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National Debt Under Trump

By John Boitnott
Data & Guides Money National Debt Under Trump

The national debt under President Trump increased from $20,244,900,016,053 to $27,751,896,236,415 (20th January 2021). [13] Treasury Direct: Debt to the Penny https://www.treasurydirect.gov/govt/reports/pd/pd_debttothepenny.htm That's $5.138 billion a day.

In less than one term, the debt under Trump’s presidency increased more than $7.5 trillion. In comparison, only Barack Obama had increased national debt more, totaling $8.3 trillion throughout his 8 years as President.

Key statistics

It is projected that the president who campaigned on eliminating the national debt will add $8 trillion to it before leaving office. [1] US Debt by President by Dollar and Percentage https://www.thebalance.com/us-debt-by-president-by-dollar-and-percent-3306296 This is likely a conservative estimate given the originally unexpected $2 trillion stimulus just passed by Congress due to the COVID-19 pandemic.

Contents

The National Debt Under Trump

National Debt

How the National Debt Has Changed Under Trump

The national debt over the nation’s history has grown from a modest $83.7 million under George Washington (even in the 1700’s wars cost staggering sums) to a whopping $23.3 trillion today.

But the debt has had some significant spikes for some very important reasons, and there was a brief period of time, one year to be exact, where the debt was entirely paid off.

In 1835, Andrew Jackson paid off the national debt through severe cost-cutting and land sell-offs. Jackson’s distrust of banks led him to redistribute funds to the states, which in turn caused an economic bubble, which led to recession. Restarting the national debt to reinvigorate the economy was inevitable.

World War I led to the debt increasing by more than $21 billion to a total of $24 billion. Two decades later, Franklin Delano Roosevelt would see the national debt rise from $22 billion to over $205 billion dollars, largely due to World War II. The Wars in Iraq and Afghanistan added $2.1 trillion to the debt just in George W. Bush’s administration alone. [8] US Debt by President: By Dollar and Percentage https://www.thebalance.com/us-debt-by-president-by-dollar-and-percent-3306296 Both Bush and Obama had massive stimulus packages to fight the 2008 recession that each added hundreds of billions to the national debt.

Coronavirus Lockdown & Unemployment

But by far, one of the most significant impacts on the national debt occurred very recently during Donald Trump’s administration. President Trump inherited a rising economy which continued to rise through the last two and a half years. The Dow reached 20,000, more than 140,000 jobs were added to the economy, and low unemployment persisted.

Then in February 2020, the COVID-19 pandemic, which had already caused economic havoc in China and Europe, reached the United States.

A highly contagious disease, COVID-19 could not only kill the very old, very young, and very sick, it could also be spread by carriers not displaying any symptoms who were completely unaware that they had it. And, it could live for hours in the air and up to days on surfaces. Faced with what was deemed an “invisible enemy,” governors across the US ordered schools and non-essential businesses closed, and citizens to self-isolate, telling them to leave their homes only for essential supplies and only when absolutely necessary.

Needless to say, the economic impacts of these decisions were staggering. The eight largest drops in the Dow Jones Industrial Average were recorded during this period. 26 million people had filed for unemployment benefits by late March (it took 10 years to add 22 million jobs to the economy, and those gains were wiped out in 5 weeks). And, Congress passed multiple large stimulus bills to assist individuals, families, and businesses.

CARES Act

The Coronavirus Aid, Relief, and Economic Security Act — also known as the CARES Act — was passed by U.S. lawmakers in late March 2020. With the stroke of a pen, the CARES Act became the largest economic stimulus bill in modern history, more than doubling the stimulus act passed to stave off the effects of the 2009 Financial Crisis.

Cares act

The various parts of the CARES act total $2.2 trillion. The parts are broken up based on what part of the economy each part is designed to help… individuals ($603 billion), big business ($500 billion), small business ($377 billion), state and local governments ($340 billion), and public services ($180 billion). A combination of loans, grants, and direct payments funds each of these areas. The most obvious direct payment is the $1,200 per individual, $500 per child payment given to every American taxpayer, depending on adjusted gross income.

Economists are still unsure of the total impact on the national debt as the COVID-19 pandemic is, to date, not even considered half over.

Trump’s Biggest Decision Areas

Often, the promises made by a candidate tend to differ from what they actually execute while in office, and Trump’s presidency is no exception. One of the promises made by Trump during his campaign was to eliminate the national debt, a feat achieved by only one other president in history, Andrew Jackson.

Trump had two strategies to reduce the debt. First, he promised to increase tax revenues. [4] Trump and the National Debt https://www.thebalance.com/trump-plans-to-reduce-national-debt-4114401 While originally promising to grow the economy by 6 percent, Trump immediately cut that estimate to 2-3 percent once he assumed office.

This was a wise move in that, while rapid growth sounds appealing, growing too rapidly can lead to boom-bust cycles and bubbles based on irrationality that usually end in recession.

The Tax Cuts and Jobs Act

Trump decided to spur the growth rate by announcing a strategy used by many other presidents, particularly Republican administrations. The outline for what would become the Tax Cuts and Jobs Act was released within his first 100 days in office, and was signed into law on December 22, 2017.

This cut the corporate tax rate from 35 to 21 percent beginning in 2018. The top individual income tax rate dropped to 37 percent. It doubled the standard deduction but eliminated personal exemptions.

Unfortunately for President Trump, his tax cuts won't stimulate the economy enough to make up for lost tax revenue. The Laffer curve indicates that tax cuts only stimulate economic growth when tax rates are above 50 percent.

By contrast, Ronald Reagan had success using tax cuts as an economic stimulus because the highest tax rate during his time in office was 70 percent.

Trump’s second promise was to eliminate waste in federal spending. [4] Trump and the National Debt https://www.thebalance.com/trump-plans-to-reduce-national-debt-4114401 He certainly lent credibility to this argument in the way he ran his campaign. By using social media and his numerous campaign rallies, he achieved as much exposure, if not more, than other candidates who had to gain visibility using expensive ad buys.

Trump wasn’t wrong in wanting to attack waste in federal spending. Both Presidents George W. Bush and Barack Obama had similar goals.

The problem is the consequences that come with cuts. Each government spending program has a constituency that lobbies Congress to remind legislators of their importance. Eliminating these benefits loses votes and contributors. Congresspeople love to agree to cut spending for any district except their own.

Domestic Social Programs and the Military

In order to make an impact on a huge and ever-increasing amount of money like the national debt, you have to cut into the largest spending programs. The largest of these programs are mandatory obligations made by previous acts of Congress.

One of the biggest, Social Security, is on that list.

For fiscal year 2021, Social Security benefits cost $1 trillion a year, Medicare, $722 billion, and Medicaid costs $448 billion. The interest alone on the national debt is $378 billion. These together total $3.3 trillion. Eliminating that entire sum will only have the tiniest of impacts on the national debt.

Outside of domestic social programs, the spending on the military makes the spending on any individual social program look tiny by comparison. If you want to have any impact on the debt, military spending must also be cut.

Trump increased military spending in fiscal year 2021 to $934 billion. [7] US Military Budget, Its Components, Challenges, and Growth https://www.thebalance.com/u-s-military-budget-components-challenges-growth-3306320 This figure includes the $636 billion base budget for the Department of Defense, $69 billion in overseas contingency operations for the fight against the Islamic State, and $228 billion to fund the other agencies that protect the U.S. and service the military.

This includes some expenditures you probably had no idea were part of the Defense Department budget.

They include:

The total budget for fiscal year 2021 is $4.8 trillion dollars. [5] Trump signs $738 Billion Defense Bill https://www.cnbc.com/2019/12/21/trump-signs-738-billion-defense-bill.html About $4.2 trillion is everything we just discussed in the last few paragraphs.

Once you deduct that from your overall budget, you have about $595 billion left to run the rest of the government. This is everything from the IRS to the rest of the Justice Department to the other government agencies not covered under defense or social programs.

For Trump to make any impact on the national debt that was either substantive or noticeable, he would basically have to eliminate it all. To even have an impact on the deficit, he would have to eliminate $966 billion.

Trump’s Impact on the Trade Deficit

The federal deficit, the gap between the amount of money the federal government spends and how much revenue it brings in, will exceed $1 trillion this year under the Trump Administration. This was the Congressional Budget Office fiscal outlook back in January. [11] Congressional Budget Office: The Budget and Economic Outlook 2020 to 2030 https://www.cbo.gov/publication/56073#:~:text=CBO%20currently%20projects%20a%20federal,see%20Table%201%2D1)

Of this $1 trillion, $893 billion of it is the trade deficit, which is the difference between how much the US imports versus how much it exports. Of the $893 billion, about half of it is with China, our largest trading partner.

Long before he was even a candidate for president, Trump advocated for tariffs to reduce the U.S. trade deficit and promote domestic manufacturing. His contention was the country was being "ripped off" by its trading partners, a sentiment he has echoed since the 1980s all the way up to his candidacy for president and throughout his administration.

Many economists argue that the trade deficit’s problems are overblown and most agree that tariffs are not a solution. [12] Economists united: Trump tariffs won't help the economy https://www.reuters.com/article/us-usa-economy-poll/economists-united-trump-tariffs-wont-help-the-economy-idUSKCN1GQ02G Tariffs are problematic because their cost is often borne by manufacturers and consumers in the form of higher prices [6] The Trouble with Tariffs is Unintended Consequences https://www.barrons.com/articles/trump-tariffs-against-china-unintended-consequences-51564748943 , which can achieve the effect of ultimately widening a trade deficit rather than reducing it. A “tit-for-tat” approach to tariffs can lead to deterioration of trade relations between opposing nations, which can prolong a trade war.

In 2001, China achieved two major accomplishments in its push to modernize its trade relations with the west. The first was joining the World Trade Organization, and the second was achieving Most Favored Nation trading status thanks to the United States–China Relations Act passed in late 2000. [3] Wikipedia - China-United States Trade War https://en.wikipedia.org/wiki/China%E2%80%93United_States_trade_war

One of the conditions of attaining this status was addressing a long list of trade grievances with the United States. Among these were protecting intellectual property. China was a major source of pirated music and movies, as well as other IP such as computer software. There was no enforcement of intellectual property rights in China's written law, and as a result, piracy and theft was costing American companies $1 billion a year by 1994.

By the time Trump took office, these complaints persisted, with American officials maintaining that China had done little to nothing to protect American IP. Trump also pointed out China’s manipulation of its currency, which made it difficult for American-made goods to compete in a global marketplace.

China’s counter was that advances in technology in China were not due to stolen IP but to research and development initiatives undertaken by the Chinese government. On January 22, 2018, the first volley of Trump’s trade war with China was fired.

Key Dates in Trump’s Trade War with China [6] The Trouble with Tariffs is Unintended Consequences https://www.barrons.com/articles/trump-tariffs-against-china-unintended-consequences-51564748943

Trump’s trade war with China produced several new trade agreements both with China and other nations, but at what cost?

In August of 2019, the Congressional Budget Office reported their estimates of the U.S. economic impact of tariffs (tariffs overall, but US tariffs were disproportionately applied against China). [10] Congressional Budget Office: The Effects of Tariffs and Trade Barriers in CBO’s Projections https://www.cbo.gov/publication/55576#:~:text=In%20CBO's%20projections%2C%20the%20tariffs,economic%20activity%20in%20several%20ways.&text=By%202020%2C%20they%20reduce%20the,businesses%20adjust%20their%20supply%20chains

In this estimate, the CBO projected that by 2020, tariffs would:

This is economists’ arguments against tariffs coming to fruition. Tariffs affect economic activity in three ways:

Sources

John Boitnott

A journalist, content strategist, and editor, John Boitnott has worked at TV, newspapers, radio and online media for 25 years. He's written for Inc, Entrepreneur, Motley Fool, Fast Company, NBC, USA Today and BusinessInsider, among others.

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