Thursday, August 23, 2012

Presidential Debt Accumulation - And The Winner Is...


Updated May 14, 2013

A little over a year ago, I posted an article that looked at the last ten Presidencies and examined which Presidents were the most fiscally responsible by looking their record of adding to the national debt.  Now that we're back to reality and facing the so-called "fiscal cliff" and hitting the debt ceiling yet again, I thought that it was time for a new look at whether Republicans or Democrat presidents have historically been at the top of the political heap in America when it comes to presiding over deficit spending.  Note that for the purposes of this posting, I have used the new debt ceiling of $16.4 trillion for President Obama.

I looked back over the past 50 years at the debt issues that faced the last 10 administrations.  For my source material, I took data from the Treasury Direct website and used their very handy monthly search function to examine the debt history for the years and months in question.  To ensure that you understand how I used the numbers, for example, for the beginning of President Nixon's term as the President, I took the debt recorded on January 31st, 1969 as linked here.  Since there is not a daily breakdown that gives us an accurate debt figure for January 20th, 1969, the debt at the end of President Johnson's term was assumed to be the debt figure recorded for January 31st, 1969 just as it was assumed to be the debt figure for the beginning of President Nixon's term.  Where Presidents did not finish their terms (i.e. JFK), I used the debt to the end of November 1963 as his final debt number as in the case of Nixon.

Here's the chart showing the Presidents in chronological order with the debt (all debt figures in billions of dollars) at the beginning of each President's term, the debt at the end of the term, the amount in nominal dollars by which the debt grew, the total percentage that debt grew over the President's full term and the length of the President's term (in years and months expressed as a decimal):



Note that I also threw in a somewhat less commonly used but more accurate growth calculation, the compound annual growth rate or CAGR.  This shows the compounded growth rate of the debt accrued each year over the entire term of a given President if the growth rate was steady over every year of his term as defined using this equation:

Here is the same data but placed in order of compound annual growth rate from least to greatest:



Lastly, here is the same data but placed in order of the size of percentage increase in debt from least to greatest:



It's surprising to see that, despite the massive arms buildup related to both the Cold War and the Vietnam War along with growing expenditures for the space race, that both the Kennedy and Johnson administrations come in with the lowest compound annual growth rate.  As well, the same factors plus the added costs of a very poor economy (think Middle East oil crisis) affected the Nixon era and yet, the compound annual growth rate of the debt was less than half its current level.  Not surprisingly, a few years of budget surpluses in the later 1990s helped the Clinton administration keep debt growth to a paltry 37 percent over its entire tenure in the White House.

I was taken back by the fact that the Reagan administration had, by a wide margin, the largest overall growth in debt as a percentage and using the compound annual growth rate.  During the eight-year term of Ronald Reagan, the debt grew by a massive 188.84 percent or a compounded annual growth rate of 14.18 percent.  While many Democrats blame the Bush II administration for debt accumulation, the compounded annual growth rate is actually firmly in the middle of the pack.  The same cannot be said for the Bush II additions to the nominal debt (second highest) and overall debt growth rate over the entire term (also second highest).  President Obama now has the distinction of having broken the record for the highest nominal debt increase, however, as a percentage increase, he is sitting in third place after Presidents Reagan and George W. Bush.  When using the measure of compound annual growth rate, the current President is in fourth highest place.

It is interesting to look back at the last 50 years and see where America's debt problem began to blossom and under which Administration the debt saw its greatest growth.  I realize that Congressional issues enter the equation, however, it is the President that represents the Administration's overall attempts to achieve some sort of fiscal balance.

10 comments:

  1. Interesting analysis.
    Since the purse strings are technically controlled by congress, it would be interesting to see the same chart by party controlling congress rather than by president. Not sure now to split Senate & House though for years where they are under different control. Thoughts?

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  2. As you say, that's a hard one, especially over split control. I might take a look at Congress and see what I can do. Thanks for the idea.

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  3. I agree with Anonymous -- your analysis of Presidential administrations is interesting, but not meaningful. Congressional complexion is the better analysis when considering debt and deficit levels and growth of debt and deficits.

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  4. I think "Increase in Debt" adjusted for inflation would be more telling.

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  5. If it helps, a section of congress (House and Senate) is considered 'owned' by whatever party has majority. As such, you could do a run down based on who owned the house, who owned the senate, and who owned both. It would not only help showwhich side grew the debt more but also show whether it happens more with a split congress or a pure one.

    btw, the comment section being quick to point out how little meaning the president has in elections is just one of the reasons why I love this site.

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  6. "I was taken back by the fact that the Reagan administration had, by a wide margin, the largest overall growth in debt as a percentage and using the compound annual growth rate. "
    If I were you, that is a secret I would be quiet about. Frankness is one thing, but admitting to staggering depths of ignorance is another. It is and was the notorious magic secret of Reagonomics. Profess an adherence to low taxation and a small state; forget to tax, but carry on spending as if it is judgement day. Perhaps Reagan's belief in Armageddon is the secret, perhaps that is why he thought debt didn't matter.

    I agree with the above comment to the effect that the figures require an inflation adjustment.

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  7. You really make it seem so easy with your presentation but I find this topic to be really something which I think I would never understand. It seems too complicated and very broad for me. I am looking forward for your next post. I will try to get the hang of it!

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  8. In addition to looking at "ownership" of the houses of congress, it would be interesting to analysis in terms of the make-up. In other words, assigning the portion of debt accumulation during a period based on the portion of congress that the party held.

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  9. The problem with house "ownership" is that wars typically outlast a house term, so one "ownership" can leave the next "ownership" with an unfunded war.

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  10. If i kept spending on my credit card for 50 years- without paying it back-my kids would hate me! Our Aussie politicians have the same mentality- lets pay for it tommorrow. Trouble for the U.S. is, tommorrow has arrived.

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