We have had seven presidential terms, and four presidents, during the period 2001 – 2025. To our knowledge, none of their campaigns promised to increase our national debt, and yet almost all have done so. When President George W. Bush took office in January 2001, the debt-to-GDP ratio was 31.5%. Believe it or not, there was a time when economists were writing research papers on how to conduct monetary policy in a world with little government debt. For instance, The Brookings Papers on Economic Activity published a paper by two economists at the Board of Governors of the Federal Reserve System, Vincent Reinhart and Brian Sack, titled “The Economic Consequences of Disappearing Government Debt” in 2000.
Figure 1 shows the actual debt-to-GDP ratio over time (the dashed line) and the Congressional Budget Office (CBO) projections made at the beginning of each presidential administration’s term of office. In January 2001, the beginning of President George W. Bush’s first term, the CBO projected a steady decrease in the debt-to-GDP ratio over the coming years, with the ratio reaching 13.5% by 2005! Needless to say, this did not happen. The actual debt-to-GDP ratio in 2004, Bush’s last full year of his first term, was 35.7%, far above the CBO’s projection when he was inaugurated. The September 11, 2001 terrorist attack on the US was at least partly responsible for increased spending on defense and public safety, but in any case, the debt-to-GDP ratio increased instead of falling dramatically during Bush’s first term in office.[1]
In January 2005, the beginning of the second Bush term, the CBO projected the debt-to-GDP ratio to remain essentially constant over the 2005-2008 period, with a 2005 value of 38.1% and a 2009 value of 39%. The reality was not far from this projection, with a value in 2008, his last full year in office, at 39.2%. There is more to the story, however, as the Global Financial Crisis occurred near the end of Bush’s second term, commonly dated from the middle of 2007 through a peak in 2008 and continuing into 2009. This was accompanied by the Great Recession, officially dated from December 2007 through June 2009. Government spending increased greatly during this time in an attempt to counteract the negative economic impact of these two concurrent and intertwined events. Due to the timing of fiscal policy expenditures, the large increase in the debt-to-GDP ratio occurred in 2009, mostly after the inauguration of President Barack Obama in January 2009.
When President Barack Obama took office, the CBO had already internalized the rise in the debt-to-GDP ratio in response to the ongoing economic crisis, and the CBO projected the 2009 value would be 50.5%, rising to 52.8% in by the fourth year of his first term, 2012. This projection for 2009 was substantially above the realized value of 39.2% for 2008. Importantly, the CBO projected that this higher value would persist but not increase much during President Obama’s first term. Again, the reality was different. The actual debt-to-GDP ratio increased from 52.2% in 2009 to 70% in 2012, the last year of Obama’s first term.
In January 2013, President Obama was inaugurated for his second term. The Great Recession and the Financial Crisis were over, but the labor market was slow to recover, and economic growth was also slow. The CBO projected (in February 2013) a debt-to-GDP ratio for 2013 of 76.3%, which was to fall slightly to 74.6% by 2016, the last full year of Obama’s second term. These projections proved fairly accurate, as the actual debt-to-GDP values rose from 71.8% in 2013 to 76.0% in 2016.
President Donald Trump was inaugurated on January 2017, and the CBO projected the debt-to-GDP ratio during his term to rise from 77.5% in 2017 to 78.8% in 2020. The actual values were in accord with CBO projections for the first three years, but in 2020 the COVID-19 pandemic struck. A sharp reduction in economic activity occurred, known as the COVID-19 Recession, from March to April 2020, followed by a rather long and slow recovery period over subsequent months. This recession led to several rounds of large fiscal stimulus to counter the negative impact of the pandemic on the economy, and in 2020 the debt-to-GDP ratio soared to 98.6%.
President Joe Biden was inaugurated in January 2021, and the CBO projections (in February 2021) for the debt-to-GDP ratio ranged from 102.3% in 2021 to 101.4% in 2024, President Biden’s last full year in office. The reality was different, as the actual debt-to-GDP ratios, while quite elevated, were below the CBO projections in every year, starting at 96.9% in 2021 and ending at 97.8% in 2024, Biden’s last full year in office.
President Donald Trump was inaugurated for his second term in January 2025, and the CBO projections were for the debt-to-GDP ratio to start at 99.9% in 2025 and rise to 105.4% by 2028. Importantly, these projections at the beginning of President Trump’s term do not include any impact from the so-called Big Beautiful Bill, which would increase the debt-to-GDP ratio, nor from the substantial increase in tariffs, which would decrease the debt-to-GDP ratio.
During this 25-year history, there are several overall features of note. First, from 2001 forward, debt-to-GDP ratios tend to rachet up when major negative shocks occur, so that spending that occurred in response to the 9-11 terror attacks, the Great Recession, and the COVID-19 Recession were never fully countered by subsequent spending reductions. Second, the CBO typically projected falling debt-to-GDP ratios during presidential terms, indicating a belief that elevated debt-to-GDP ratios would be countered in future years. Even if these reductions did not materialize, there was typically a belief that Congress would slowly take actions to counter previous increases in the debt. However, this is not true of the January 2025 projections. In fact, these projections show increasing debt-to-GDP ratios during President Trump’s entire second term. In fact, the CBO’s ten-year projections are for the debt-to-GDP ratio to increase steadily through 2035, reaching 118.5% in that year.
The CBO projections, like long range weather forecasts, are difficult in the best of circumstances. Major events can upset any set of projections. It is perhaps telling, however, that the CBO sees no end to our current ever-increasing debt. The U.S. has gone from a concern about too little debt in 2000 to a lack of concern about too much debt in 2025.
ENDNOTES
[1] The CBO provides budget projections several times per year assuming that the current laws implemented remain the same. Here we focus on projections made at the beginning of each presidential term, in order to see what were the expectations for the debt-to-GDP ratio at the time each president was inaugurated and compare that to the actual result at the final full year of his four-year term.