U.S. Federal Deficits, Presidents, and Congress

Stephen Bloch

Last update: data from Sept 30, 2013 (the end of the fiscal year)

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.

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.

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

3. In 1976, 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.

4. Adjusted this annualized deficit by the annual Consumer Price Index to give one-year federal deficits in constant (1983) dollars.

   (An economics-professor friend recently pointed out a problem with this approach, suggesting that it might be more accurate to adjust for inflation before subtracting one year's debt from another's. I think he's right, but I haven't yet rewritten the page to reflect that approach.)

5. Annotated each year by the party of the President and the party controlling each house of Congress (see House history and Senate history). Since Congressional terms start in early January, Presidential terms in late January, and fiscal years in October (since 1977) or July (before then), 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 "Deficit" (seventh) column is computed, in most cases, by subtracting one year's public debt from the next's. (Fiscal 1976-1977 was fifteen months long, so that figure has been adjusted to be comparable.) This number is then adjusted by the Consumer Price Index to produce a figure in 1983 dollars, which appears both textually and graphically in the last column.

Comments on Table 1:

I was somewhat surprised to notice that the 1930's, the era of the New Deal, were a period of fairly small deficits relative to the cost of living; not until the U.S. joined World War II did the deficits explode. On the other hand, these "fairly small deficits" followed a decade of budget surpluses in the roaring 1920's.

The single best predictor of deficits for most of the century has been war. There's a bulge in the graph for World War I, another for World War II, then a long low-grade deficit corresponding to the Korean and Vietnam wars, and of course the expense of G. H. W. Bush's invasion of Iraq, and G. W. Bush's invasions of Afghanistan and Iraq. But starting in the 1970's, it becomes harder to see a connection between war and deficits: permanent budget deficits became a way of life, regardless of whether there was a war going on.

Table 2: The Top Ten Years

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

• 2008-2009, at $879 billion (transition from G. W. Bush to B. H. Obama)
• 2009-2010, at $758 billion (B. H. Obama)
• 2011-2012, at $556 billion (B. H. Obama)
• 2010-2011, at $546 billion (B. H. Obama)
• 2007-2008, at $472 billion (G. W. Bush)
• 1942-1943, at $372 billion (F. D. Roosevelt)
• 1943-1944, at $365 billion (F. D. Roosevelt)
• 1944-1945, at $320 billion (transition from F. D. Roosevelt to H. S. Truman)
• 1990-1991, at $317 billion (G. H. W. Bush)
• 2003-2004, at $315 billion (G. W. Bush)

Analyses by President

I then grouped the data by Presidential administration. I wasn't certain how to count those years in which there's a change of administration, but it seemed to me that the budget in the fiscal year that spans a Presidential election and inauguration is mostly under the control of the previous President and Congress, so I count that fiscal year as the last year of the previous 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 consistent with my treatment of 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.

Table 3: Average change in annual deficit

Comments on Table 3:

The deficit has decreased in the first five years of the Obama administration by more than in the Clinton, Carter, Johnson, Eisenhower, Truman, Coolidge, and Wilson administrations combined. The average rate of deficit-cutting during the Obama administration, after adjusting for inflation, is four times the average rate of any previous deficit-cutting administration.

The deficit increased in the 8-year G.W. Bush administration by 40% more than in the G.H.W. Bush, Reagan, Ford, Nixon, Kennedy, Roosevelt, Hoover, and Harding administrations combined. The average rate of deficit increase during the G.W. Bush administration, after adjusting for inflation, is four times the average rate of any previous deficit-increasing 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.

At least in my lifetime, 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.

There may be other factors at work, e.g. the American people tend to elect a Democrat when things are at their worst and about to improve anyway, or something like that. Read into the numbers what you will.

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). (Note: I computed this as an average of CPI-adjusted annual deficits, rather than as the increase in national debt divided by the number of years.)

Table 4: Average annual deficit

Comments on Table 4:

Again, Republican Presidents seem to rack up the big debts, at least in my lifetime. Democratic Presidents tend to be "troughs" in the above graph, relative to their Republican successors and predecessors. On the other hand, the only two Presidents in this table to actually run an average surplus (in the Roaring Twenties) were both Republicans, and the Obama administration, in its first four fiscal years, was still running enormous deficits (albeit smaller than in the transitional year; see table 1).

The first four years of B.H. Obama slightly more total debt than the first seven years of G.W. Bush, which was more than eight years of Reagan, and half again as much as twelve years of FDR. If you include 2008-2009, the 8-year G.W. Bush administration accrued almost as much total debt as the 8-year Reagan administration and the 12-year FDR administration combined. The biggest accrued-debt-per-year figures are associated with B.H. Obama, G.W. Bush, G.H.W. Bush, Ronald Reagan, Gerald Ford, FDR, Bill Clinton, and Jimmy Carter, 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. FDR presided over most of the Great Depression, initiated many expensive government programs to fight it, and presided over the beginning of World War II.

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.

Last modified: Wed Oct 2 20:37:39 EDT 2013