Dan Mitchell: “The bottom line is that budget deficits don’t necessarily lead to inflation. But if a government is untrustworthy, then it will have trouble issuing debt to private investors”


Milton Friedman – Deficits and Government Spending


The Federal Reserve and “Fiscal Dominance”

Appearing on Vance Ginn’s Let People Prosper, I discussed spending caps, entitlement reform, past fiscal victories, and potential future defeats.

For today, I want to highlight what I said about monetary policy.

The above segment is less than three minutes, and I tried to make two points.

First, as I’ve previously explained, the Federal Reserve goofed by dramatically expanding its balance sheet (i.e., buying Treasury bonds and thus creating new money) in 2020 and 2021. That’s what produced the big uptick in consumer prices last year.

And it’s now why the Fed is raising interest rates. Part of the boom-bust cycle that you get with bad monetary policy.

Second, I speculate on why we got bad monetary policy.

I’ve always assumed that the Fed goofs because it wants to stimulate the economy (based on Keynesian monetary theory).

But I’m increasingly open to the idea that the Fed may be engaging in bad monetary policy in order to prop up bad fiscal policy.

To be more specific, what if the central bank is buying government bonds because of concerns that there otherwise won’t be enough buyers (which is the main reason why there’s bad monetary policy in places such as Argentina and Venezuela).

In the academic literature, this is part of the discussion about “fiscal dominance.” As shown in this visual, fiscal dominance exists when central banks decide (or are forced) to create money to finance government spending.

The visual is from a report by Eric Leeper for the Mercatus Center. Here’s some of what he wrote.

…a critical implication of fiscal dominance: it is a threat to central bank success. In each example, the central bank was free to choose not to react to the fiscal disturbance—central banks are operationally independent of fiscal policy. But that choice comes at the cost of not pursuing a central bank legislated mandate: financial stability or inflation control. Central banks are not economically independent of fiscal policy, a fact that makes fiscal dominance a recurring threat to the mission of central banks and to macroeconomic outcomes. …why does fiscal dominance strike fear in the hearts of economists and financial markets? Perhaps it does so because we can all point to extreme examples where fiscal policy runs the show and monetary policy is subjugated to fiscal needs. Outcomes are not pleasant. Germany’s hyperinflation in the early 1920s may leap to mind first. …The point of creating independent central banks tasked with controlling inflation…was to take money creation out of the hands of elected officials who may be tempted to use it for political gain instead of social wellbeing.

A working paper from the St. Louis Federal Reserve Bank, authored by Fernando Martin, also discusses fiscal dominance.

In recent decades, central banks around the world have gained independence from fiscal and political institutions. The proposition is that a disciplined monetary policy can put an effective brake on the excesses of political expediency.This is frequently achieved by endowing central banks with clear and simple goals (e.g., an inflation mandate or target), as well as sufficient control over specific policy instruments… Despite these institutional advances, the resolve of central banks is chronically put to the test. … the possibility of fiscal dominance arises only when the fiscal authority sets the debt level.

The bottom line is that budget deficits don’t necessarily lead to inflation. But if a government is untrustworthy, then it will have trouble issuing debt to private investors.

And that’s when politicians will have incentives to use the central bank as a printing press.

P.S. Pay attention to Italy. The European Central Bank has been subsidizing its debt. That bad policy supposedly is coming to an end and things could get interesting.


A.F. Branco for Oct 21, 2021

US Debt by President: By Dollar and Percentage

Who increased the U.S. debt the most? That depends on how you measure it.

US President Barack Obama (L) former President Bill Clinton (C) and former President George W. Bush (R) walk to the Rose Garden

What’s the best way to determine how much each president has contributed to our nation’s $31 trillion in U.S. debt? The most popular ways to measure involve comparing the debt level from when a president enters office to the debt level when they leave. It’s also good to compare the debt as a percentage of economic output, which takes into account the size of the economy at the time the administration accumulated the debt.1

Drawback of Measuring Debt by President

Neither of the techniques mentioned above is a very accurate way to measure each president’s impact on the national debtbecause the president doesn’t have much control over the national debt during their first year in office.

For example, President Donald Trump took office in January 2017. He submitted his first budget in May. It covered the 2018 fiscal year, which didn’t begin until October 1, 2017. Trump operated the first part of his term under President Barack Obama’s budget for fiscal year 2017, which ended on Sept. 30, 2017.2

fusing, Congress intentionally sets it up this way. An advantage of the federal fiscal year is that it gives the new president time to put together their budget during their first months in office.

The Best Way to Measure Debt by President

The best way to measure a president’s debt is to add up their budget deficits and compare that total to the debt level when they took office. A president’s budget reveals their administration’s priorities.


Though they sound similar, deficit and debt are two different things. A deficit is a budget shortfall, whereas debt is the running total of all deficits and surpluses. Deficits add to the debt, while surpluses reduce it.

Top 5 Presidents Who Contributed to the Debt by Percentage

Franklin D. Roosevelt (1933-1945)

President Roosevelt added the largest percentage increase to the national debt. Although he only added $236 billion, this was an increase of about 1,048% from the $22.5 billion debt level left by President Herbert Hoover before him. The Great Depression and the New Deal contributed to FDR’s yearly deficits, but the biggest cost was World War II—it added $186.3 billion to the debt between 1942 and 1945.3

Woodrow Wilson (1913-1921)

President Wilson was the second-largest contributor to the debt, percentage-wise. He added about $21 billion, which was a 723% increase over the $2.9 billion debt of his predecessor. World War I contributed to the deficits that raised the national debt.3

Ronald Reagan (1981-1989)

President Reagan increased the debt by $1.86 trillion, or by 186%. Reagan’s supply-side economics didn’t grow the economy enough to offset the lost revenue from its tax cuts. Reagan also increased the defense budget by 35%.4

George W. Bush (2001-2009)

President Bush added $5.85 trillion to the national debt. That’s a 101% increase, putting him in fourth. Bush launched the War on Terror in response to the 9/11 attacks, which led to multi-trillion-dollar spending on the War in Afghanistan and the War in Iraq. Bush also dealt with the 2001 recession and the 2008 financial crisis.5

Barack Obama (2009-2017)

Under President Obama, the national debt grew the most in dollar terms ($8.6 trillion) and was fifth by percentage at 74%. Obama fought the Great Recession with an $831 billion economic stimulus package and added $858 billion through tax cuts. Even though the fiscal year 2009 budget was set by President Bush, Obama added to it with the Economic Stimulus Act in 2009.657

US Debt Increase by President Per Fiscal Year

The U.S. Treasury Department has historical tables that report the annual U.S. debt for each fiscal year (FY) since 1790. We’ve compiled this data from that source to create the figures used below.81

Joe Biden

In January 2023, the nation hit the $31.4 trillion debt limit Congress passed in 2021.9Republican lawmakers control the House of Representatives and said they won’t raise the debt limit unless Democrats, who control the Senate, agree to budget cuts.

On Oct. 1, 2021, at the end of fiscal year 2021, the national debt was $28.4 trillion. Between the end of fiscal year 2020 and the end of fiscal year 2021, the national debt grew $1.5 trillion, a 5.6% increase year over year. For fiscal year 2022, President Joe Biden’s budget included a deficit of $1.84 trillion, and by August 2022, the national debt had grown to $30.8 trillion.110

When Biden took office, the economy and household finances were still reeling from the pandemic, and Biden continued his predecessor’s policy of spending heavily to keep households afloat. In March 2021, Biden signed the American Rescue Plan, which showered taxpayers with pandemic relief cash in the form of stimulus checks and extra unemployment payments, and temporarily expanded child tax credits, plus other help. It all came with a cost to future budgets: The bill would add $1.9 trillion to the national debt by 2031, the Congressional Budget Office estimated.11

The bipartisan infrastructure bill, signed by Biden in November 2021, which provided new funding for highways, railways, broadband Internet expansion and other projects, added to the debt too, with estimates on its 10-year impact ranging from $374 billion to $400 billion, depending on how it’s calculated.1213

Some of Biden’s actions cut the other way. In August 2022, Biden signed the Inflation Reduction Act, an anti-climate change bill that spent money on new green energy programs and tax credits as well as to make drugs cheaper for patients, and paid for it by raising taxes on corporations and the ultra-wealthy. The bill should reduce the national debt by $102 billion by 2031, the CBO estimated.14

Biden followed up this bill with an executive action that forgave up to $10,000 of federal student loan debt per borrower, and $20,000 for those who received Pell Grants. He also proposed a new, cheaper income-driven student loan repayment program for future borrowers. However, he also announced that student loan interest and required payments, both of which had been frozen since the pandemic hit, would resume in January 2023.15

In August 2022, the government did not have an official estimate for how these measures would impact the national debt. One piece of it—forgiving $10,000 of debt per student loan borrower—would cost $329.7 billion over 10 years, according to an estimate by the Wharton School of Business.16

Donald Trump

At the end of fiscal year 2020, the debt was $26.9 trillion. Trump added $6.7 trillion to the debt between fiscal year 2017 and fiscal year 2020, a 33.1% increase, largely due to the effects of the coronavirus pandemic and 2020 recession.

In his FY 2021 budget, Trump’s budget included a $966 billion deficit.17 However, the national debt actually grew by $1.5 trillion between October 1, 2020, and October 1, 2021.

  • FY 2021: $1.5 trillion
  • FY 2020: $4.2 trillion
  • FY 2019: $1.2 trillion
  • FY 2018: $1.3 trillion

Barack Obama

President Obama added about $8.6 trillion, about a 74% increase, to the national debt at the end of President Bush’s last budget in 2009.

  • FY 2017: $671 billion
  • FY 2016: $1.42 trillion
  • FY 2015: $326 billion
  • FY 2014: $1.09 trillion
  • FY 2013: $672 billion
  • FY 2012: $1.28 trillion
  • FY 2011: $1.23 trillion
  • FY 2010: $1.65 trillion
  • FY 2009: $253 billion (Congress passed the Economic Stimulus Act, which spent $253 billion)18

George W. Bush

President Bush added $5.85 trillion to the national debt, a 101% increase from the $5.8 trillion debt at the end of Clinton’s last budget for fiscal year 2001.

  • FY 2009: $1.63 trillion (this was Bush’s deficit without the impact of the Economic Stimulus Act)
  • FY 2008: $1.02 trillion
  • FY 2007: $501 billion
  • FY 2006: $574 billion
  • FY 2005: $553 billion
  • FY 2004: $596 billion
  • FY 2003: $555 billion
  • FY 2002: $421 billion

Bill Clinton

President Clinton increased the national debt by almost $1.4 trillion, almost a 32% increase from the $4.4 trillion debt at the end of President H.W. Bush’s last budget.54

  • FY 2001: $133 billion
  • FY 2000: $18 billion
  • FY 1999: $130 billion
  • FY 1998: $113 billion
  • FY 1997: $189 billion
  • FY 1996: $251 billion
  • FY 1995: $281 billion
  • FY 1994: $281 billion

George H.W. Bush

President H.W. Bush added $1.55 trillion to the debt, a 54% increase from the $2.857 trillion debt at the end of Reagan’s last budget.4

  • FY 1993: $347 billion
  • FY 1992: $399 billion
  • FY 1991: $432 billion
  • FY 1990: $376 billion

Ronald Reagan

President Regan added $1.86 trillion to the national debt, a 186% increase from the $997.8 billion debt at the end of Carter’s last budget.4

  • FY 1989: $255 billion
  • FY 1988: $252 billion
  • FY 1987: $225 billion
  • FY 1986: $302 billion
  • FY 1985: $251 billion
  • FY 1984: $195 billion
  • FY 1983: $235 billion
  • FY 1982: $145 billion

Jimmy Carter

President Carter added $299 billion to the debt, a 42.7% increase from the $698.8 billion debt at the end of Ford’s last budget.4

  • FY 1981: $90.1 billion
  • FY 1980: $81.1 billion
  • FY 1979: $54.9 billion
  • FY 1978: $72.7 billion

Gerald Ford

President Ford added $223.7 billion to the debt.4

  • FY 1977: $78.4 billion
  • FY 1976: $87.2 billion
  • FY 1975: $58.1 billion

Richard Nixon

President Nixon added $121.1 billion to the national debt, a 34% increase from the $353.7 billion debt at the end of President Johnson’s last budget.4

  • FY 1974: $16.9 billion
  • FY 1973: $30.8 billion
  • FY 1972: $29.1 billion
  • FY 1971: $27.2 billion
  • FY 1970: $17.1 billion

Lyndon B. Johnson

President Johnson added $41.8 billion to the national debt, just a small 13% increase from the $312 billion debt at the end of President Kennedy’s time in office in 1964.4

  • FY 1969: $6.1 billion
  • FY 1968: $21.3 billion
  • FY 1967: $6.3 billion
  • FY 1966: $2.6 billion
  • FY 1965: $5.5 billion

John F. Kennedy

President Kennedy added $22.6 billion to the national debt.4

  • FY 1964: $5.8 billion
  • FY 1963: $7.6 billion
  • FY 1962: $9.2 billion

Dwight Eisenhower

President Eisenhower added $22.8 billion to the national debt.4

  • FY 1961: $2.6 billion
  • FY 1960: $1.6 billion
  • FY 1959: $8.3 billion
  • FY 1958: $5.8 billion
  • FY 1957: $2.2 billion surplus
  • FY 1956: $1.6 billion surplus
  • FY 1955: $3.1 billion
  • FY 1954: $5.1 billion

Harry Truman

President Truman added $7.3 billion to the national debt.43

  • FY 1953: $6.9 billion
  • FY 1952: $3.8 billion
  • FY 1951: $2.1 billion surplus
  • FY 1950: $4.5 billion
  • FY 1949: $478 million surplus
  • FY 1948: $6 billion surplus
  • FY 1947: $11 billion surplus
  • FY 1946: $10.7 billion

Franklin D. Roosevelt

President Roosevelt increased the national debt by $236 billion, a 1,048% increase from the $22.5 billion debt at the end of Hoover’s last budget.3

  • FY 1945: $57.7 billion
  • FY 1944: $64.3 billion
  • FY 1943: $64.2 billion
  • FY 1942: $23.5 billion
  • FY 1941: $6 billion
  • FY 1940: $2.5 billion
  • FY 1939: $3.2 billion
  • FY 1938: $740 million
  • FY 1937: $2.6 billion
  • FY 1936: $5 billion
  • FY 1935: $1.6 billion
  • FY 1934: $4.5 billion

Herbert Hoover

President Hoover added about $5.7 billion to the national debt.3

  • FY 1933: $3 billion
  • FY 1932: $2.8 billion
  • FY 1931: $616 million
  • FY 1930: $746 million surplus

Calvin Coolidge

President Coolidge reduced the national debt by about $5.3 billion.3

  • FY 1929: $673 million surplus
  • FY 1928: $907 million surplus
  • FY 1927: $1.1 billion surplus
  • FY 1926: $873 million surplus
  • FY 1925: $734.6 million surplus
  • FY 1924: $1 billion surplus

Warren G. Harding

President Harding reduced the national debt by about $1.6 billion thanks to budget surpluses.3

  • FY 1923: $614 million surplus
  • FY 1922: $1 billion surplus

Woodrow Wilson

President Wilson added about $21 billion to the national debt, a 723% increase from the $2.9 billion debt at the end of Taft’s last budget for fiscal year 1913.3

  • FY 1921: $1.9 billion surplus
  • FY 1920: $1.4 billion surplus
  • FY 1919: $12.8 billion
  • FY 1918: $9.8 billion
  • FY 1917: $2.1 billion
  • FY 1916: $551 million
  • FY 1915: $146 million
  • FY 1914: $0 (slight surplus)


All presidents from 1790 to 1913 added a total of $2.8 billion to the national debt.8

Frequently Asked Questions (FAQ)

Which president has put the United States the most in debt?

President Joe Biden is on track to add the most to the budget deficit, largely due to the costs associated with continuing to battle the coronavirus pandemic. In late 2021, Congress voted to raise the debt ceiling.

Why does the United States owe so much debt?

Continued decreases in the amount of taxes paid by corporations and the wealthiest Americans have resulted in less money coming in. At the same time, spending on pandemic relief and the military continues to increase.

March 31, 2021

President Biden  c/o The White House
1600 Pennsylvania Avenue NW
Washington, DC 20500

Dear Mr. President,

Please explain to me if you ever do plan to balance the budget while you are President? I have written these things below about you and I really do think that you don’t want to cut spending in order to balance the budget. It seems you ever are daring the Congress to stop you from spending more.

President Barack Obama speaks about the debt limit in the East Room of the White House in Washington. | AP Photo

“The credit of the United States ‘is not a bargaining chip,’ Obama said on 1-14-13. However, President Obama keeps getting our country’s credit rating downgraded as he raises the debt ceiling higher and higher!!!!

Washington Could Learn a Lot from a Drug Addict

Just spend more, don’t know how to cut!!! Really!!! That is not living in the real world is it?

Making more dependent on government is not the way to go!!

Why is our government in over 16 trillion dollars in debt? There are many reasons for this but the biggest reason is people say “Let’s spend someone else’s money to solve our problems.” Liberals like Max Brantley have talked this way for years. Brantley will say that conservatives are being harsh when they don’t want the government out encouraging people to be dependent on the government. The Obama adminstration has even promoted a plan for young people to follow like Julia the Moocher.  

David Ramsey demonstrates in his Arkansas Times Blog post of 1-14-13 that very point:

Arkansas Politics / Health Care Arkansas’s share of Medicaid expansion and the national debt

Posted by on Mon, Jan 14, 2013 at 1:02 PM

Baby carrot Arkansas Medicaid expansion image

Imagine standing a baby carrot up next to the 25-story Stephens building in Little Rock. That gives you a picture of the impact on the national debt that federal spending in Arkansas on Medicaid expansion would have, while here at home expansion would give coverage to more than 200,000 of our neediest citizens, create jobs, and save money for the state.

Here’s the thing: while more than a billion dollars a year in federal spending would represent a big-time stimulus for Arkansas, it’s not even a drop in the bucket when it comes to the national debt.

Currently, the national debt is around $16.4 trillion. In fiscal year 2015, the federal government would spend somewhere in the neighborhood of $1.2 billion to fund Medicaid expansion in Arkansas if we say yes. That’s about 1/13,700th of the debt.

It’s hard to get a handle on numbers that big, so to put that in perspective, let’s get back to the baby carrot. Imagine that the height of the Stephens building (365 feet) is the $16 trillion national debt. That $1.2 billion would be the length of a ladybug. Of course, we’re not just talking about one year if we expand. Between now and 2021, the federal government projects to contribute around $10 billion. The federal debt is projected to be around $25 trillion by then, so we’re talking about 1/2,500th of the debt. Compared to the Stephens building? That’s a baby carrot.


Here is how it will all end if everyone feels they should be allowed to have their “baby carrot.”

How sad it is that liberals just don’t get this reality.

Here is what the Founding Fathers had to say about welfare. David Weinberger noted:

While living in Europe in the 1760s, Franklin observed: “in different countries … the more public provisions were made for the poor, the less they provided for themselves, and of course became poorer. And, on the contrary, the less was done for them, the more they did for themselves, and became richer.”

Alexander Fraser Tytler, Lord Woodhouselee (15 October 1747 – 5 January 1813) was a Scottish lawyer, writer, and professor. Tytler was also a historian, and he noted, “A democracy cannot exist as a permanent form of government. It can only exist until the majority discovers it can vote itself largess out of the public treasury. After that, the majority always votes for the candidate promising the most benefits with the result the democracy collapses because of the loose fiscal policy ensuing, always to be followed by a dictatorship, then a monarchy.”

Thomas Jefferson to Joseph Milligan

April 6, 1816

[Jefferson affirms that the main purpose of society is to enable human beings to keep the fruits of their labor. — TGW]

To take from one, because it is thought that his own industry and that of his fathers has acquired too much, in order to spare to others, who, or whose fathers have not exercised equal industry and skill, is to violate arbitrarily the first principle of association, “the guarantee to every one of a free exercise of his industry, and the fruits acquired by it.” If the overgrown wealth of an individual be deemed dangerous to the State, the best corrective is the law of equal inheritance to all in equal degree; and the better, as this enforces a law of nature, while extra taxation violates it.

[From Writings of Thomas Jefferson, ed. Albert E. Bergh (Washington: Thomas Jefferson Memorial Association, 1904), 14:466.]


Jefferson pointed out that to take from the rich and give to the poor through government is just wrong. Franklin knew the poor would have a better path upward without government welfare coming their way. Milton Friedman’s negative income tax is the best method for doing that and by taking away all welfare programs and letting them go to the churches for charity.



Thank you so much for your time. I know how valuable it is. I also appreciate the fine family that you have and your commitment as a father and a husband.


Everette Hatcher III, 13900 Cottontail Lane, Alexander, AR 72002, ph 501-920-5733

Williams with Sowell – Minimum Wage

Thomas Sowell

Thomas Sowell – Reducing Black Unemployment



Ronald Reagan with Milton Friedman
Milton Friedman The Power of the Market 2-5

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