Committee on Finance Presents First National Budget to Continental Congress (1778)
On September 19, 1778, the Committee on Finance of the First Continental Congress presented the first national budget. After passing the U.S. Constitution, Congress had the first opportunity to pay for its war debts and work to regulate the federal government’s finances.
After the Revolutionary War, the United States had incurred a large amount of debt. However, under the Articles of Confederation Congress had virtually no power to force taxation on the states and could not adequately regulate the economy. So, the delegates at the Constitutional Convention replaced the Articles of Confederation with the Constitution.
The Constitution granted Congress the power to levy taxes and better regulate the federal budget. Under the Constitution the U.S. Treasury Department is responsible for raising money for debt and limited by a veto on spending from Congress. In short, Congress must either approve or deny any new requests for money by the Treasury Department. This is one of the checks and balances of the Constitution and has been part of the very core in the development of the United States.
Generally speaking, large public debt usually results from wars, recessions, and inflation. Throughout most of the first 200 years of U.S. history the federal budget remained in a surplus or at a balance. However, the United States incurred significant national debt as a result of the combination of the Great Depression and World War II. Then, the country began to rebound during post-World War II.
Then came the 1980s. For the first time in the nation’s history Congress voted to run large national deficits without any wars or significant economic downturns in the economy. At this time, Congress also passed some large tax cuts and increased defense spending. All of these factors led to a great increase in the nation’s federal debt.
In recent history, Congress rarely denies debt increases and the current U.S. debt is well in the trillions of dollars. U.S. debt to foreign countries has more than doubled in the last twenty years and China and Japan own a very large percentage of that money. For example, by 2009, the U.S. owed China nearly $800 billion and Japan over $750 billion.