The promise was not only bold, but calm and measured. Candidate Donald Trump in 2016 promised to eliminate America’s federal debt, which at that time was $19.23 trillion. Within eight years. It is now at an all-time high $23.69 trillion, a rise since the inauguration of a staggering $3.7 trillion. That is before the impact of the coronavirus pandemic.
Brief history
Economists and reporters who follow these things were intrigued to see federal debt reduced significantly in Trump’s first year. Could he pull this off?
From $19.95 trillion at Trump’s inauguration it declined to $19.85 trillion at the end of the 2017 first quarter. That’s not a huge percentage change, but an auspicious early reduction of $100.9 billion. It fell further by September 2017, down $103 billion since the inauguration.
Then came the December 2017 tax cuts which slashed tax income from corporations and immediately increased the debt. Within a year, it had deepened by $1.2 trillion.
Then followed the disastrous trade wars of 2018-09 which reduced corporate profits and workers’ incomes, blew out the deficit and pushed the debt out to where we are today. More than $1.48 trillion was added to the borrowings just in 2018, as Trump’s inept trade, tax and spending policies took effect. That is the third highest annual increment in US history, the only higher times being the great recession years 2009 and 2010.
Record interest payments
Interest payable on the debt for the current fiscal year is budgeted at a record $618.2 billion, a whopping 42.9% higher than President Obama’s final year, 2015-16.
That is $4,369 per US taxpayer. Each year. They just don’t know it yet. That’s based on debt projections before the trillions were allocated to the economic stimulus package last week.
Washington Post interview
In April 2016, candidate Trump sat down with The Washington Post’s Bob Woodward and Robert Costa to go through several matters in detail. With him were campaign aides Corey Lewandowski and Hope Hicks and son Donald Trump Jr. So this was on the record.
In discussing how he would make America win, Trump said, “We’ve got to get rid of the $19 trillion in debt.” When Woodward asked “How long would that take?” Trump replied, “I think I could do it fairly quickly ... I would say over a period of eight years.”
Global comparisons
Now here’s the thing about that commitment to eliminate the debt within eight years. Woodward and Costa did not laugh in Trump’s face. Firstly, because Trump’s extreme braggadocio and compulsive lying were not as well understood back then. Nor was his fundamental ineptitude in financial management widely comprehended.
But secondly, because impressive debt reductions were in fact being achieved elsewhere. Many well-managed economies have substantially reduced their national debt through the global recovery following the great recession.
Germany’s debt declined from 80.7 per cent of gross domestic product (GDP) in 2012 to 61.9 per cent in 2018.
Ireland, from 119.9 per cent of GDP in 2012 down to 63.6 per cent in 2018.
The Netherlands, from 67.7 per cent in 2013 to 52.4 per cent in 2018.
Denmark, from 45.2 per cent in 2012 to 34.1 per cent in 2018.
Even Venezuela down from 72.3 per cent in 2013 to 23.0 per cent in 2017 (latest data).
Under Trump, US federal debt to GDP increased from 104.8 per cent of GDP in 2017 to 106.9 per cent in 2019. The US now ranks 161st in the world out of 171 countries on government debt to GDP.
This concludes our analysis of the eight components of the US economy which have been tracking disastrously over the last three years, and completes our detailed look at all 26 key variables. We shall return tomorrow with a summary and overview.
Meanwhile, comments, questions, challenges and suggestions for further exploration are most welcome.