Which Political Party is to Blame for the Rising Federal Debt?
Former JPMorgan Chase Chief Economist (Ph.D. in Economics) & Current Global Keynote Speaker
Getty Images by Kbeis
Spoiler Alert: Democrats and Republicans are to blame!
As Washington debates the growing annual federal budget deficits, some might be tempted to blame one political side. Republicans often point to President Biden’s pandemic-related stimulus spending and legislative efforts, while Democrats refer to President Trump’s 2017 Tax Cuts and Jobs Act (TCJA). However, the truth, as confirmed by nonpartisan budget experts such as the Bipartisan Policy Center, is that both parties have contributed to the increase in federal deficits. These actions have led to a significant increase in the U.S. public debt-to-GDP ratio over the past 60 years, rising from 40.3% to 120.9%. The ratio peaked at 132.8% during the COVID-19 pandemic in Q2 2020, as the government responded to the economic shutdown.
Source: U.S. Office of Management and Budget
Moving forward, the Congressional Budget Office (CBO) projects that the federal debt will increase by a staggering $21.1 trillion over the next 10 years, reflecting not just recent decisions but also years of accumulated fiscal choices by both political parties.
It always surprises me when I speak at conferences and hear people criticize a single piece of legislation for adding $2 to $4 trillion to the deficit over the next decade, while overlooking that our total federal deficits are expected to grow by five to ten times that amount.
If there’s one feature that stands out from a nonpartisan review of the facts, it is this: no political party has clean hands when it comes to the surge in the nation’s swelling deficits.
Source: Investopedia.com
Examining individual presidential administrations, it’s clear that both parties have significantly increased the federal debt. Interestingly, when adjusted for inflation since 1913, Democratic presidents have accumulated more debt than Republican presidents, primarily because they served an average of nine more years in office. Ranking the growth of inflation-adjusted federal debt by presidency reveals that the Carter administration had a $38.9 billion inflation-adjusted surplus and a nominal deficit of $280 billion. In comparison, President Trump's first term is marked by a $7.1 billion increase in inflation-adjusted federal debt, as well as a nominal $7.8 billion increase.
Source: U.S. Treasury Department and the Bureau of Labor Statistics
The TCJA (2017) Tax Cut
One of the most frequently cited fiscal policies of the past decade was the 2017 Tax Cuts and Jobs Act (TCJA), enacted under President Donald Trump and a Republican-controlled Congress. At that time, the CBO estimated that the TCJA would increase the federal debt by $1.9 trillion from 2018 to 2027, even after accounting for expected economic growth.
Republicans argued that these cuts would “pay for themselves” by speeding up economic growth. But follow-up studies by seven nonpartisan groups, including the Joint Committee on Taxation, the CBO, the Tax Policy Center, and others, found that the tax cuts did increase growth, but not nearly enough to make up for the revenue loss from the tax cuts associated with the TCJA 2017.
The TCJA lowered the corporate tax rate from 35% to 21% and cut individual tax rates, with some of these provisions set to expire in 2025 unless extended, potentially leading to another fiscal showdown.
Even with stronger growth in 2018 and 2019, the U.S. began the pandemic with a nearly $1 trillion deficit. Some have subsequently argued that cutting taxes during a period of economic expansion—rather than saving such stimulus for a downturn—weakened the nation’s fiscal flexibility during the COVID-19 emergency.
Biden-Era Spending: Emergency Aid and Legislative Ambition
President Joe Biden was not innocent either, having entered office in 2021 amid a global pandemic and economic crisis. During his administration, Congress passed the American Rescue Plan Act (ARPA)—a $1.9 trillion spending package that included direct stimulus payments, extended unemployment benefits, and aid to state and local governments. Though much of this was viewed as emergency spending, critics argue that the size and timing of the package fueled inflation and worsened the long-term fiscal outlook.
Republicans also criticized the Biden administration’s Inflation Reduction Act (IRA), passed in 2022, which was initially promoted as a deficit-reducing measure. The IRA included health care savings and increased IRS enforcement, alongside investments in green energy. While early CBO estimates suggested that it would modestly reduce the deficit over a decade, subsequent projections indicated that the bill added slightly to the deficit, primarily due to higher-than-expected costs for clean energy tax credits. Of course, if those tax credits are eliminated, the revenue losses will diminish.
It is worth noting that some of the most significant spending initiatives under Biden—such as the Bipartisan Infrastructure Law and the CHIPS and Science Act—gained Republican support, reflecting a consensus that America's aging infrastructure and global competitiveness needed urgent attention. Still, gaining bipartisan support does not grant politicians a free pass. It only reinforces the view that both parties share responsibility for the rise in the deficit caused by this legislation.
The Big Beautiful Bill: Senate vs. House Deficit Projections
The most recent legislative flashpoint is the Big Beautiful Bill (BBB), a sweeping economic and tax package moving through Congress. As of June 29, 2025, the CBO projects that the Senate version of the bill will increase the federal debt by $3.3 trillion over the next 10 years, while the House version would raise it by $2.4 trillion. The Senate version of the BBB increased the cost of tax cuts to $4.5 trillion, with the additional inclusion of federal tax-free status for tips and overtime compensation. Meanwhile, deeper cuts to Medicaid and Food Stamp programs reduce the budget impact to a $3.3 trillion cost over the next decade.
Regardless of the version in question, both increase the debt, and both have drawn criticism from deficit hawks on both sides of the political aisle. Yet neither chamber seems prepared to significantly pare back the bill, as political momentum builds around boosting economic growth and renewing the expiring tax provisions.
Budget Gimmicks and the Current Law vs. Current Policy Debate
Much of the confusion about future deficits also emanates from the difference between current law and current policy projections. The CBO is required to assume that existing laws remain in place; therefore, the 2017 TCJA tax cuts would have expired in 2025, thereby requiring that any new legislation be measured against its impact on the deficit over the next 10 years.
This is a logical approach for neutral forecasting, as ignoring the impact of future deficits by assuming they would not have expired would understate the true deficit outlook.
The same logic applies to spending programs, such as temporary increases in discretionary spending or emergency provisions. If they are continually renewed, they create ongoing fiscal commitments that contribute to the deficit, even if the law designates them as temporary.
What About Real GDP Growth Controversy?
Some politicians and commentators criticize the CBO for underestimating economic growth, citing the agency’s long-term growth assumption of 1.8% annually. The argument is simple: if growth is higher, deficits will decrease as revenues increase.
However, the CBO’s 1.8% figure reflects the structural potential of the economy, rather than short-term cycles. It factors in aging demographics, labor force participation, and productivity trends, not the effects of short-term stimulus or optimistic “best case” scenarios.
Moreover, critics rarely mention that the CBO assumes no recession occurs during its 10-year forecast window. That’s a generous assumption. Historically, the average U.S. economic expansion since 1945 has lasted an average of 5.35 years, according to data compiled by the National Bureau of Economic Research. If a recession occurs, revenue falls, and automatic stabilizers (such as unemployment insurance) kick in, widening the deficit further.
In reality, any realistic budget projection should include the risk of a recession roughly every 5.35 years!
Who’s Responsible for the $21.8 Trillion Increase?
Let’s revisit the headline figure. Currently, the CBO projects that the federal debt held by the public will increase by $21.1 trillion through 2035. This estimate considers the cumulative effects of numerous past policies.
The 2017 Trump tax cuts, which are scheduled to expire in 2025, may be extended.
Emergency COVID relief bills under both Trump and Biden, totaling trillions.
Biden-era legislative packages: American Rescue Plan, Inflation Reduction Act, Bipartisan Infrastructure Investment and Jobs Act, and Medicaid for Children.
Rising mandatory spending, including Social Security, Medicare, and interest payments, is now among the fastest-growing budget items.
Both political parties have contributed to the current fiscal situation. Republicans emphasized tax cuts and military spending, which haven’t fully offset those costs. Democrats promoted significant domestic investments and pandemic relief without fully offsetting those expenditures!
Summary and Concluding Thoughts
No political party is innocent in Washington’s debt drama! Blaming one administration or party for the rising deficits may be politically convenient, but it is factually misleading. The federal budget deficit is the result of decisions made by both political parties, some of which were strategic, while others were reactive or simply politically expedient.
From the tax cuts of 2017 to the emergency relief of 2020–2021, and from infrastructure upgrades to the ongoing battle over the Big Beautiful Bill, each major initiative has contributed to a larger fiscal burden.
A structural imbalance has plagued the U.S. for decades, enabling rising mandatory spending to outpace government revenues.
The CBO’s job is to project what happens under current law, but political reality often causes politicians from both sides of the aisle to ignore those assumptions. Lawmakers use budget tricks, temporary provisions, and unrealistic growth projections to sell legislation that they know will cost more than advertised.
Meanwhile, neither party has taken the difficult step of cutting spending or raising revenue significantly to alter the current budget trajectory. I bet that neither political party is ready to remind voters that the U.S. national federal debt is expected to increase by $21.1 trillion over the next decade, which will require a solid plan to prevent this disastrous outcome.