Published: Oct. 29, 2018 at 2:31 p.m. ET
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Donald Trump claimed on the campaign trail that, as president, he would completely eliminate the then–$19 trillion in national debt. Let’s just say he’s not exactly on track.
Since he made that promise in early 2016, the debt has ballooned to $21.7 trillion, and his tax cuts are expected to drive that number higher.
But before you jump on...
Donald Trump claimed on the campaign trail that, as president, he would completely eliminate the then–$19 trillion in national debt. Let’s just say he’s not exactly on track.
Since he made that promise in early 2016, the debt has ballooned to $21.7 trillion, and his tax cuts are expected to drive that number higher.
But before you jump on the Trump-bashing bandwagon, it might be helpful to see how we got in this debt-riddled position.
Cost-estimating website HowMuch.net crunched numbers from the U.S. Treasury as well as various data points uncovered by the Balance to come up with this colorful, and very telling, history of America’s debt problem:
Of note, the visual lumps together all the presidents from 1780 to 1913 and uses inflation-adjusted dollars to make a fair comparison.
As you can see, Barack Obama takes the crown with almost $9 trillion added to the heap, though Trump may surpass that by the time he’s done. Percentage-wise, however, Ronald Reagan gets the nod, considering U.S. debt nearly tripled during his terms.
Here’s another look at how we got here from earlier in the year, when the debt first broke the $20 trillion barrier:
It’s not all about the president, of course. He submits the budget, but fiscal policies are ultimately set by Congress. More important, outside factors like downturns and wars obviously make for uneven comparisons.
Dick Cheney once famously said, “Deficits don’t matter.” As it stands now, the country and the economy just keep plugging along even as the debt continues to grow. But how long can that last?
HowMuch.net’s Raul Amoros referred to Earnest Hemingway’s response when asked how he’d gone bankrupt. “Gradually, then suddenly,” the author quipped.
Government spending is often designed to boost the economy, which means that the national debt and the country's gross domestic product—the total market value of all goods and services produced within the country's borders—are correlated.[13]
"The national debt is typically scaled relative to GDP, because this allows investors to determine the total amount of governments obligations relative to its ability to repay these obligations," says Rhea Thomas, an economist at Wilmington Trust.
"In addition, it allows for consistent comparison over time and across countries. Countries with high debt to GDP ratios tend to be associated with lower long term growth."[13]
For the fourth quarter of 2021, the U.S. had a debt-to-GDP ratio of 123.39%, according to the Federal Reserve Bank of St. Louis. That's almost double what it was in the fourth quarter of 2007, shortly before the Obama administration increased spending to deal with the Great Recession. [14, 15]
According to a study conducted by the World Bank, a ratio above 77% for a prolonged period could stymie economic growth.[16]
In all of this, it's important to note that the federal government pays its debts with tax revenue, not GDP.[17] Politicians continue to be at odds over how to generate revenues and how to spend those revenues.[10]
"Paying back the debt will require higher taxes or reduced government spending, both of which are difficult to do politically and result in slower growth," says Thomas. "Governments may also choose to print money to pay for debt, but this raises the risk of runaway inflation and higher interest rates."
Thomas also adds that as debt levels grow, investors may demand higher interest rates out of concern over the government's ability to pay its debts. Higher interest rates would, in turn, take away from private investments, and it would also require more government spending to make larger interest payments, dampening productivity and long-term growth.
The national debt can be a politically polarizing issue, but it's important to keep the context in mind for each president. As spending continues to rise without a correlated increase in revenues, the national debt will continue to increase, likely putting more financial strain on future generations.
When a president takes office, they inherit the previous administration's federal budget and budget deficit, which stands for their first year. This is because the federal fiscal year runs from Oct. 1 to Sep. 30, making it impossible for the incoming president to influence whether or not the budget has a deficit from January, when they take office, through the end of the fiscal year.
Although almost every U.S. president in the past half-century has run a record budget deficit at one time or another, the largest budget deficits in U.S. history were run by former President Donald Trump and his two immediate predecessors.
However, under the administration of Trump's successor, President Joe Biden, the deficit has gone down, even though his administration has had to deal with expenses connected to the COVID-19 pandemic.
- Donald Trump is one of three presidents with the biggest budget deficits in history.
- The deficit topped $1 trillion in 2020.
- By 2022, under Joe Biden's administration, the deficit has declined to some $900 billion.
- The U.S. government has run a budget deficit for nearly all of the past 60 years.
- A president's influence over a budget deficit doesn't start until after the fiscal year ends (September 20) during their first year in office.
During the first half of the 20th century, the largest budget deficits were seen during the two world wars, and, relative to the size of the economy, the largest budget deficits in history were seen during World War II.
While the United States has run a budget deficit nearly every year since 1961, the deficits began to balloon during the 1970s and 1980s.
President Ronald Reagan took office in 1981, vowing to limit the size of government. Still, during his eight years in the White House, the nation's deficit roughly doubled and topped $200 billion several times. Reagan's successor, George H.W. Bush, also presided over a record-breaking deficit of $290 billion in 1992.
Under pressure from Republicans in Congress, President Bill Clinton, a Democrat, agreed to consistently cut the deficit and eventually oversaw the first budget surplus in decades.
The surplus stood at $236 billion in 2000, Clinton's final year in office. The $128 billion surplus recorded in 2001 was the last time a surplus had been seen this century.
When he took office in 2001, President George W. Bush cited the Clinton surplus as evidence that taxes were too high. He pushed through significant tax cuts and oversaw an increase in spending, and the combination again drove the U.S. budget into the red.
The deficit reached a record $458 billion in 2008, Bush's last year in office, and would triple the following year as the Bush and Obama administrations faced the Global Financial Crisis.
When discussing presidents and budget deficits, it's essential to keep some things in mind. First, Congress must approve all spending while a president proposes an annual budget. The president's power over the budget is never absolute. It can be severely limited if the opposition party holds a majority in either the House of Representatives or the Senate or if they hold the majority in both.
Another thing to know is that "discretionary" spending accounts for only about one-third of the typical U.S. budget. The majority is "mandatory" spending that is dictated by law. The most significant sources of mandatory spending are Medicare and Social Security.
In addition, the federal fiscal year runs from Oct. 1 to Sept. 30. This means that during a new president's first year in office, the budget that is in place was passed during their predecessor's term. However, incoming administrations can request additional spending upon taking office.
The U.S. budget deficit exploded in fiscal year 2009, ultimately reaching $1.4 trillion under President George Bush and the incoming Obama administrations struggled to contain the economic fallout from the financial crisis. Most of that deficit was created on Bush's watch, but Obama and the Democratic-controlled Congress added hundreds of billions of dollars to it in early 2009.
The deficit would remain above $1 trillion through the 2012 fiscal year but would be slashed to as low as $440 billion in the later years of Obama's presidency.
Relative to the size of the nation's economy, the biggest U.S. deficits in history were seen during World War II.
President Trump continued the trend of pushing the deficit higher as he sought massive tax cuts and increased defense spending. His first budget, for the 2018 fiscal year, recorded a deficit of $779 billion.
Under Trump, the deficit reached $984 billion in 2019 and hit more than $1 trillion in 2020, and that was before Congress passed a $2 trillion stimulus package to fight the economic fallout from the coronavirus pandemic.
One of Joe Biden's campaign promises was to reduce the federal deficit, and there's been progress on the account. The Congressional Budget Office (CBO) estimates that the federal budget deficit was $475 billion in the first five months of fiscal year 2022, which represented an amount lower than those for the years 2021 and 2020.
"It is less than half the shortfall recorded for the same months of fiscal year 2021 ($1.047 billion) and three-quarters of the deficit recorded in 2020 ($624 billion), just before the start of the coronavirus pandemic," noted the CBO. The turnaround is due to more robust revenues and fewer expenses—from October 2021 through February 2022, revenues were $371 billion (or 26%) higher, and outlays were $201 billion (or 8 percent) lower than they were during the same period a year ago," CBO estimates.
Still, the federal budget deficit stands at an estimated $900 billion.
A budget deficit occurs when expenses exceed revenue and indicate the financial health of a country. The government generally uses the term budget deficit when referring to spending rather than businesses or individuals. Accrued deficits form national debt.
A budget surplus occurs when income exceeds expenditures. The term often refers to a government's financial state, as individuals have "savings" rather than a "budget surplus." A surplus is an indication that a government's finances are being effectively managed.
Formers presidents George Bush, Barack Obama, and Donald Trump all ran the largest U.S. deficits in history.
When President Regan left office after serving two terms, the deficit was 5% of the economy and interest payments on the debt were $169 billion in 1989.