Deficit Swing - How Deficits Have (and are projected to) Change Under Each President

Trump signed a budget that will increase the deficit to a trillion dollars.

The deficit will grow simply because the economy is growing. If the deficit were stable as a percentage of GDP, it would grow about $100 billion during Trump’s four-year term.

Using the average spending and tax levels since 1979, the deficit under Trump would grow from about $600 to $700 billion. But given his tax cut this year and spending increases in the next few, it will instead hit $1,017 billion (a trillion) in 2020, or about $300 billion higher than what it would be if the Republican budget just met average standards for fiscal responsibility. (Since 1979, spending has averaged 20.6% of GDP and taxes 17.4%.) And this during a projected boom time; if you aren’t going to lower the deficit when unemployment is under 4% and the stock market is at an all-time high, you aren’t going to lower the deficit.

Here’s a table showing how much the deficit swung during a president’s time in office. Reagan’s first year in office, he had a deficit equal to 2.5% of GDP. In George H. Bush’s first he had a deficit of 2.7% of GDP. So, during Reagan’s time the deficit swung negative by 0.2 percentage points of GDP, which you can see in the "Swing" column.

	Deficit (-) or Surplus (+) Swing
	Inherited	Passed on		Swing
Ronald Reagan	-2.5	-2.7		-0.2
George H. Bush	-2.7	-3.8		-1.1
Bill Clinton	-3.8	+1.2		+5.0
George W. Bush	+1.2	-9.8		-11.0
Barack Obama	-9.8	-3.5		+5.3
Donald Trump	-3.5	-4.9		-1.4

Trump's first year in office he inherited a deficit equal to 3.5% of GDP.

According to CBO projections, whoever is president in 2021 will inherit a deficit of 4.9% of GDP. And that assumes no recession, which could raise the deficit by hundreds of billions.

Since 1981, the deficit has worsened every time a Republican president was signing and vetoing bills and has improved every time a Democrat was. You know what they say: you campaign like a fiscal conservative and govern like you're trying to make friends with everyone at the bar. "Tax cuts on me! For everyone!"

Magic Math in Trump's Budget: How an Imaginary $2 Trillion Gets Spent Twice

Trump's new budget plan forecast $2 trillion in additional revenues because of economic growth and then simultaneously applied that $2 trillion to a tax cut and to a deficit reduction. This faster economic growth will both increase revenues in the form of higher taxes and fund a tax cut in the form of lower taxes. Wrap your mind around that.  It is as if Trump's Budget Direct Mick Mulvaney (people say he's Irish but it seems clear that he's a goblin) said, "The amount we get in extra taxes will pay down the deficit AND will let us cut taxes by that same amount." It's like someone has won $100,000 in the lottery and excitedly announces their plan to pay down their $100,000 in debt and spend $100,000 on new cars and travel. It's double counting.

It might be that the Trump administration is that sloppy. Or it might be that they trust that they have so undermined the credibility of the press by continually calling it fake news that they will be able to ignore or brush off any reporting that points this out. They are operating in a fact free zone.

If that's not enough, there is more. Where does this extra $2 trillion over 10 years come from? It's existence comes from an assumption that the economy will grow by 3% a year for a decade. How likely is that?

Well, since 1948, the longest stretch during which GDP growth exceeded 3% was 6 years. (From 1961 to 1966, when Johnson's New Deal was increasing government spending, defense spending for Vietnam was just ramping up, and the baby boomers were starting school and driving their parents to buy more housing, clothes, and cars.) It has been eleven years since GDP growth has been as high as 3% (exactly 3% in 2005, and 3.1% the year before that.) In this century - since 2000 - GDP growth has not even averaged 2%, much less 3%.

So is there reason to believe that economic growth will bump up 50%? (3% is 50% more than 2%.)

Curiously, per capita GDP growth has been incredibly stable since after the Civil War. Here it is by decade. (Source data here.)

Note that in only one decade has per capita GDP growth been more than 3%; in the 1940s, when the US was spending a huge amount of money first fighting Nazis and then rebuilding Europe and Japan, per person GDP growth was nearly 4%. World War 2 was the catalyst. Pull out that decade and you can see that per capita GDP growth has never averaged 3% for a decade. 

And here is a phenomenal statistic. Pull out the 1940s and the average per capita GDP growth since the 1870s has been 1.88%. The average GDP growth in this century? 1.88%.

GDP growth bounces over 3% in healthy and normal decades but it does not stay much above 2% for any length of time without a growth in the workforce. A growth in the workforce depends on immigration and birth rate.

So, will GDP bounce up to 3% for a decade? Only if Donald decides to encourage immigration. (Insert laughter here.) Millennials will cause a growth in the workforce during this next decade to offset baby boomer retirements but it won't be enough to cause a noticeable surge. 

Trump's budget plan doesn't just use the same $2 trillion to simultaneously pay down debt and cut taxes. It forecasts this additional $2 trillion by assuming GDP growth we've only experienced in one out of the last fourteen decades. It's not just that he and Mulvaney are spending this money twice; it's imaginary money.

83% of what Trump says ranges from half-true to pants on fire. Only 17% of what he says is mostly true or simply true. It's little wonder that with such disregard for facts he would put out a plan that shows such utter disregard for simple arithmetic or reasonable assumptions. He continues to show his contempt for Americans' ability to reason. So far, assuming that we're all stupid has worked out well for him. It doesn't seem like it'll work out as well for the rest of us.