During the 2016 campaign, Donald Trump asserted on multiple occasions that, if he were elected president, he would eliminate the national debt during his time in office. It was not as central to his campaign as his promise to build “the wall,” but he did not shy away from suggesting that the government was wasting billions of dollars and that he would do much better than recent presidents had to protect taxpayers. At his campaign launch speech in July 2015, he suggested that the country would cross the “point of no return” if government debt ever exceeded $24 trillion.
When questioned by Bob Woodward of the Washington Post during the spring of 2016 about his plans for fiscal restraint, Trump said he would complete the goal of eliminating all government debt “over a period of eight years,” and that renegotiated trade deals with China and other nations would be the key to how he would get it done.
Trump’s response to Woodward’s inquiry is one instance of many when he provided a confusing and implausible answer to a question about fiscal policy—in effect conflating current account trade deficits with government borrowing. In reality, there’s no reason to expect improved trade relations with China or any other country to lead directly to lower borrowing by the federal government. However, running large fiscal deficits does lead to wider current account deficits, as higher consumption fueled by government borrowing pulls in more goods from abroad. So if, after becoming president, Trump had wanted to narrow the country’s trade deficit, a good place to start would have been by cutting back on annual budget deficits, most likely through spending restraint.
But, of course, exactly the opposite has occurred. During his three years in office, President Trump has taken several steps that have greatly increased the government’s borrowing requirements. He pushed for a tax cut in 2017 and agreed to another large reduction in revenue as part of the budget agreement reached with Democrats late last year. He also agreed to successive deals on appropriations that substantially increased spending for both defense and nondefense accounts.
The cumulative effect of these actions has been to put the federal government in the most precarious fiscal position it has ever been in during a period of relatively strong economic growth.
As President Trump was taking office in January 2017, the Congressional Budget Office (CBO) released its annual budget forecast, which showed the government would run a cumulative, four-year deficit over the period 2018 to 2021 of $2.6 trillion. This is the period that coincides with the fiscal years that Trump could influence during his current term in office. Grim though that estimate was, the reality was worse: The actual deficits for fiscal year 2018 and 2019 exceeded CBO’s January 2017 forecast by $675 billion, even as economic growth over those years far exceeded what CBO assumed would occur. CBO’s current forecast (which will be updated shortly) shows the cumulative budget deficit over 2018 to 2021 exceeding the forecast from January 2017 by $1.2 trillion.
President Trump made clear during the campaign that he was not interested in reforming the major entitlement programs—particularly Social Security and Medicare—that comprise a large and ever-growing portion of the federal budget. Nor was he supporting a big cut to defense, although he sometimes argued he could get much better deals than his predecessors for the military’s planned acquisitions. That leaves only programs providing cash support, health insurance, and other aid to lower-income households, along with appropriated spending outside of defense, as potential sources of budgetary savings. (Although the president sometimes expresses an openness to making wealthy Americans pay more in taxes, he has yet to support or propose any kind of net increase in federal revenues.)
While the administration has attempted to restrain spending for some low-income assistance programs through work requirements, the substantial increases in appropriated accounts agreed to by the president has been far more consequential in fiscal terms. The first deal, struck in early 2018, raised the caps on defense and nondefense spending by a combined $300 billion over the years 2018 and 2019. The second deal, struck in mid-2019, raised the caps on appropriations by $320 billion over 2020 and 2021.
The cumulative effect of the non-stop spending increases and tax-cutting since 2017 has been to push the federal government’s fiscal outlook from highly problematic to (almost) beyond hope. In its January 2017 estimate, CBO projected the ten-year deficit over the period 2018 to 2027 would be $9.4 trillion. Its forecast from last summer puts the deficit over the same period at $11.1 trillion, and that doesn’t include the effects of the latest round of spending hikes and tax cuts.
This period of fiscal excess is occurring just as the United States is entering its most intensive phase of demographic transformation, with the baby boom generation retiring in great numbers and spending for the major entitlement programs rising commensurately. CBO’s long-term forecast shows the federal government’s debt (held by the public, which does not include debt held in government accounts) rising from 78 percent of GDP at the end of 2019 to over 100 percent of GDP in 2034. Debt held by the public was less than 40 percent of GDP at the end of fiscal year 2008.
The president’s record on fiscal and spending issues over the past three years speaks for itself. He and the officials who support him have not implemented a serious plan to trim government spending, reform programs, or make the government more efficient. The government today looks almost exactly like it did three years ago, only it is substantially more expensive.
Incidentally, the government’s gross debt—the measure of cumulative borrowing that candidate Trump referenced when he announced his candidacy in 2015—currently exceeds $23 trillion and will be approaching $24 trillion as voters go to the polls later this year.