The Only Time America Was Free of Debt—and How It Led to the Two-Party Political System
“An engaging treatment of a topic of perennial concern and frequent misunderstanding, this lucid tale of the brief moment when the United States was debt-free should be on every Congress member’s bedside table.”—Peter J.Woolley, Professor of Comparative Politics, Fairleigh Dickinson University
When President James Monroe announced in his 1824 message to Congress that, barring an emergency, the large public debt inherited from the War for Independence, the Louisiana Purchase, and the War of 1812 would be extinguished on January 1, 1835, Congress responded by crafting legislation to transform that prediction into reality. Yet John Quincy Adams,Monroe’s successor, seemed not to share the commitment to debt freedom, resulting in the rise of opposition to his administration and his defeat for reelection in the bitter presidential campaign of 1828. The new president, Andrew Jackson, was thoroughly committed to debt freedom, and when it was achieved, it became the only time in American history when the country carried no national debt. In A Nation Wholly Free: The Elimination of the National Debt in the Age of Jackson, award-winning economic historian Carl Lane shows that the great and disparate issues that confronted Jackson, such as internal improvements, the “war” against the Second Bank of the United States, and the crisis surrounding South Carolina’s refusal to pay federal tariffs, become unified when debt freedom is understood as a core element of Jacksonian Democracy.
The era of debt freedom lasted only two years and ten months. As the government accumulated a surplus, a fully developed opposition party emerged—the beginning of our familiar two-party system—over rancor about how to allocate the newfound money. Not only did government move into an oppositional party system at this time, the debate about the size and role of government distinguished the parties in a pattern that has become familiar to Americans. The partisan debate over national debt and expenditures led to poorly thought out legislation, forcing the government to resume borrowing. As a result, after Jackson left office in 1837, the country fell into a major depression. Today we confront a debt that exceeds $17 trillion. Indeed, we have been borrowing ever since that brief time we freed ourselves from an oversized debt. A thoughtful, engaging account with strong relevance to today, A Nation Wholly Free is the fascinating story of an achievement that now seems fanciful.

The staggering United States debt has a direct impact on every American, yet few are aware of where the debt came from and how it affects their lives
The United States has a debt problem—we owe more than $18 trillion while our gross domestic product, the value of all goods and services produced in America, is only $17.5 trillion. To pay down the debt, some recommend austerity, cutting federal expenditures. Others suggest increasing taxes, especially on the wealthiest Americans. In Understanding the National Debt: What Every American Needs to Know, economic historian Carl Lane urges that the national debt must be addressed in ways beyond program cuts or tax increase alternatives, but change can only occur when more Americans understand what constitutes our debt and the problems it causes. The gross national debt is composed of two elements: the public debt and “intragovernment holdings.” The public debt consists of bonds, bills, and notes purchased by individuals, banks, insurance companies, hedge and retirement funds, foreign governments, and university endowments. Intragovernment holdings refers to money that the U.S. Treasury borrows from other parts of the government, principally Social Security and Medicare. This accounts for approximately a quarter of the gross national debt, but that is money that we owe to ourselves, not another entity. The more the government borrows, the less is available for private sector investment, creating a “squeeze” effect that inhibits economic growth. The most burdensome problem is the interest due each year on the debt. Every dollar spent on interest is a dollar less for other purposes. Those elements of the federal budget which are termed “discretionary” suffer. The mandatory elements of the budget—Social Security, Medicare, Medicaid, and the interest on the debt—must be provided for, but defense and national security, education, energy, infrastructure repair and development, and other needs wind up with less. By understanding the national debt we have an opportunity to address our real debt challenge—its principal and interest.