Wonkblog | Analysis
February 25, 2017 at 2:44 PM
On "Fox & Friends" Saturday morning, former Republican presidential candidate Herman Cain credited President Trump with reducing the national debt, after just one month in office.
"And here's another statistic that I haven't heard anybody talk about. Did you know that the national debt in President Trump's first month went down $12 billion?" Cain asked the hosts.
Less than an hour later, the statistic appeared on another highly visible platform. "The media has not reported that the National Debt in my first month went down by $12 billion vs a $200 billion increase in Obama first mo," Trump tweeted.
Trump quickly followed the tweet with another: "Great optimism for future of U.S. business, AND JOBS, with the DOW having an 11th straight record close. Big tax & regulation cuts coming!"
The debt statistics Trump and Cain cited appeared earlier this week in an article on the conservative blog Gateway Pundit, which compared the change in the U.S. debt load during Trump's first month in office with what happened for former president Barack Obama. Looking closer at these figures, they hardly add up to the success that Trump and Cain are claiming.
The Gateway Pundit article says that the change in debt under Trump translates to a 0.1 percent reduction in the U.S. debt burden. Actually, it's .06 percent between Jan. 20 and Feb. 21 -- a very small change. (The national debt has gone up or down by as much .19 percent on single days this year.)
The dollar figures, which come from the Treasury Department, are accurate, but they deserve a lot more context.
For one, Trump is citing such a narrow window of time that the statistics he's pointing to don't mean very much. The level of debt fluctuates day to day and week to week, depending on seasonal changes in growth and when the government makes payments, collects tax revenue, issues new debt and other debt matures — making the data very susceptible to cherry-picking.
Using the same logic, for example, you could claim that after four days in office Trump increased outstanding public debt by more than $10 billion, and that Obama had reduced it by $6 billion.
On Thursday, the public debt outstanding was $19.9 trillion — or, to be more exact, $19,913,903,120,188.10. And while that is less than it was on Inauguration Day, it's $29.2 billion more than it was on Feb. 8. All that goes to say you can't pay attention to infinitesimal movements in the debt week-to-week.
It's impossible to know whether Trump's election has really had time to filter through to concretely affect the economy. Congress has not passed any of his policies yet. The stock market has certainly continued to boom, but it was already rising before the election.
While it's possible anticipation of tax cuts or regulatory relief is heating up the economy and leading to increased government receipts, investors might also be choosing not to sell assets to avoid current capital gains tax rates and waiting to see whether the Republican-dominated Congress successfully slashes rates.
As for the comparison to Trump's predecessor, Obama took office amid the depths of a historic recession that had started over a year before he entered the White House. The U.S. economy was shedding more than 700,000 jobs a month and the unemployment rate was more than double its current level.
Dire economic conditions like these naturally inflate the debt level. As people lose work, take out unemployment insurance and draw on food stamps, the government both doles out far more in supportive payments and takes in less revenue in the form of taxes.
Partly as a result of these factors, debt increased significantly over the beginning of the Obama administration. It's important to note that while Trump and the figures refer to total public debt outstanding, this is not the most commonly used number by budget experts. That's because a little less than one-third of the total public debt outstanding is money the government owes itself in the form of expected Social Security payments and the like. Most experts focus on the debt held by the public — banks, ordinary people, foreign countries, etc. That was $14.4 trillion on Thursday.
In 2009, the debt as a percentage of gross domestic product, a common measure, went to 52.3 percent from 39.3 percent the year before. That was the result of the massive shortfall in tax revenue because of the Great Recession and substantial new fiscal spending to support the economy. Today, the debt-to-GDP ratio stands at 77 percent, and it's expected to rise slowly to 88.9 percent over the next decade under current policies.
The question is whether under Trump, the debt will decline, continue to rise gradually or explode. While Republicans pushed for a balanced budget during the Obama administration, Trump's brand of populist economics doesn't seem as focused on containing the debt. His agenda involves massive tax cuts and large increases in spending on defense and infrastructure, which independent budget experts suggest will explode the debt.
For example, the nonpartisan Tax Policy Center estimates his tax plans would cut federal tax revenue over the next 10 years by at least $6.2 trillion. And that's before taking into account Trump's spending plans. Republicans say tax cuts will pay for themselves by speeding up economic growth, but most independent experts — even those who favor tax reform — doubt the GOP's rosy predictions. And Republicans also tend to favor big cuts to entitlement programs, although Trump has said he opposes such cuts.
The Committee for a Responsible Federal Budget, an anti-debt group, meanwhile, says the government would need to cut the deficit by $3.3 trillion over the next decade simply to maintain the current GDP-to-debt ratio. We will learn more about Trump's plan when he releases his budget next month.
Note: A previous version of this post miscalculated the percent change in debt over Trump's first month. The article has been updated.