As a share of potential GDP (CBO May 2022 estimate):
figure 1: Cyclically adjusted federal budget balance (blue, left scale) and federal debt held by the public (tan, right scale) as a percentage of potential GDP. Dates of peak-to-trough recessions as defined by NBER are shaded in gray. Sources: CBO, NBER, and authors’ calculations.
Note that the decline in the cyclically adjusted budget balance (officially, the budget balance adjusted for the automatic stabilizer) was lower under Trump, even before the pandemic. Debt held by the public has also increased. The debt-to-potential GDP ratio has been fairly stable since the first quarter of 2021.
(Why use a periodically adjusted budget balance. Because the budget balance is an endogenous variable. Why use potential GDP? Because GDP is an endogenous variable.)
