As the high-stakes wrangling over the fiscal cliff gets
underway, we thought it might be the proper moment to remind
everybody just how the United States managed to become the
world’s biggest debtor. So, here’s how. Freedom isn’t free The
US was born in debt. The earliest full reckoning of US national
debt was compiled by Alexander Hamilton, the first US Treasury
Secretary, who was sort of like the Nate Silver of his era—a
self-taught economist. The analysis dates to 1790 and puts the
newborn US at around a 30% debt-to-GDP ratio, with the debt a
bit higher than $75 million. Where did that debt come from?
Well, the Continental Congress, the rough equivalent of the
Federal government in revolution-era America, lacked the power
to tax. It first tried to pay for stuff by printing money. This
currency, known as the Continental, collapsed. The nascent US
government also raised cash by borrowing under all sorts of
authorities. This National Bureau of Economic Research working
paper lists them: These included certifi