This is a corrected title of a mendacious (and typically statistically incompetent) article by Craig Eyermann in an Independent Institute blogpost (previously highlighted as Ironman of PoliticalCalculations). He writes:
After two years in power, President Joe Biden doesn’t have many positive accomplishments to brag about.
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But while his economic legacy is not shaping up to be a good one, he has given Americans one enduring legacy. He’s grown the U.S. national debt by 11% in the two years he has occupied the Oval Office. That is really saying something because the national debt was already $27.76 Trillion on the day he was sworn in.
Mr. Eyermann’s title is, as far as I can tell, wrong. According to the Treasury Department’s Bureau of the Debt (accessed on 3/8/2023), on January 20, 2023, gross federal debt was $31454980005742.4, and on January 20, 2021, it was $27751896236414.7. Using excel (so as to ensure no mistyping errors), I find the change in the two years to be $3703083769327.70, and not $3,695,343,467,324.62 (as indicated in the PoliticalCalculations blogpost he references). Since the January 20, 2023 number matches my figure, and the figure in the Treasury website, I can only conclude that he made a subtraction mistake. He also made a mistake in calculating the percentage growth rate. I obtain 13.3% (and not 11%) change. My advice – don’t trust the math in Independent Institute pieces.
But there’s actually a bigger problem with Mr. Eyermann’s calculations. First, there’s no context in terms of what others have done in their first two years. In the two years going from January 20, 2017 to January 20, 2019*, gross federal debt rose by 11.7% – during a time of buoyant growth (January 2019 predates the pandemic by more than a year– take the two last years of Trump and it’s a blowout at 34.4%).
Second, we would probably want to think about the debt burden normalizing by something. One way to do that is to look at the debt to potential GDP ratio. Then, we have the following comparison (where I’m using end-of-month debt figures now).
Figure 1: Gross federal debt in billions of $, end of month (blue, left scale), and gross federal debt in percentage points of potential GDP (red, right scale). Numbers attached to black arrows denote changes over 2 years. Quarterly estimates of potential GDP converted to monthly using quadratic interpolation procedure in EViews. Orange shading denotes Trump administration. Source: Dallas Fed, CBO, and author’s calculations.
While gross federal debt rose by 13.2% by January 2023 (using end-of-month data), as a share of potential GDP, it fell by 3.7 percentage points.
Gross federal debt includes intra-government holdings (so debt that Social Security trust fund holds, for instance). A more appropriate series to look at is debt held by the public (FRED series FYGFDPUN). I don’t have this series on a monthly basis, but I have marketable federal debt, which over the past two decades moves very closely with FYGFDPUN at the quarterly frequency (see Figure 4). Here’s the analogous graph using marketable debt.
Figure 2: Marketable federal debt in billions of $, end of month (blue, left scale), and marketable federal debt in percentage points of potential GDP (red, right scale). Numbers attached to black arrows denote changes over 2 years. Quarterly estimates of potential GDP converted to monthly using quadratic interpolation procedure in EViews. Orange shading denotes Trump administration. Source: Dallas Fed, CBO, and author’s calculations.
While nominal marketable debt rose by 15.5%, as a share of potential GDP it fell by almost a percentage point.
In terms of assessing debt burden, one might want to use the market — rather than par — value of debt. The par value represents the interest rate at issue, while market value represents the interest rate prevailing at the time of observation. Using the market values of marketable debt (roughly, debt held by the public), we have the following picture.
Figure 3: Marketable federal debt at market value in billions of $, end of month (blue, left scale), and marketable federal debt at market value in percentage points of potential GDP (red, right scale). Numbers attached to black arrows denote changes over 2 years. Quarterly estimates of potential GDP converted to monthly using quadratic interpolation procedure in EViews. Orange shading denotes Trump administration. Source: Dallas Fed, CBO, and author’s calculations.
In other words, the Trump administration ramped up debt to potential GDP in a period of economic boom, and was a true fiscal profligate even before the Covid response.
Other analyses by Mr. Eyermann, regarding the definition of externalities, what metrics are most useful for tracking state level economic activity, time series econometrics, adding/subtracting chain-weighted volumes I, adding/subtracting chain-weighted volumes II, and reporting nominal vs. real magnitudes.
Appendix: Comparison of Marketable Federal debt and Federal debt held by public.
Figure 4: Marketable federal debt (blue), federal debt held by public, FRED series FYGFDPUN (tan),in billions of $, end of quarter. Orange shading denotes Trump administration. Source: Dallas Fed, CBO, and author’s calculations.
* Actually refers to average of January 18 and January 22, 2019, since no data reported for January 20.
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