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US Economy 101: National Debt vs. National Deficit
The U.S. national debt and deficit have become buzzwords for the 2020 election. But what is the difference?
Just the FAQ, TODAY
The claim: Clinton and Obama were the only president to reduce the deficit over the past 50 years
A few 2018 posts about presidential administrations and the federal deficit have reappeared on Facebook in recent weeks.
The reports contain photos of Democratic Presidents Bill Clinton and Barack Obama, and ask the question, “Why do Republicans claim to be fiscally conservative when they are the only two presidents to have reduced the deficit in the last 50 years?”
Erlene King – a user who shared a version of the post – told USA TODAY that she believes it is ‘100% true’.
“A Democrat is usually elected after a Republican resolves the issue. Then Republican Senators become fiscally responsible, forcing the Democrat to just solve the problem and never vote for social programs,” she wrote. “So the lower deficit.”
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What is the federal deficit?
Like any entity, the federal government generates revenue annually and collects expenses.
The income comes from sources such as federal income tax. Its expenditure is determined by the federal budget, and it includes federal benefits and funding for federal agencies, according to USA.gov.
If the total income exceeds the total expenses, the difference is called a ‘surplus’. If the total expenditure exceeds the total income, the difference is called a ‘deficit’. The figure is specific to each financial year.
The federal government usually works against a deficit rather than a surplus. The accumulated federal budget deficits, plus other out-of-budget expenses, consist of federal debt, according to the Treasury Department.
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Who reduced the federal deficit?
The claim in the viral post is on presidents who left office with less shortage than when they entered the White House.
The Office of Management and Budget tracked the revenue, expenditure and surpluses / deficits of the federal government from 1789 to 2025 (financial years after the current one are estimates). Let’s look at the last five decades.
President Richard Nixon entered the White House in 1969. At that time, there were $ 3.2 billion surplus. By the time he resigned in 1974, there was $ 6.1 billion deficit.
This was the basis for President Gerald Ford, who took over in 1974. By the time he left the White House in 1977, the deficit had widened to $ 53.7 billion.
That was the starting point for President Jimmy Carter when he entered the White House in 1977. By the time he left in 1981, it had grown to $ 78.9 billion.
That was the baseline for President Ronald Reagan when he left the White House in 1981. When he left in 1989, the deficit doubled to $ 152.6 billion.
This was the starting point for President George HW Bush, who entered the White House in 1989. With the departure in 1993, the deficit grew by more than $ 100 billion to $ 255 billion.
It was the base of President Bill Clinton, who entered the White House in 1993. By the time he went out there, there was a surplus of $ 128.2 billion.
It was the starting point for President George W. Bush, who took over the White House in 2001. By the time he left in 2009, there was a deficit of $ 1.41 billion.
This was the baseline for President Barack Obama, who entered the White House in 2009. By the time he left in 2017, there was a shortfall of $ 665.4 billion – about half of what it was when he entered.
That was the starting point for President Donald Trump, who came to the White House in 2017. By the time Trump leaves in 2021, there will be a deficit of $ 966 billion, according to estimates from the Office of Management and Budget.
According to these figures, it is true that only Clinton and Obama – the only Democrats other than Carter in the last 50 years – left the Oval Office in a year with a lower deficit than the year they arrived there.
Some other presidents reduced the deficit halfway, but they all left the White House in a year with a higher deficit than the year they entered.
What is behind the deficits and surpluses?
Joann Weiner, a professor of economics at George Washington University, told the USA TODAY that “it is in fact true that Republicans are creating deficits and Democrats are reducing the deficits by their personal choices.”
Tax cuts, for example – a hallmark of Republican presidents – reduce government revenue and make a deficit more likely.
“Presidents do not control every leverage in the economy,” she said. “However, many of the specific policies add to or reduce the budget deficit, and in general, Democrats are better at dealing with the deficit than Republicans are.”
Stephen Ellis, the president of common sense taxpayers, told the USA TODAY that some responsibility for the deficit also falls on Congress.
“Any president bears some responsibility for the deficit, but so does Congress, they pass on the expenses the president signs,” he wrote.
Ellis noted that divided government – in which the White House and Congress are controlled by different parties – also tends to “limit some of the spending.”
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What about federal debt?
It is noteworthy that the way in which each president increased or reduced the budget deficit over their term of office differs from the amount they contributed to the total federal debt.
“Reducing the deficit every year does not mean that the debt will go away,” Weiner explained.
The Treasury Department has been tracking the accumulated debt since 1993, and it has grown under each presidential administration, per Business Insider.
Under Clinton, federal debt grew to $ 1.49 billion.
“The debt is the country’s accumulated annual deficits over the years,” Ellis wrote. “Although Clinton had some surpluses, the accumulated deficits were more than that.”
Under Bush, federal debt increased by $ 4.30 trillion. Under Obama, it grew another $ 8.95 trillion.
It’s too early to say the final figure for Trump. But so far, the federal debt under his administration with US today has increased by about $ 7 trillion.
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Our rating: Missing context
It is true that Clinton and Obama have been the only president in the past five decades to leave the White House in a year with a lower deficit than the year they entered. But some other presidents have reduced the deficit halfway through their terms. Presidents are also not solely responsible for changes in the deficit; Congress, for example, plays a role. It is also noteworthy that the deficit differs from the federal debt – which has increased under Clinton and Obama. As a result, we view these messages as DISCONTINUING CONTEXT, as they can be misleading without additional information.
Our sources for fact checking:
- USA.gov, October 10, 2019, US Government Budget
- Treasury Direct, May 5, Frequently Asked Questions About Public Debt
- Office of Management and Budget, consulted 31 December, historical table 1.1
- Joann Weiner, Professor at George Washington University
- Stephen Ellis, President of Commonwealth Taxpayers
- Business Insider, February 20, 2019, US National Debt Exceeds $ 22 Trillion – Here’s How Trump’s $ 2 Trillion Debt Compared to Obama, Bush and Clinton
- USA TODAY 5 November Fact Test: Since 2017, national debt has risen, but by less than claimed
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