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How did the national debt get to be so big?

National Debt Glossary: Key terms for understanding America's financial crisis


The government has been increasing its spending — particularly on such items as Social Security, Medicare and, for a time, national defense — at a rate faster than revenues have been growing.

Also, there is a snowball effect resulting from each increase in the debt: As the debt expands, so do the interest payments. In addition, the high inflation and interest rates of the 1970s and early 1980s contributed to the rapidly growing debt.

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Even with inflation and interest rates declining in recent years, the debt has not been reduced because spending has continued to outpace revenues.

SOURCE: Federal Reserve Bank of New York

 

See all terms in the National Debt Glossary

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