Trump incorrectly says federal debt was falling before the pandemic

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While presenting his economic program to a group of business leaders, President Donald Trump claimed that the United States was close to paying off federal debt, but the coronavirus pandemic then hit and derailed these planes.

David Rubenstein, president of the Economic Club of Washington, DC, asked Trump in a virtual discussion on Oct. 14 whether another stimulus bill would increase federal debt to an amount that would be “too large for us to can repay reasonably. “Trump said debt is very much on his mind.

“Before the plague, we were starting to reduce that number. We were getting that number, interest rates were so low and we were seeing things on such a positive scale, we had no choice but to invest the money,” Trump said. “You had to invest money, you had to force money because of the pandemic, but we were starting to focus very, very deeply on that. We were doing it for the long haul, we were getting ready to pay off the interest, we were getting ready to pay off the debt, and a lot of good things were happening.

Federal debt was falling before the pandemic hit? By several measures, Trump’s claim does not verify. We asked the White House and Trump’s re-election campaign for information, but got no response.

Distribution of federal debt

To finance its activities, the U.S. government issues securities to private investors abroad, to central banks in other countries, and to U.S. buyers, such as the Federal Reserve, banks, mutual funds, and individuals. This type of debt — more than $21 trillion as of October 14 — makes up the bulk of federal debt and is known as “publicly held debt.”

“Total debt” or “gross debt” — exceeding $27 trillion — includes debt held by the public as well as Treasury securities held by U.S. government accounts and federal trust funds, such as Social Security and Federal Trust Funds. ‘Health Insurance. Debt held by federal accounts is essentially an IOU from one part of government to another, so most experts focus on public debt, not total debt, said Donald Marron, member and Director of Economic Policy Initiatives at the Urban Institute.

Data for both measures show increases before the pandemic and before Congress approved a stimulus package to help businesses and individuals struggling with the pandemic.

While economists focus primarily on debt held by the public because it is “external debt” and must be repaid to avoid default, total debt is “equally important because federal lawmakers are always quick to say they’re going to pay back ‘every penny’.” due to Social Security and Medicare,” said Tori Gorman, policy director at the Concord Coalition, a group that advocates for fiscal responsibility.

Marron told PolitiFact that analysts also often look at the debt-to-gross domestic product ratio, a measure of the overall economy called GDP, rather than just dollar debt, because it puts debt into context and helps make comparisons over time and across countries. Nor is Trump’s claim supported by this metric.

“Overall, the trend is clear – debt is growing faster than the economy,” Marron said.

A September report from the Government Accountability Office predicted that debt held by the public would reach 98% of GDP by the end of the 2020 financial year.

“At a time when the federal government’s ability to financially respond to COVID-19 is critical, the high level of federal debt that existed prior to the pandemic continues to weigh on the federal budget,” the report said.

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In March, before the fiscal and economic effects of COVID-19, the office had already forecast that debt as a percentage of GDP in 2050 would be nearly double its all-time high of 106% reached in 1946 – and about four times its post rate. -global. World War II average. (Debt averaged 46% of GDP from 1946 to 2019, according to the report.)

“The president may have planned to reduce the debt, or even pay it off, but that doesn’t make it true,” Gorman said. “It’s like saying, ‘I plan to win the Masters golf tournament next year.’ It’s meaningless (and also highly unlikely).

Trump’s fiscal year 2021 budget proposal also fails to show a plan for debt reduction. An analysis of Trump’s 2021 budget by the Congressional Budget Office in March shows that debt, measured as a percentage of GDP, is rising each year of the budget window, fueled by large and growing deficits, Gorman said.

Our decision

Speaking about the federal debt before the coronavirus pandemic, Trump said, “we were starting to bring that number down.”

Trump’s claim is not supported by government data and analysis. Public debt and gross debt have increased during Trump’s presidency. Debt as a percentage of GDP also increased throughout his administration.

We rate Trump’s claim as false.

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