OpenTube

How Did America Pay Off The National Debt Last Time?

How Business Worked

1,074,834 views

Sign up for my FREE newsletter! - https://www.compoundeddaily.com/

------

Link To Our Other Channel: howmoneyworks

Written By: Sam

Video Created By:
Svibe Multimedia Studio
Editor: Cardan
Media Gatherer: Andrea Rivas

Footage Courtesy of: Getty Images

Music Provided By: Epidemic Sound

📩 Business Inquiries ➡️ sponsors@worksmedia.group

#debt #finance #money

------

Sources (In Order)

https://fred.stlouisfed.org/series/A0...

https://www.theatlantic.com/newslette...

https://fred.stlouisfed.org/graph/?g=...

https://econofact.org/wp-content/uplo...

https://fred.stlouisfed.org/graph/?g=...

https://www.oecd.org/en/topics/marsha...

https://www.econlib.org/archives/2010...

https://fred.stlouisfed.org/series/FY...

https://apnews.com/article/doge-musk-...

https://www.nbcnews.com/politics/poli...

https://www.jstor.org/page-scan-deliv...

https://upload.wikimedia.org/wikipedi...

https://www.nber.org/digest/oct09/war...

https://fred.stlouisfed.org/series/FY...

https://www.federalreservehistory.org...

https://www.nytimes.com/2026/09/01/bu...

https://www.theguardian.com/business/...

https://fred.stlouisfed.org/series/GDP

https://www.cbo.gov/publication/59946

https://www.ssa.gov/oact/TR/2024/

https://www.nber.org/system/files/wor...

https://peri.umass.edu/wp-content/upl...

------

For just the second time in history, America has a debt to GDP ratio of over 120% represented by 40 trillion dollars worth of outstanding liabilities.
Just paying the interest on this debt is now costing Americans over a trillion dollars a year alone…
and, as Uncle Sam piles on ever more debt and continually refinances onto higher interest rate bonds, that cost is only going to grow from here.
Now for a long time, we have always been told by most economists that America's debt burden was “manageable” or perhaps even “optimal” given its size and uniquely privileged position in the global economy… (whatever that meant)... but today, even a lot of those confident voices are suggesting that this might have gone too far.
If this continues, just the interest on this debt could quickly end up growing faster than the American economy does… and at that point it’s basically in a hole that will be impossible to dig its way out of… or atleast… that’s the story…
Because well yeah… we have kind of played these games before…
In the aftermath of the second world war the national debt was ALSO over 120% of GDP, and America still managed to pay it down to roughly half that level within a decade.
And it’s not exactly like Uncle Sam was pinching pennies, this happened at the same time as expanding generous welfare programs that effectively established the modern American middle class, while also gearing up for the cold war, and helping to rebuild both Western Europe and Japan.
Sooo what is it that they did back then that they can’t just do again today?
Well, the answer involves everything you need to get a finance bro excited, from years of global macro-economic planning being based on an excel formatting error, all the way down to the simple fact that… as much as we might not like to admit it… it’s possible that America just isn’t that special anymore…

20 Comments

@johnl.7754 3 weeks ago

Winning WW2 almost unscarred probably helped

@dougsheldon5560 3 weeks ago

Remember what the 1950's top tax rate was? yeah, about 90%. And somehow we had the most prosperity.

@peterbyrne7348 3 weeks ago

Hey it's Labor Day. I'll look at a spreadsheet tomorrow

@disorderandregression9278 3 weeks ago

Ironically, the only other time in US history where paying more in interest than in its own military ever happened was between thelate 1920's and early 1930's. However, that was only because military spending was uniquely depressed at that time.

@hyperionsama 3 weeks ago

Has America tried unplugging the economy, and plugging it back in?

@palpalps 3 weeks ago (edited)

the often overlooked factor is the double digit inflation that rapidly halved the value of the currency in the 1940s

@RManPthe1st 3 weeks ago

9:43 I didn't know 1940 was groundhog day hah

@weswest8666 3 weeks ago

Plenty of available workers now except there are no jobs, all the money just circulates between 10 mega companies over and over.

@camadams9149 3 weeks ago

I don’t do the debt conversion. It is quite literally only brought up when we are offering something to average people.
There is infinite money for wars, tax cuts, businesses. But healthcare or food assistance? Nah “the debts too big”

@RobinNow_Art 3 weeks ago

The irony is that people say that the wealthy can’t afford to pay taxes, but the people buying the bonds are the same people who have enough disposable wealth to afford them.

In other words we used to tax the rich, now we just borrow from them.

@MrChronicpayne 3 weeks ago

Glossing over how the US got all the money to pay these companies to build factories and to pay families two salaries... The European empires moved a shitload of their wealth (either through purchase or repayments) to North America. That is not something that is repeatable in 2026.

@nivbarshem2674 3 weeks ago (edited)

10:46 same problem in the graph, the year 2000 and 2020 are represented, but 2010 is there twice.

@sebastiaanb2651 3 weeks ago

You aren't supposed to be slashing budgets during a recession. You're supposed to be running surpluses during a boom so that you can spend during recessions. It's just that politicians dont wanna cut the free gifts when things get better coz ppl like free money.

@Keeve5 3 weeks ago

Our system should really be called "debtism" instead of "capitalism"

@kpp8349 3 weeks ago

While there is always the saying “don’t attribute to maliciousness what can be attributed to incompetence” its very easy to see them “accidentally” dropping the data points that would completely change it from the outcome they wanted. Too bad that did terrible things to major economies

@alexraskalove7119 3 weeks ago

Corporate marginal tax rate was 92% in the 1950s...

Also the fed is a private corporation itself , printing $$$ backed by nothing... This might have something to do with the situation

@henrikleppa7632 3 weeks ago (edited)

STOP USING AI FOR YOUR CHARTS!!! Edit: at 9:48 the chart has every year as "1940", and at 10:42 the year "2010" appears twice.

@thumbsprain42 3 weeks ago

Imagine posting all this without mentioning their effective tax rate until Reagan. Are you ignoring that for a reason?

@DataScienceDIY 3 weeks ago

The larger problem is what we choose to spend our government money on. The national debt isn't being used to build infrastructure projects or put the average citizen ahead, it is being used to fight wars of choice and give grants and bailouts to some of the biggest corporations. Meanwhile inequality is at historically unprecedented levels. If the USA collapses under the weight, do you think the rich individuals and mega corporations will help? They will just leave once they have extracted all they can.