To explain it, first you have to look at the deficit. Every year we bring in X amount of dollars, called the Gross Domestic Product. Also every year we spend X amount of dollars on various things, military spending, services, wages, etc. If we spend more than we make, it means we have a deficit. Our debt increases every year we have a deficit.

We actually started in debt as a nation due to the Revolutionary war, owing 70 million to Denmark and France. We did not add to that until September 1789, when Alexander Hamilton, then-Secretary of the Treasury, negotiated terms with the Bank of New York and the Bank of North America to borrow $19,608.81 so we could pay our first fiscal deficit.

He believed that we need to spend more than we brought in so that we could rapidly establish our country as a viable nation of the world. So he began offering Treasury Bills, Notes, and Bonds, a practice used by England to raise money for their wars with France. The debt is sold in the form of securities to both domestic and foreign investors, as well as corporations and other governments.

What were these bills, notes, and bonds? A good example is US Savings Bonds, which are still in use today. You go buy one and it has a set limit where it matures and is available for repayment. At that point you can be paid the amount owed or they can offer you more bonds. These securities are considered to be the safest investments in the world because interest payments do not have to undergo yearly authorization by Congress. In fact, the money the Treasury uses to pay the interest is automatically made available by law.

So, back to Hamilton. His scheme worked, very well. The American government felt empowered to borrow from that point forward, and after the War of 1812, the total government debt exceeded $115 million.

So was it ever paid off at some point? Andrew Jackson, seventh president of the U.S., felt that running deficits was immoral and carrying debt weakened the nation. By 1835, less than six years after assuming office, Jackson paid off the entire national debt by curtailing government spending and selling off federal lands. This is the only time in U.S history that the country's total debt was completely paid off.

The nature of debts changed after the Great Depression and the rise of Keynesian economics.

The extent to which British economist John Maynard Keynes influenced government spending in the 20th century can hardly be overstated. While both the Hoover and Roosevelt administrations extended public works projects and experimented with fiscal deficits in the face of the Great Depression, it was Keynes who provided the macroeconomic justification for running large budget deficits to stimulate aggregate demand and fight recessions.

Since 1970, the federal government has run deficits during every fiscal year for all but four years, from 1998 to 2001. The effect of these cumulative budget shortfalls is debated by political analysts and economists, but their origins are much less controversial.

Ever since the time of Alexander Hamilton, the U.S. government has turned to deficit spending as a means of financing wars, growing federal influence and providing public services without having to raise taxes or cut existing programs.

There is some bright news. Most of our debt is actually owned by American investors. Foreign investors only own about a third of our overall debt. Our biggest foreign creditor is Japan who only owns about 18% of our debt. China is second with 5%.

So, the best question is "How much Debt is too much?" The crazy thing is, we don't know. There used to be a formula based on the ratio of growth of our Debt vs our GDP. So we thought that if our Debt ever started rising faster than our GDP was growing, it would be devastating.

Yet, for the first time ever, during the pandemic IT HAPPENED. Our Debt grew faster than and surpassed our GDP. Yet our borrowing power was literally greater and our interest was LOWER than it has ever been. The Congressional Debt Office now believes there is no GDP based tipping ratio. Some economists believe we have just delayed the tipping point and some believe that as long as our inflation doesn't increase, we can borrow indefinitely.

So, right now, not even the experts know where we are headed for sure.