The Federal Debt of the United States, 1791 to 2018: A Presidential Ranking

A recent story in the National Post by Tristan Hopper highlighted the “utterly unbelievable scale” of current US federal public debt levels.  As is always the case, it is useful to get some historical perspective on the evolution of the U.S. federal debt over time – which under President Trump has become the biggest U.S. nominal gross federal debt ever at about 22 trillion dollars.  It is also interesting to see how US federal debt levels have varied across assorted administrations over time.

Of course, there is always the issue of what metric to use.  Nominal debt is really not terribly helpful given changes in the size of the economy, inflation and population of the United States over time.  One could adjust for inflation and population and look at real per capita federal debt but again given the changes in the composition of consumer baskets of goods and the construction of price indices, over more than two centuries this raises issues regarding comparability.

As well, one could simply look at a basic measure of the economic burden of debt such as the ratio of the federal debt to GDP.  In other words, given the size of the economy at a point in time, what was the size of the US federal debt relative to the economy. I am going to exercise economist’s prerogative and go with this last measure as the basis of comparison of the size of the US public debt over time.  The size of the debt relative to the economy is a good measure that is easy to grasp for comparison purposes keeping in mind that over such long time spans, any measure is going to have some issues regarding comparability.

The data for this exercise comes from the resources of EH.NET and FRED.  Figure 1 plots the gross U.S. federal debt as a percent of GDP from 1791 to 2018 while Figure 2 works out the average annual gross federal debt to GDP ratio by president and also ranks them from highest to lowest.  Note that Grover Cleveland gets two separate mentions as he serves two terms (I-1885 to 1889 & II – 1893 to 1897) separated by Benjamin Harrison. One drawback to this approach of annual averages is that some presidents served longer terms than others and in the case of the current incumbent the term to date with only two years of data is the shortest window of observation.

At the birth of the republic, the United States in 1791 under George Washington had a federal debt to GDP ratio of 36 percent and it fell steadily – with a brief interruption during the War of 1812 – and actually reached 0 in 1834 and stayed at 0 for the next two years growing to 0.2 percent in 1837.  The only US President to have the achievement of reaching a zero federal debt to GDP ratio is Andrew Jackson (1829-1837).  Martin Van Buren (1837 to 1841) follows Jackson and again begins adding to the debt.  However, the debt to GDP ratio stays below 2 percent until 1861 when it starts to rise. 

By the end of Abraham Lincoln’s term (1861 -1865) and the end of the US Civil War, the ratio reaches 26 percent and then continues to rise peaking at 31 percent in 1869 under Andrew Johnson (1865-1869) and then starting another decline until a low of 2.4 percent in reached in 1916.  America enters the First World War in 1917 and the debt to GDP ratio begins a largely uninterrupted rise (some respite during the 1920s) that reaches a peak of 117 percent in 1946 in the wake of the Great Depression and World War II.  There then follows the postwar boom and the debt to GDP ratio falls steadily bottoming out in the period of the late 1970s/early 1980s with the low point reached in 1981 at 30.7 percent.  Growth of the debt to GDP ratio then resumes with a brief hiatus during the late 1990s/early 21^st century and then continues onwards and upwards to the present where it is estimated at 107 percent at the end of 2018.

Figure 2 does a ranking of US Presidents by average federal debt to GDP ratios during their terms.   Well, the largest average presidential federal debt to GDP ratio to date is indeed under Donald Trump coming in for the first two years of his term at an average of 105 percent.  At number two is Barack Obama at 97 percent followed by Harry Truman in third spot at about 90 percent.  Harry Truman of course inherited the debts of World War II and fights the Korean War but also benefits from the robust early growth of the post war era which is why during his tenure the debt to GDP ratio drops from 117 percent in 1946 to 67 percent in 1953. However, in terms of spot estimates – Harry Truman does have the single highest year at 117 percent.

At fourth and fifth place are George W. Bush (62 percent) and Bill Clinton (60 percent). Sixth place belongs to Dwight Eisenhower (59 percent) followed by seventh place George H.W. Bush (57 percent), eight place Franklin Roosevelt (54 percent), ninth place John F. Kennedy (50 percent) and then tenth place Ronald Reagan (42 percent). 

At the other end of the ranking – the bottom ten with the lowest average debt to GDP ratios -are a bevy of largely nineteenth century presidents ranging from William H. Taft (3 percent) who actually served just before World War I - to the lowest of then all – Martin Van Buren (0.4 percent). The nineteenth century was a era of more limited government activity and this carries over to the federal debt to GDP ratio relative to the more activist 20^th and 21^st centuries.   Of course, Martin Van Buren also benefited from Andrew Jackson’s fiscal restraint who at an average of 1.4 percent had the sixth lowest debt to GDP ratio. During Jackson’s tenure, the federal debt to GDP ratio falls from 5 percent to zero. 

So, there you have it.  Whether measured in nominal dollars or as a share of GDP average over the course of years served, President Trump is presiding over the largest US federal debt ever.

 

Comments

[Gavin Moodie]

Thanx for this. I am pleased you chose the ratio of debt to gross domestic product since this is the measure I am most familiar with. But I wonder about its analytic purity since it compares a measure of capital with a measure of recurrent production. Would an analytically purer measure be debt interest payments per gross domestic product?

[Livio Di Matteo]

Good question Gavin. Certainly a good alternate measure to consider if you are concerned about stock/flow comparisons. Still, we make debt/GDP comparisons all the time whether it is public debt or even household debt levels and helps us visualize what the amount of current output a stock of debt represents.

[Livio Di Matteo]

Of course, another way to look at this data would be to look at the change in the debt to GDP ratio from the start of a President's term to the end to measure the increase/decrease under their watch. After all, when a President takes office, they do inherit the debt to date. I guess that is work for another time...

[Peter Jakobsen]

Denmark: Welfare State with no natural resources. Debt to GDP Ratio 2017: 36.4%
Canada: Rich in natural resources yet lots of poverty and urban decay. Debt to GDP Ratio 2017: 89.60%

What the heck is going on, someone please explain.

As for the USA, is there a clear correlation between rate of increase debt and the invention and growth of entitlements (starting with agricultural entitlements in 19th century).

[Tel]

Congress has the purse strings, not the President. Because of a general consensus that a "line item veto" is unconstitutional, all the President can do is slam the government shutdown button, which (surprisingly) doesn't save money anyway; the workers all get back pay.

Any Congress could cut spending if they wanted to ... they simply need to agree on which government programs are not important. Sadly, there isn't a lot of incentive to bring government debt under control ... only a small fraction of voters care (those Tea Party weirdos) and as a "last resort" the government bonds end up at the Fed where the debt gets monetized (shhh, don't say money printing). The difference typically washes through into price inflation, but that takes a while, and we can argue about who genuinely pays for that. If you can keep your wealth in assets, have a regular stream of income, and you can achieve pay rises now and then ... price inflation isn't such an issue.

On the other hand if you are on a tight budget, trying to save money in a bank account, and your income is haphazard so you don't qualify for a loan ... then price inflation is one of worst things that can happen.

[Matt]

Bigger question is if we have more private debt than ever. $27 trillion? How will people ever pay it back? Why isn't private debt ever part of the discussion?

[Gavin Moodie]

Isn't private debt a problem only if it is unlikely to be repaid? If a company borrows to invest in new plant isn't that good debt? If a person borrows to pay 80% of the price of a residential property isn't that safe debt?

[Matt]

Gavin, is it safer than federal debt?

[Gavin Moodie]

I think lenders charge most private debt higher interest than most sovereign debt and so consider it less safe than public debt. But debt that is secured by assets is safe and therefore on its face unproblematic whether it is incurred by a public or private body.

[Matt]

Peter, I think Denmark runs a trade surplus, Canada a deficit.