget in the world at $192 billion.

Reagan still chose to fight the debt with a Coolidge strategy, which actually belonged to Cal’s treasury secretary, Andrew Mellon (who also served under Harding and Hoover). Mellon firmly believed in driving taxation down to stimulate private investment. Reagan emulated the idea with a series of breaks across the board, mostly to large corporations. While the government acquired approximately 45 percent of its revenue from individual income taxes (a level consistent since the Eisenhower administration), the Gipper reduced the burden on big business down to 8 percent and less (compared to 25 percent under Eisenhower and others). In turn, the president demanded Congress make cuts to entitlements (that is, commit political suicide) while he beefed up the Cold War military.
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Falling revenues and increased expenditures worried a great many people, including budget director David Stockman, who noted that Reagan’s military buildup was more expensive in adjusted dollars than Lyndon Johnson’s tab for Vietnam. He also realized that his boss had chastised Jimmy Carter for running an eighty-billion-dollar deficit yet proceeded to double that amount in short order. When discussing these matters with his chief executive, Stockman noticed Reagan “ignored all palpable, relevant facts and wandered in circles.”
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