Are Republicans fiscally responsible?

For nearly 200 years, US federal government debt rarely exceeded 50% of GDP regardless of which political party was in power. Even during World War I and the Great Depression the debt stock did not rise above this level. The only exception was during World War II, when the stock of US public debt briefly soared above 100% of GDP due to the enormous fiscal effort required to defeat fascism. However, prudent post-war US administrations - Republican and Democrat alike - brought the debt stock back to 'normal' levels by the late 1970s as the chart below shows.

(Source: here)

In the 1980s, something suddenly changed. As illustrated in the chart below, a structural break occurred at the start of the 1980s, when the US government suddenly began to borrow very heavily and on a sustained basis. While the pace of debt accumulation oscillated around the rising trend, the general upwards direction of the debt stock has not been broken for nearly five decades. As a result, the US government now owes more than 122% of GDP, which is completely unprecedented in US peace time history.

(Source: here)

Looking ahead, the debt stock looks set to continue to rise for several reasons. For one, Donald Trump's Big Beautiful Bill slashed taxes for America's richest people and the costly war with Iran and many of his tariffs, which he hoped could make up for the short-fall in domestic taxes have been overturned by the courts. In addition, as I will show later in this article the likely change in the balance of power in the US Congress following the upcoming mid-term election will also contribute to significantly higher fiscal risks going forward.

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It is no mystery why the US government's debt stock has gone up since the early 1980s. The ratio of government spending to tax revenue simply went up and governments at the time decided to finance the resulting deficits by issuing more debt. What is far less well appreciated, however, is who was responsible for the massive increase in debt. The singular purpose of this blog post is to answer that question.

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When you ask voters, large sections of the media, and most commentators and analysts which political party can best be trusted with the public finances the usual answer is the Republicans. Right-wing political parties are generally regarded as more fiscally trustworthy than Left-wing political parties.

The perception that Left-wingers, including US Democrats, are fiscally irresponsible rests on the belief that Democrats' cannot contain public spending, because their political base principally consists of lower-income groups, who depend more on government handouts than businesses and rich people.

I believe this view is far too simplistic. The US Republican Party is also under great political pressure to satisfy its political base. The main difference between the two parties is who they have to please. The Republican political base tends to demand greater military spending and lower taxes for businesses and the wealthy.

From the perspective of government debt, however, it does not matter one iota whether debt-financed deficits are caused by higher social security spending, purchases of more missiles, or larger tax cuts for the rich.

It is therefore an empirical question whether the Democrats or the Republicans have actually the more fiscally irresponsible party. In order to find the answer, I collected publicly available quarterly data on the stock of US public debt from the St. Louis Fed covering 58 years from the Johnson Administration in 1967 to the Trump Administration of today. The table below presents a basic set of summary statistics for this data.

(Source: here)

The main thing to highlight from this table is the shocking increase in US government debt over this period; an 83.4% of GDP increase from 39.2% of GDP in 1967 to 122.6% of GDP as of the end of 2025. This is equivalent to adding 1.4% of GDP in new net liabilities every single year and sustaining that effort un-interrupted for 58 years in a row. Quite the feat!

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Who did this? Who was responsible for piling so many obligations onto future generations? In order find out, I calculated how the debt stock changed under every administration and under each power constellation in the US Congress dating back to 1967. Over this period, the United States had twelve presidents of which five were Democrats (Johnson, Carter, Clinton, Obama, and Biden) and seven were Republicans (Nixon, Ford, Reagan, Bush Sr., Bush Jr, Trump 1, and Trump 2). In addition, there were three distinct periods of Democrat control of Congress, three periods with Republican control, and three periods during which the House and the Senate were controlled by different parties. We can now examine how well or badly the two parties managed the debt.

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US presidents and government debt

We start by looking at how Democrat and Republican presidents handled the debt. The chart below shows how the US government debt stock changed under different adminstrations. The black bars show quarter-on-quarter changes in public debt; when the black bars rise above (below) zero the public debt increases (decreases). The blue and red segments denote periods of Democrat and Republican presidents, respectively.

(Source: here and here)

I see six main take-aways from this chart:

First, the structural break around the early 1980s to which I alluded earlier is clearly visible in the chart. Prior to the 1980s, the changes in government debt to GDP were modest size and stationary, meaning that the debt swung some 2-3% of GDP around the mean with no large or discernibly sustained departures from the mean. In other words, the US presidents in this period managed the debt conservatively. Moreover, there were no discernible differences between Democrat and Republican presidents as far as debt management was concerned; Johnson (DEM), Nixon (REP), Ford (REP), and Carter (DEM) all kept the stock of debt within a tight range around 30% and 40% of GDP.

Second, as noted earlier, things began to change at the beginning of 1981. From this point onwards, the US government debt stock experienced a massive and sustained expansion. The expansion began very early in Republican President Ronald Reagan's first term and continued without interruption under his Republican successor, George Bush Sr. By the end of the Reagan-Bush era, the US public debt stock had increased by 32% of GDP. Reagan added 19% of GDP to the debt stock during his two terms in office, while Bush Sr. piled on another 13% of GDP in his single term. At no point during the Reagan-Bush era did the government debt decline.

Third, things changed again in 1993, when Bill Clinton, a Democrat, moved into the White House. During Clinton's two terms in office, the US debt stock declined more than under any other president in the 58-year period under analysis. At 8% of GDP, the reduction in government debt under Clinton was not only large, but also sustained across both his terms in office, leaving the US government with just 55% of GDP in debt at the end of Clinton's presidency. This is very close to the long-term historical average for US government debt prior to the 1980s.

Fourth, Republican George Bush Jr., who also served two terms, brought in yet more sweeping change. During Bush Jr.'s presidency, the US government's debt increased by an almost unfathomable 23% of GDP (from 54% of GDP to 77% of GDP). Much of this increase happened at the end of Bush Jr.'s presidency as his Administration launched an enormous bail-out of the American banking system. The bailout was designed to cover eye-watering losses incurred by US banks as a result of reckless bets on and exposure to the US sub-prime mortgage market. The sub-prime debacle had been allowed to fester during Bush Jr.'s eight years in the White House and for most of this period Republicans also controlled the US Congress. None of them did anything to prevent what would eventually turn into the 2008/2009 Global Financial Crisis (GFC).

It therefore befell to Democrat president Barack Obama to sort out the mess. Obama inherited all the fiscal and economic consequences of the GFC, including fiscal commitments large enough to make most economists swoon. The crowning achievements of Obama's presidency are often said to be the killing of Osama Bin Laden and reforming the US healthcare system ('Obama Care'), but in my opinion Obama's greatest achievement was to stabilise the US government's debt stock after the GFC. In a truly impressive effort of sustained fiscal corrective action, which is clearly visible in the chart above Obama brought down the rate of growth of US public debt from a near-criminal 23% of GDP in Bush Jr.'s last two quarters in office to minus 1% of GDP in the last quarter of his second term.

The sixth and final observation is that the pattern of Republican fiscal profligacy and Democrat fiscal restraint has repeated itself in the last three presidential terms, where Trump increased US government debt by more than 21% of GDP in his first term and has so far added another additional 6% of GDP to the debt in his second term, based on newly released estimates for Q1 2026 from BEA. By contrast, the US debt-to-GDP ratio declined by 3.5% during Biden's single term in the White House.

It is therefore unequivocally the case, contrary to popular perceptions, that US Republican presidents are massively more fiscally irresponsible than Democrat presidents. Indeed, if we add up the total debt accumulated under all Republican presidents and all Democrat presidents from 1967 to 2025 and compare them we find that Democrats added only 9% of GDP to US public debt stock, while Republican presidents added 74% of GDP, or eight times more than the Democrats!

The implication of this finding should be self-evident: if you value fiscal stability and lower future taxes, if you want to avoid default, massive inflation, and a potential Dollar collapse you should never vote a Republican into the White House.

Debt and the balance of power in the US Congress

Of course, US presidents do not decide tax and spending policies on their own. While US presidents are hugely important to the fiscal outlook in that they propose the budget, the ultimate authority to appropriate funds and approve spending lies with Congress.

The US Constitution stipulates that a single, merged version of the president's budget must be passed by full chambers in both the House of Representatives and the Senate before the budget bill can be sent back to the president for his signature. Each administration's fiscal stance is therefore a balancing act between Congress and the president.

Between 1967 and 2025, control of the US Congress oscillated between Democrat majorities in both houses, Republican majorities in both houses, and periods where control of the House of Representatives and the Senate was split between the two parties.

The chart below shows who controlled Congress over the period with red segments denoting Republican control and blue segments indicating Democrat control. Segments without blue or red were periods of no overall control. The black bars show the level of US public debt (as a percentage of GDP).

(Source: here and here)

Based on this chart, I draw the following conclusions:

First, the big picture is that the political centre of gravity has generally shifted to the right in recent decades. Democrats controlled both houses of Congress in the earlier periods (1967-1980, 1987-1994, and 2007-2010), while Republicans have been more in control in the later periods (1995-2006, 2016-2019, and 2024-now). In other words, Republicans have been in charge of Congress during periods of higher levels of debt-to-GDP, all else even.

Having said that, the periods in which Democrats have controlled Congress have generally been associated with larger changes in debt stock than periods with Republican control as one can see from the table below. The US government's debt-to-GDP ratio increased by a total of 13.7% of GDP during the three periods in which Democrats were in control of Congress, while the debt stock only rose by 2.3% of GDP during periods of Republican control.

(Source: here)

However, this does not mean that Congress Democrats have been completely out of control. For one, the increments in debt during periods of Democrat and Republican control have been relatively small in both absolute terms and compared to, say, the impact Republican and Democrat presidents have had on the size of the public debt stock.

It should also be noted that a sizeable chunk of the increase in government debt - 17.3% of GDP to be exact - was due to the GFC rescue package for US banks, which, unusually, was approved in Congress with broad bi-partisan support, wherefore I have not attributed it to any one party in particular.

Yet, this still leaves a massive 60% of the increase in debt unaccounted for by either the bank bail-out or any one of the two political parties. This huge chunk of debt - 50% of GDP in absolute terms - was approved by Congress in periods of no overall control. What makes this even more remarkable is that periods of no overall control of Congress only make up 29% of total parliamentary time.

The big insight from the analysis of debt accumulation and Congress is therefore that periods of no overall control are extraordinarily dangerous. The danger arises from the fact that members of Congress understand - and take advantage of - the fact that they can increase spending and cut taxes with near impunity, since voters find it difficult to identify who to blame for the rise in spending at such times.

Conclusion

The preceding analyses have produced two very clear conclusions. The first conclusion is that periods with Republican presidents lead to vastly greater increases in public debt than periods with Democrats in the White House. The second conclusion is that periods of no overall control of Congress give rise to multiple times greater fiscal profligacy than periods where one party or the other is in control.

These conclusions are highly relevant right now as the November mid-term election draws nearer. We may be on the threshold of yet another period of no overall control in Congress as most polls currently show the Democrats taking firm control of the House, while control of the Senate remains a toss-up.

Given that we are stuck with a Republican, Donald Trump, in the White House for at least another two years, we are staring at the worst possible constellation as far as the outlook for public debt is concerned.

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In their book "This Time is Different: Eight Centuries of Financial Folly", Kenneth S. Rogoff and Carmen M. Reinhart showed that returning to debt sustainability can be challenging once the stock exceeds 90% of GDP.

Given that the US public debt stock has already breached 122% of GDP and looks set to rise further for the reasons I have outlined, it would be prudent for investors to reduce their exposure to US Treasury bonds right away.

The United States government is unlikely to default outright in the sense of halting repayment of the debt. The far more likely scenario is one akin to the 1970s, where the Dollar lost 50% of its value and inflation was allowed to run hot - meaning above 10% per year - for the better part of a decade. These conditions eroded away the value of US Treasuries, hurting large overseas institutional investors particularly badly due to the fall in the Dollar. In other words, it is irrelevant whether investors lose their money through outright default or via currency debasement and inflation.

Big inflation and devaluation episodes are deliberate policy choices. In the 1970s, these policy policies were handled by Federal Reserve governors Arthur Burns and G. William Miller, who ensured that interest rates were kept low enough to allow inflation to do its dirty work on the nominal debt contracts.

Today, we have our own Burns & Miller clone in the guise of Kevin Warsh, who was recently appointed by Donald Trump to run the Federal Reserve following a sustained period of presidential arse-licking. I am just mentioning this so you won't be surprised when they start reciting the Anthem for Doomed Bonds.

The End