Shortly after Obama assumed office in early 2009, our national debt (debt held by the public) stood at $6.8 trillion. By the end of this year it will have reached about $14.3 trillion, having more than doubled in the space of just eight years.
A $7.5 trillion increase in our national debt in eight years is a huge number, but so is the economy, which will likely be almost $19 trillion in size by the end of this year. Only by comparing the debt to the size of the economy can we judge how big and burdensome the debt really is. By my calculations, federal debt should be about 76% of GDP by the end of this year. In the history of our country, the surge in our debt burden that began in 2008 (Bush gets a share of the blame) is exceeded only by the immense amount of debt we incurred while fighting WW II.
I should point out that the federal deficit this year will likely exceed 3% of GDP. Fortunately, that is down hugely from a peak of 10.2% in 2009. Unfortunately, the deficit is once again increasing relative to GDP, having bottomed at 2.2% of GDP a year ago.
The chart above illustrates the change in our national debt burden by presidents. Red bars stand for increasing debt burdens, green bars for declining debt burdens. The increase in our debt burden under Obama is about the same as the net increase in our debt burden for all presidents preceding Nixon. Clinton stands out for having achieved the most significant reduction in our debt burden since the 1970s, and G.W. Bush stands out for reversing all of that gain.
When as a nation we borrow money to finance our federal debt, what matters most is not how much we borrow, but what we do with the money we have borrowed. (Recall Milton Friedman's admonitions that "spending is taxation." All money spent must eventually be paid for by taxes, either directly or indirectly, even if it's financed initially by debt.) Debt that is used to finance productive investments can pay for itself by boosting incomes and creating new jobs (e.g., infrastructure, research). But debt that is used to finance consumption is money that is squandered—Greece comes to mind as a good example of what not to do with borrowed money.
By that measure, we have squandered a huge portion of the money we've borrowed in the past 8+ years. For example: Since the end of 2007, transfer payments have increased by $3.76 trillion, rising from 12% of GDP to now 15% of GDP. This is money that was taken from one person and given to another, with no regard as to whether the beneficiary has contributed anything to the economy. Call it "unproductive spending" if you will. And as I noted some years ago, only 8% of the nearly $1 trillion in "stimulus" spending under Obama was spent on transportation and infrastructure. Not a dime went to increase anyone's incentive to work harder or invest more.
We've been spending lots of money in an unproductive fashion, and that helps explain why this has been the weakest recovery ever. As bad as things are, however, this is not necessarily the end of the world. We can reverse course, and with a lot of growth we can reverse the increase in our debt burden, which is what happened in the post-war period. Unfortunately, Hillary will almost certainly attempt to double-down on the failed spending and taxation policies of the Obama administration. Only Trump is talking about pro-growth policies, with the notable exception of his complete lack of understanding of the dynamics of trade.