U.S. Federal Deficits, Presidents, and Congress

Stephen Bloch

Last update: Oct. 24, 2013
Numbers for the end of fiscal year 2012-2013
Changed formulæ to more accurately reflect inflation

To anybody who's followed this page over the years: I've just changed the formula for adjusting for inflation, so the numbers in this page don't match what was on this page before Oct. 2013. The old version of the page is here.

Some time in early 2004, I ran across a Web site maintained by the Department of the Treasury, listing the U.S. National Debt year by year since 1791. The numbers by themselves are too big to be meaningful, so I put them into a spreadsheet to see if I could extract any interesting trends and patterns.

In particular, I wanted to be able to compare the effects of government policies under different Presidents and Congresses on budget deficits. This sort of comparison will inevitably have political implications, so I resolved to make the page as transparent and fact-based as possible: if you don't like my conclusions, here are the data and you can replicate them yourself. I was concerned about (conscious or unconscious) political bias, so I wanted to avoid any sort of sophisticated analysis that required lots of judgment calls. But some judgment calls are unavoidable.

Which President or Congress?

One issue is to which President or Congress a particular year's deficit should be attributed. U.S. Congressional terms start on Jan. 1, Presidential terms later in January, and the fiscal year on Oct. 1, so none of them exactly match up. Since most Presidential and Congressional actions take months to be implemented, much less to show a measurable effect on the debt, I decided that the fiscal year spanning a change of (Presidential and/or Congressional) terms would be counted as belonging to the outgoing President and Congress.

How to define "deficit"?

Another question was how to define the word “deficit”. In trying to keep things simple and transparent, I chose “one year's national debt minus the previous year's national debt”. But even that simple definition doesn't entirely resolve things.

How to adjust for inflation?

I wanted to adjust for inflation so one could meaningfully compare deficits from more than a few years apart. Originally, I used the formula

(debt in year X) - (debt in year X-1)
-------------------------------------
          (CPI in year X)

Then an economics-professor friend of mine pointed out a problem with this. Suppose the national debt is a trillion dollars, and the inflation rate is 10%. If the government spends exactly as much as it takes in this year, the national debt will still be a trillion dollars, but those dollars will be 10% less valuable a year from now; the nation is less deeply in debt than before, because it's easier to pay off the debt with inflated dollars.

To look at it another way, part of any year's government expenditures is interest on the national debt, paid at a rate that must be higher than inflation (or nobody would buy the bonds). So suppose we want to compare two governments: each inherits a $1 trillion national debt, and each spends exactly as much as it takes in, aside from interest payments, but one of them has 0% inflation and the other 10% inflation. All else being equal, the latter will have to pay 10% higher interest rates to bond-holders. So of these two governments, the latter shows up as having a $100 billion larger deficit than the former, even though both are in some sense equally fiscally responsible and this $100 billion increase in nominal debt is cancelled by inflation.

So as of Oct. 2013, I'm calculating deficit as

(debt in year X)   (debt in year X-1)
---------------- - ------------------
 (CPI in year X)    (CPI in year X-1)

What I did

1. Tabulated the national debt by year, back to 1911. (I originally went only back to my birth, in 1964, but then expanded the chart to 1911, stopping there because I ran out of CPI data.)

2. Adjusted these debts by the Consumer Price Index as of the end of the fiscal year to get a debt in constant (1983) dollars. (There's nothing magical about 1983, except that CPI figures are often expressed in 1983 dollars. If I used, say, 2006 dollars, all the numbers would be about half as large, but the shape of the curve would be exactly the same.)

3. Subtracted each year's constant-dollar debt from the next year's, as a measure of one-year federal deficit (including interest paid).

4. In 1977, the reporting date shifted by 3 months, so that "year" was actually 15 months long; I multiplied the deficit in this year by 4/5 to give an annualized figure.

5. Annotated each year by the party of the President and the majority party in each house of Congress (see House history and Senate history). Many years show a transition from one party to another.

6. Also annotated each year with the top-bracket individual marginal Federal income tax rate for returns filed that year (i.e. on the previous year's income), drawn from The Tax Foundation. This is an oversimplification, of course, since it doesn't say where that top tax bracket starts: for example, in 1992 the top tax bracket was 31% on income above $86,500, and in 1993 it was 39.6% on income above $250,000, but somebody who earned $125,000 in each of those two years would have seen almost no change. More dramatically, in 1941 it was 81% on income above $5 million, and in 1942 it was 88% on income above $200,000; somebody earning $250,000 in both years would have seen a marginal tax rate rise not from 81% to 88% but rather from 71% to 88%.

   Note that it's hard to ascribe cause and effect here: for example, when a war starts, tax rates and deficits usually both go up, but it would be hard to claim that one is because of the other; in fact, both are because of the cost of the war.

I haven't done much analysis of the Congressional data yet: I'd like to see whether party control of the Senate makes a consistent difference, whether party control of the House makes a consistent difference, whether the margin of control (e.g. 51% as opposed to 69%) makes a consistent difference, whether having the House and Senate controlled by the same party makes a consistent difference, whether having one or both houses of Congress controlled by the same party as the President makes a consistent difference, etc. But the data are there: perhaps somebody else will do that analysis for me :-)

Table 1: Deficit by year, corrected for inflation

These are the data from which all of the following tables are drawn, organized by year so you can draw your own conclusions about Presidents, Congresses, tax rates, etc.

The inflation-adjusted debt (seventh) column is simply the public debt expressed in 1983 dollars.

The deficit (eighth) column is the difference between one year's inflation-adjusted debt and the previous year's (annualized in 1977 because that fiscal year was 15 months long). I display this both as a number and as a bar-graph.

Comments on Table 1:

The largest one-year deficit in history was in fiscal 2008-2009, in the trough of the recession and the peak of TARP and stimulus spending intended to end that recession. Deficits decreased rapidly for the next two years as TARP loans were repaid and temporary stimulus ended, grew for one year of the tepid recovery, then apparently decreased again in 2012-2013.

The figures for 2012-2013 are probably rosier than they should be, because the Treasury department had reached the statutory debt limit five months earlier and used "extraordinary measures" to stay below the limit. On Oct. 17, 2013, after a political deal to raise the debt limit, the national debt jumped by $328 billion (about $140 billion in 1983 dollars), largely due to the unwinding of these "extraordinary measures". If all of this were counted in 2012-2013, it would increase the 2012-2013 deficit to about $353 billion, less than that in 2011-2012 but more than that in 2010-2011. Unfortunately, I have no way to separate the "extraordinary measures" from normal day-to-day variation or October expenditures, so I don't have an objective way to correct the figure. So I've put a row of question marks into the chart above; the "correct" 2012-2013 deficit is somewhere in that range.

Graph: Real Debt, 1911-present

The following graph shows the "real" (inflation-adjusted) national debt over the past century. This measures "how difficult would it be to pay off the debt?" A “sustainable” budget is one in which it doesn't get harder to pay off the debt -- in other words, inflation-adjusted deficits and surpluses balance one another over a number of years. Sometimes (e.g. 1998-2001 and 1978-1981), the national debt grows in nominal dollars, but actually becomes easier to pay off because inflation has made those dollars "smaller". I've put the graph on a log scale, so (for example) a 10% growth in 1941 looks the same as a 10% growth in 1915. (The vertical scale is labelled in 1983 dollars.)

Note the spikes for World Wars I and II and the remarkable flat line from 1946 to 1981, during which time real national debt varied by less than 25%. In other words, the Federal government had a “sustainable” debt for 35 years, as years of surplus almost exactly balanced years of deficit. But since 1981, the real debt has grown by a factor of six, shrinking in only three of those 33 years.

Table 2: The Top Ten Deficit Years

I have in my hand a copy of tonight's Top Ten list....

• 2008-2009, at $933 billion
• 2009-2010, at $694 billion
• 2011-2012, at $424 billion
• 1943-1944, at $361 billion
• 1942-1943, at $337 billion
• 2010-2011, at $310 billion
• 1944-1945, at $287 billion
• 2007-2008, at $262 billion
• 1985-1986, at $245 billion
• 1990-1991, at $235 billion

Again, 2012-2013 is probably somewhere on that list, but I don't know exactly where because I don't know how to correct for the Treasury department's "extraordinary measures" to stay below the debt ceiling.

Analyses by President

I then grouped the data by Presidential administration. As mentioned above, I consider the fiscal year spanning a Presidential election and inauguration to be part of the outgoing administration. This is usually a fair assumption, because most government programs take a while to start, and last for multiple years. Fiscal 2008-2009 is perhaps an exception: both the outgoing and incoming Presidents enacted expensive economic-stimulus programs that were written to take effect immediately. Accordingly, in the following tables, I've given George W. Bush two rows in the table: one for his whole term, consistent with all other Presidents, and one counting only his first seven years, ending with the figures of September 2008, by which time a recession had started but the government measures to deal with it hadn't been enacted yet.

After deciding on those conventions, there were still several different reasonable ways to look at the data.

How much did the annual deficit shrink or grow?

I subtract the deficit in a President's first year from the deficit in the year after that President stepped down (or, in the case of the current President, from the most recent deficit figures I have). This change in deficit is then divided by the number of years it took to achieve it.

Again, the data for 2012-2013 are unclear due to debt-ceiling shenanigans. Accordingly, I've added a row for Obama's first 3 years, for which we have more-reliable data.

Table 3: Average change in annual deficit

Comments on Table 3:

The first two full fiscal years of the Obama presidency saw an unprecedented decline in real-deficits: more than twice as much in two years as in Truman's eight years, and almost four times as much as much as in Clinton's eight years. Obama's third year broke this trend; the fourth year is unclear as mentioned above.

If the trends of Obama's first three or four years were to continue, the budget would show a substantial surplus in 2014-2015.

The first seven years of the G.W. Bush presidency increased the real deficit by slightly more than the twelve years of the FDR administration.

If one includes fiscal year 2008-2009 as part of the G.W. Bush administration (consistent with my treatment of all other administrations), that administration oversaw 3.7 times as much increase in Federal budget deficits as the FDR administration.

Obviously, many of the reasons a deficit grows or shrinks are beyond the President's control: Congress, the economy, the beginning or ending of a war, the beginning or ending of a recession, etc. For example, the beginning of World War II can be blamed for much of FDR's increase in the deficit, just as the end of World War II and the start of the post-war economic boom can be credited for much of Truman's matching decrease. I'm not sure what happened to Ford: he faced an economic recession, but so have many Presidents.

In my lifetime, every Democratic President has left office with a smaller deficit than he inherited, and every Republican President except Nixon has left office with a larger deficit than he inherited. This may be because Republican Presidents have placed high priority on cutting taxes, and placed lower priority on (or had less success at) cutting spending. Democratic Presidents have perhaps had equal success at cutting spending (I haven't researched those numbers), but have not been bound by promises to cut taxes.

How much debt was accumulated over a President's term(s)?

The previous approach, looking only at starting and ending deficits, doesn't distinguish between a President who oversees initially increasing deficits, then decreasing at the end (like Reagan) and a President who oversees initially decreasing deficits, then increasing at the end (like Carter), even though the former racks up more of a debt. So I computed the average annual deficit over a President's term(s).

Table 4: Average annual deficit

Comments on Table 4:

Again, Republican Presidents seem to rack up the big debts, at least in my lifetime (which started in 1964): Democratic Presidents tend to be "troughs" in the above graph, relative to their Republican successors and predecessors. Before 1964, the pattern is reversed: three of the four Democratic Presidents ran deficits over their time in office, while three of the four Republican Presidents ran surpluses.

The first three years of B.H. Obama accrued 2/3 as much total debt as the eight years of G.W. Bush, which in turn was almost twice as much as eight years of Reagan or twelve years of FDR. The biggest accrued-debt-per-year figures are associated with B.H. Obama, G.W. Bush, G.H.W. Bush, Ronald Reagan, FDR, Gerald Ford, Bill Clinton, and Herbert Hoover, in that order.

How does the accumulated debt compare with what it would have been with no change?

Since many of the items in the budget are multi-year commitments with considerable inertia (most obviously, interest on the national debt!), I recomputed the previous numbers, subtracting the annual deficit in each President's first year. In other words, this table compares how much debt was actually accumulated with how much would have been accumulated if deficits had continued as they were when the President took office.

Table 5: Average deficit minus first-year deficit

Comments on Table 5:

Again, Truman is an outlier: he took office in the middle of World War II, which immediately followed the Great Depression. The Federal government was running an enormous annual deficit in his first year, so it would have been remarkable if it hadn't decreased during his term. Likewise, Obama took office in the middle of, by far, the biggest-deficit year in history, dealing with two wars and the most severe recession since the 1930's; it would have been remarkable if the deficit hadn't decreased during his term.

In the past 100 years, there have been eight Democratic and nine Republican Presidents. Five of the eight Democrats oversaw average deficits smaller than they inherited, while seven of the nine Republicans oversaw average deficits larger than they inherited.

Last modified: Thu Oct 24 12:00:33 EDT 2013