WASHINGTON — On Capitol Hill, Democrats and Republicans are at odds over a plan to raise the debt ceiling amid a warning from the Treasury Department that it must be done by the start of October.
On social media, lawmakers are pointing their fingers at the opposite party as the cause of the rising debt. The Verify team looked into Treasury data to break down how the debt has changed over the last forty years.
QUESTION:
Based on current projections of Fiscal Year 2021, is the debt expected to rise under President Biden? How does this compare to past administrations?
SOURCES:
- Fiscal Data from the Department of the Treasury, "Historical Debt Outstanding"
- Congressional Budget Office, "Federal Debt and the Statutory Limit, July 2021"
- Secretary of the Treasury letter to Congress, September 8, 2021
- Bipartisan Policy Center, "Federal Debt Limit Myths Vs. Facts" and "Recent History of the Debt Limit"
- Congressional Research Service, "The Debt Limit"
- Josh Bivens, Director of Research at The Economic Policy Institute
- Thomas Kahn, CCPS Faculty Fellow and Adjunct Professorial Lecturer at the Department of Government at American University
ANSWER:
Yes. According to the Congressional Budget Office, the deficit for Fiscal Year 2021, which ends on September 30, is expected to be approximately $3 trillion.
The debt has risen drastically over the last four decades, rising from less than $1 trillion in FY 1981 to $26.9 trillion in FY 2020. The GDP has also jumped dramatically during this time.
WHAT WE KNOW:
On Capitol Hill, lawmakers are arguing about raising the debt limit, a process that would allow the Treasury to go deeper into debt. So far, Republicans have refused to offer their support for a bill that would increase the debt limit.
The debt limit is defined as a "statutory constraint on the amount of money that Treasury may borrow to fund federal operations," according to the Congressional Research Service.
Josh Bivens, the Director of Research at the Economic Policy Institute, said that the debt limit is a necessary step in order to take out debt, despite the fact that spending and revenue levels have already been decided by Congress.
"On the one hand, Congress decides on spending and taxes," he said. "And their decision on spending and taxes leads directly to debt. But then they make this other decision divorced from their taxing and spending decision."
As the debate over the debt limit continues, the two parties are pointing their fingers at each other, as the cause for such a large debt.
Sen. Minority Leader Mitch McConnell said that the GOP would not support any effort to raise the debt ceiling, adding that Democrats have been "racking up historic debt."
On the other side of the debate are Democrats like Sen. Majority Leader Chuck Schumer, who pointed out that debt increased by trillions of dollars, during the Trump Administration.
The Verify team turned to data from the Treasury Department to break down the debt increases over the last forty years. To look through the data yourself, visit this link.
A fiscal year runs from September 30, year to year, meaning that it sometimes crosses over multiple presidencies. Below are debt levels for various landmark years.
- FY 1981 (Reagan's First Year): $998 Billion
- FY 1988 (Reagan's Final Year): $2.6 Trillion
- FY 1989 (Bush Sr's First Year): $2.9 Trillion
- FY 1992 (Bush Sr's Final Year): $4.1 Trillion
- FY 1993 (Clinton's First Year): $4.4 Trillion
- FY 2000 (Clinton's Final Year) $5.7 Trillion
- FY 2001 (Bush Jr's First Year) $5.8 Trillion
- FY 2008 (Bush Jr's Final Year) $10 Trillion
- FY 2009 (Obama's First Year): $11.9 Trillion
- FY 2016 (Obama's Final Year): $19.6 Trillion
- FY 2017 (Trump's First Year): $20.2 Trillion
- FY 2020 (Trump's Final Year) $26.9 Trillion
According to the Congressional Budget Office, this debt is expected to grow even larger in FY 2021. The deficit for this year is estimated to be approximately $3 trillion, according to the CBO.
This data indicates that the debt has skyrocketed over forty years, rising from less than a $1 trillion in FY 1981 to nearly $30 trillion in FY 2021.
"We're here because of old spending under Democrats and Republicans," said Thomas Kahn from American University. "And tax cuts under Republicans."
Bivens agreed, pointing out that the debt has been on the rise through multiple administrations.
“It's definitely happened under presidents of both parties," he said. "There is a brief period in the late 1990s when debt actually did start to go down. It was sort of a mix of some tax increases and spending cuts and just a very strong economy, which combined for about a four-year period of debt actually going down in the late 90s. But besides that, it's been pretty, perpetually up.”
It's important to note that the GDP has also grown dramatically, jumping from just over $3 trillion in 1981 to nearly $21 trillion in 2020. Our experts also said that debt is not necessarily a bad thing, although as it grows larger, it could mean greater payments towards "debt services."
"You have to pay interest on those loans," said Kahn. "You have to pay interest on those treasury bills. That interest is called debt service. You have to serve the debt that is growing and it is one of the fastest-growing parts of the budget in terms of the speed with which it's expanding."
Kahn said that federal debt is now "equal to the size of the economy." In 2020, the GDP in the United States was roughly $20.9 trillion.
"That has never happened before," he said. "And over the long term, that is steadily increasing. We do have a debt problem.