It was a Democrat who once famously said, “the era of big government is over.” That phrase, uttered in President Bill Clinton’s 1996 State of the Union Address, seemed to signal an embrace of fiscal responsibility and a limit to the seemingly endless number of ways the federal government sought to expand its reach well beyond the constitution’s original intent. Words in the preamble of the constitution about promoting the “general welfare” of the country have come to mean just about anything Congress wants it to mean. However, in response to the Republican victories of taking over the U.S. House of Representatives in 1994, with the GOP running on a promise to balance the federal budget, President Clinton seemed on board with the idea that deficit spending, ballooning social programs, and expanding the welfare state were not ideas his party, or the country, should embrace.
Give President Clinton credit since he’s the only president in the past 25 years to end his presidency with a federal surplus and a 1% decrease in the overall federal budget. Many will argue that the Republican Congress helped propel the cause, and that is true, but Clinton ended up signing on, leaving the country in a good place financially:
President Bill Clinton: Total = $63 billion surplus, a 1% decrease
- FY 2001 – $128 billion surplus
- FY 2000 – $236 billion surplus
- FY 1999 – $126 billion surplus
- FY 1998 – $69 billion surplus
- FY 1997 – $22 billion
- FY 1996 – $107 billion
- FY 1995 – $164 billion
- FY 1994 – $203 billion
Enter George W. Bush, a “cowboy” from Texas who ran on a platform of budgetary restraint and seemed in tune with the idea of limited government spending. It’s arguable that in many ways, on September 11, 2001, the terrorist attacks shaped the contours of Bush’s presidency and the resulting economic numbers that derived from it. Defense spending increased tenfold, as two wars were being fought. Domestically, Bush passed tax cuts, which over time can become budget-neutral through increased economic activity. However, the looming issue on the horizon didn’t become evident until Bush’s last year in office as the housing market collapsed due to a bubble of loosely issued loans and inflated property values. This event knocked even the rosiest of budgetary projections off course.
By the fiscal year 2002, Bush 43 was running a deficit of over $100 billion, in sharp contrast to Clinton’s surplus:
President George W. Bush: Total = $3.293 trillion, a 57% increase
- FY 2009 – $1.16 trillion. This amount is calculated from $1.413 trillion minus $253 billion from Obama’s Stimulus Act.
- FY 2008 – $459 billion
- FY 2007 – $161 billion
- FY 2006 – $248 billion
- FY 2005 – $318 billion
- FY 2004 – $413 billion
- FY 2003 – $378 billion
- FY 2002 – $158 billion
2009 brought us the first trillion-dollar budget deficit, a number which can be partially attributed to both President Bush and President Obama, as noted above.
Into the Obama term, budget deficits in the trillions became the norm for several years as the U.S. federal debt exploded to deal with a busted economy reeling from the “Great Recession” of 2007-2008. Spending continued, and the lowest budget deficit of Obama’s full term occurred in the fiscal year 2015 topping out at $442 billion, a number more in line with the “smaller” numbers coming from the years of Obama’s predecessor:
President Barack Obama: Total = $6.781 trillion, a 58% increase
- FY 2017 – $665 billion. Although Trump requested additional spending, Congress did not approve it.
- FY 2016 – $585 billion
- FY 2015 – $442 billion
- FY 2014 – $485 billion
- FY 2013 – $680 billion
- FY 2012 – $1.077 trillion
- FY 2011 – $1.300 trillion
- FY 2010 – $1.5 trillion. This is the sum of $1.294 trillion-plus $253 billion from the Obama Stimulus Act that was attached to the FY 2009 budget
After Presidents Bush and Obama paved the way for Congress to have carte blanche with the nation’s credit card, the path continued forward to President Trump. The Trump economy, following on the tails of Obama, began taking a sharp turn in a positive direction as growth started increasing in 2017 and 2018. CNBC said Trump “set economic growth on fire,” which might be an indication that maybe the federal government could begin catching up with spending and deficits leftover from the prior two administrations.
The first two years of the Trump administration brought deficit spending that was near a trillion dollars, but not quite. The trend looked to be continuing at an Obama-like pace until the Coronavirus pandemic struck in early 2020. At that point, Congressional spending went into overdrive creating the largest budget deficits ever seen:
President Donald Trump: Total Actual plus Budgeted = $6.612 trillion, a 33% increase
- FY 2021 – $966 billion budgeted + $600 billion from pandemic impact = $1.566 trillion
- FY 2020 – $1.083 trillion budgeted + $2.2 trillion from pandemic = $3.283 trillion
- FY 2019 – $984 billion
- FY 2018 – $779 billion
The $3.2 trillion deficit in 2020 is eye-popping, but at least it’s explainable as states forced businesses to close for months as a way to “slow the spread” and “flatten the curve.” Remember “two weeks to flatten the curve”? How naive we were.
As the economic growth of 2020 deteriorated and flatlined, Congress stepped in to start handing out stimulus checks of $1,200 and allocating billions upon billions for Covid-19 relief and aid to various entities, such as harmed businesses and vaccine makers. Much of this money still remains unspent, but that won’t stop Congress from spending more.
It’s arguable that the government had to spend and spend big on keeping Americans afloat who were forcibly sent home as businesses temporarily closed. Many businesses would never and will never re-open. Livelihoods have been lost, life savings invested in business openings have been squashed, and the ripple of economic devastation will continue for years. Providing relief to the country as means of avoiding other economic disasters, like endless foreclosures and bankruptcies, seemed necessary and prudent as much of the economic destruction was caused by government actions, not directly the result of a virus.
As it stands now, with President Biden, the “I see your deficit and I raise you mine” way of doing things in Washington will likely continue.
Reports indicate that the U.S. is looking to be set with a $2.3 trillion deficit in fiscal year 2022-a number which does not include President Biden’s Covid relief package that will add more once it’s signed:
The Congressional Budget Office says the federal government is on track for a $2.3 trillion deficit this year, down roughly $900 billion from last year when the coronavirus pandemic led Congress to provide historic amounts of financial aid.
Stronger economic growth has helped to reduce the anticipated shortfall for this year. Still, the deficit could soon be revised upward if President Joe Biden’s $1.9 trillion coronavirus relief package becomes law. The additional aid — coming after roughly $4 trillion was approved last year — would add more red ink once enacted, but isn’t included in Thursday’s CBO projections.
Excluding the Biden plan, this year’s deficit will equal 10.3% of gross domestic product, which is a measure of the total value of the economy’s goods and services. The past two years have the highest deficits relative to GDP since 1945.
Sitting at $2.3 trillion before the real Biden spending has even started is very daunting. Adding the $1.9 trillion new spending for the recently-passed “American Rescue Plan” will drive this number up further, perhaps over $3 trillion for the fiscal year 2022. Much of the spending in the plan is phased in or triggered over many years meaning this legislation will continue to drive up deficit spending for the entire duration of Biden’s first term.
So much of the spending, including in Biden’s $1.9 trillion Covid relief plan, is predicated on projections of future economic growth which will help pay for the cost of the legislation as tax receipts increase. These numbers, however, don’t often pan out, or they fall below expectations, or they simply don’t hold true over the projected time period due to external forces. Just look at President Trump’s chugging economy which was blasted by the Coronavirus in 2020, derailing any semblance of a country headed toward a new era of fiscal restraint. President Bush suffered similar fates with 9/11 and the housing market crisis which bled into President Obama’s term.
The bottom line here seems to be that concerns over deficit spending are dead. Both parties have done their share of charging things to the nation’s credit card.
From what it seems now, the era of “the era of big government is over” is over.
