Bomb Three
Separately, Bomb #1 and Bomb #2 were disastrous but, taken together, they drastically widened our deficit and blew our debt out of the water. In the end, the national debt rose by roughly $7.8 trillion under Donald Trump, which is the third-largest increase of any president in history (and remember, George W. Bush and Abraham Lincoln were both funding wars). In fact, Donald Trump’s deficit increase equals around $23,500 for every single American.
Deficit
(the difference between government spending and tax revenue)
Less than one year after the Republican tax bill passed, the U.S. Treasury Department reported that the federal budget deficit increased by 17 percent — to $779 billion — from FY2017 to FY2018.
According to the Committee for a Responsible Federal Budget, an independent, bipartisan public policy organization, “234 percent of the increase in deficits, or $264 billion, was due to legislation enacted by Congress over the past year. The largest portion was the tax law, estimated to cost $164 billion in FY2018, followed by the Bipartisan Budget Act of 2018 which was estimated to cost $68 billion in 2018.”
The next year, Treasury reported that the deficit had grown to $984 billion from FY2018 to FY2019, a 26 percent increase. In the 2020 Fiscal Year, our budget deficit soared to $3.1 trillion. This was by far the largest one-year gap in the history of the United States. In FY2023, the federal budget deficit effectively doubled, to $2 trillion. Donald Trump’s tax cuts were the main culprit, but so was an increase in Medicare, Medicaid and Social Security spending — which was largely due to inflation — and spending for expensive legislation passed in the first two years of the Biden administration.
The second biggest factor, behind the tax cuts, was an increase in borrowing costs — and it’s a gift that will keep on giving well beyond FY2023. In November 2023, interest rates on the 10-year Treasury bond and the 3-month Treasury bill were 4.3 percent and 5.5 percent, respectively. This is a huge problem. Huge. Because interest rates have risen, interest payments alone will cost us $10.5 TRILLION over the next ten years.
Now the deficit has completely blown out. In a report released on February 7, 2024, the CBO projected “the deficit totals $1.6 trillion in fiscal year 2024, grows to $1.8 trillion in 2025, and then returns to $1.6 trillion by 2027. Thereafter, deficits steadily mount, reaching $2.6 trillion in 2034… After 2028, deficits climb as a percentage of GDP, returning to 6.1 percent in 2034. Since the Great Depression, deficits have exceeded that level only during and shortly after World War II, the 2007–2009 financial crisis, and the coronavirus pandemic.”
Debt
(Tip: Think of the federal debt as the sum of our past deficits.)
Meanwhile, at the end of December 2019 and right before the pandemic hit, the United States’ total public debt outstanding was $23.2 trillion. By September 2020, the CBO was reporting that, for the first time since World War II, our nation’s debt now equaled the size of the entire American economy. (Spoiler Alert: That’s not good). By July 2021, our debt had hit $28.4 trillion.
The CBO’s February 7, 2024 report projected “debt held by the public increases from 99 percent of GDP at the end of 2024 to 116 percent of GDP — the highest level ever recorded — by the end of 2034.”