In August, the U.S. reached its highest-ever debt level: $40 trillion. As a percentage of gross domestic product (GDP), it now stands at about 123%. The Republican controlled House Budget Committee reported that our debt now exceeds the size of the U.S. economy.
It surpasses the historic peak following World War II, when the debt-to-gross domestic product (GDP) ratio was 122%.
Total debt is referred to as gross debt because it combines debt held by the public and intragovernmental debt (money the government owes to its own internal trust funds, such as Social Security and Medicare). Public debt is bought and sold in the marketplace, with current foreign holdings accounting for about 32% of the federal public debt. The three largest countries holding our debt, in order of size, are Japan, the UK, and China, totaling $2.7 trillion.
The parties feud over who is responsible for our current debt. The Republicans issued a statement through the House Budget Committee accusing “Bidenflation” of causing Americans to feel the pain of higher prices at the grocery store or at the pump over the last four years, without mentioning that about half that time President Donald J. Trump was in office. House Democratic Leader Hakeem Jeffries appeared on Bloomberg TV and put it bluntly: “People are drowning in this failed Trump economy.”
Aside from the political debate, the reality is that United States budgets have grown exponentially faster than revenue since 1981, during Ronald Reagan’s two administrations. From 1950 to 1975, under both Democrats and Republicans, America kept the debt-to-GDP ratio below 20%.
We recovered from the post-World War II debt because the United States was the world’s leading manufacturer. We produced just over 50% of all products worldwide. Our major competitors, the Europeans, found their countries’ infrastructure destroyed by the war. America dominated the world, not only in military strength but also in economic productivity.
The world’s economy grew, and so did our competition, to the point that the U.S. share of global manufacturing output is about 17%. Meanwhile, China now ranks as the world’s largest manufacturer, producing about 31% of the world’s manufactured goods. As a result, U.S. budget deficits cannot be reduced as quickly as they were in the three decades after World War II, even though the U.S. federal budget ran a deficit in 22 of the 30 years from 1946 to 1975 inclusive. And from 1947 to 1974, the deficit didn’t exceed 20%.
So, budget deficits have been the norm since WWII, not balanced budgets. Nevertheless, Americans should be concerned that President Donald J. Trump, with the backing of the Republican-controlled Congress, has accelerated the burden of historically high debt payments on our country.
Trump’s two terms have each had the highest percentage of public debt as a portion of our Gross Domestic Product (GDP) since the end of WWII. In 1946, the ratio of our public debt to GDP reached 106%; in 2020, the last year of Trump’s first term, it was 100%. Public debt currently accounts for 80% of the total debt.
By the end of the first fiscal year of Trump’s second term in 2026, debt is just above 100%, even though COVID is no longer an economic threat. Without including Trump’s $1.5 trillion Fiscal Year 2027 defense budget proposal, the Congressional Budget Office (CBO) estimates that public debt will reach 107% in less than 3 years.
Over the past three weeks, I have searched for an explanation of how the world’s richest country now has the largest debt. Numerous articles from both the right and the left describe the seriousness of the situation and assign blame to their opponents.
Journalists and politicians from both sides of the political spectrum present inconsistent and misleading data, such as the following:
- The word “debt” may not be identified as either gross or public debt. I explained the differences earlier.
- The time frame used to measure debt associated with a president is inconsistent; sometimes it is an administration’s calendar years, and other times it’s their fiscal years.
The time period for measuring a president’s contribution to the debt could be either their fiscal years or calendar years in office. Fiscal years begin on October 1st and end the following year on September 30. As a result, the first nine months of a newly elected president’s term are spent inheriting the budget from the prior year. Comparing debt from different sources is inaccurate if the data does not refer to the same time period.
- Some graphs show changes in the federal deficit by president, which does not measure debt. This implies that a particular president either contributed to or reduced gross debt.
Explanation of the Above Table
The first column after each president shows their actual calendar term, from Jan. 20 of the inauguration year to Jan. 20 of the departure year. This time frame applies to all the data.
The second column comes from data collected in the A-Mark Foundation’s report, “U.S. Presidents and the Federal Deficit.” This column’s data has been presented, by itself, on Facebook and other social media to illustrate that Republicans are largely responsible for the national debt.
The numbers are correct; however, the methodology uses only two data points for each president’s Fiscal Years, which run from a president’s first budget FY (October 1 of the first year in office) to that president’s final FY budget (September 30 of the year after he left office). The problem isn’t using 2 single fiscal year balances, but that It leads the reader to mistakenly assume the single measurement measuring their difference shows which presidents reduced or increased public debt while in office.
The A-Mark report implies that the Democrats reduced deficits and therefore public debt, but it ignores the total debt accumulated over a president’s term. The nominal amounts listed for each president are not totals of all deficits in that president’s term.
The third column shows that the nominal amount of public debt grew in every president’s term. The news doesn’t look so good for the Democrats. The total public debt increase under the Republicans was $13.45 T, and for Democrats it was $14.49 T. If you break it down by the number of terms served by each party, the public debt per term comes to $2.24 T for Rs and $3.62 T for Ds.
The fourth column also shows a nominal amount gross debt increase in every president’s term. The total gross debt increase under the Republicans was $17.077 T, and for Democrats it was $18.345 T. If you break it down by the number of terms served by each party, the gross debt per term comes to $2.85 T for Rs and $4.59 T for Ds.
For columns 3 and 4, the period uses debt changes measured using the quarterly Treasury observation closest to each president’s actual January 20 inauguration and departure dates. Data originates from the U.S. Department of the Treasury’s Treasury Bulletin series, as reported by FRED: Federal Debt Held by the Public (FYGFDPUN) and Federal Debt: Total Public Debt (GFDEBTN).
Bottom Line
This chart provides a necessary baseline for a critical discussion of how each administration spent taxpayer dollars, resulting in a $40 trillion debt. We know the exponential increase in debt began during Reagan’s two terms, when the national debt nearly tripled, rising from a gross federal debt of $965 billion to $2.741 trillion.
This table’s numbers were affected by numerous variables. Consequently, it is important to examine the conditions and policies that led to the national debt during each president’s term. To judge the merit of a growing national debt, one must ask whether the borrowed funds are improving or burdening citizens’ lives. Part II of this exploration of the national debt will attempt to answer Why Does America Have a $40 Trillion Debt?
Nick Licata is the author of Becoming A Citizen Activist and Student Power, Democracy and Revolution in the Sixties. He is the founding board chair of Local Progress, a national network of over 1,300 progressive municipal officials and a former Seattle City Council President.
Thank you NIck for this article. I'm glad to see a Democrat focused on this vital issue. The interest payments alone are going to be a terrible waste of revenue.The consensus among budget hawks seems to be that we need Democrats to target getting the annual deficit down to 3% of GDP right away, the next session balancing the annual budget and eventually producing enough of a surplus that we can reduce the debt down to about 60% of GDP. That will need significant reductions in annual spending and increases in annual revenues. I argue for a target of returning the corporate tax revenues to 40% of the total income tax revenues and significantly increasing the tax revenues from households with more that $250,000 in gross income (not adjusted net). The cuts need to come from the military budget. It is totally a waste as defense, although it does provide a lot of employment, which we need to address. Finally we need to quickly fully fund Medicare and Social Security and we need to stop promising folks we will expand regular Medicare to include things we don't have the revenues to support. I'm told Social Security Works is preparing a workable proposal.
Looking forward to your continuation of this topic. I hope it addresses our tax system and the many handouts given to corporations. Thanks so much!