The Rest of the Story Behind President Obama's Deficit Claim and PolitiFact's "Fact Checking"

In a speech at Knox College in Illinois on July 24, 2013, President Obama said ...

"... our deficits are falling at the fastest rate in 60 years."

The fact-checking website PolitiFact even rated this claim as true.  However, PolitiFact fails to put this claim and their "true" rating into proper context.  It is much like saying that it is true that the Nazis did good things, as some still claim, while ignoring the big picture of their atrocities and mass murder.

It is indeed true that "our deficits are falling at the fastest rate in 60 years," as shown in the following figure (click to enlarge).  According to the PolitiFact article, the White House makes this claim using a four-year change in the deficit as a percentage of the U.S. gross domestic product, as shown in this chart.  However, what both President Obama and PolitiFact fail to mention is that while "our deficits are falling at the fastest rate in 60 years," this comes after increasing our deficits at the fastest rate since we won World War II after defeating the Nazis and the Japanese Empire.  The deficit reduction is laudable, but it also comes as a result of the prior massive deficits.  Some of the deficit spending during President Obama's first term can be attributed to Bush-era spending, under a Democrat-controlled Congress, including seizing Fannie Mae and Freddie Mac, TARP, and the initial auto bailouts. Additional spending happened under the Obama Administration, again with the Democrat-controlled Congress, including the $787 billion Stimulus, Cash for Clunkers, buying General Motors, 99 weeks of unemployment benefits, and increased welfare, food stamps, and disability benefits.

Let's look at this same information in another manner.  The following chart shows the annual budget surplus or deficit (mostly deficits) as measured as a percentage of the U.S. gross domestic product (GDP).  The bars are color-coded by political party of the President (red for Republican, blue for Democrat) and the Presidents are listed at the top.  As you can see, it is technically true that we are currently reducing our deficits at their fastest pace in 60 years, but only because we ran massive deficits in excess of $1 TRILLION for four years from 2009 through 2012.  Although the 2013 fiscal year isn't yet complete, the White House Office of Management and Budget (OMB) forecasts a smaller annual budget deficit of $759 billion, which helps bolster the President's claim.  However, as a percentage of GDP, this "greatly reduced" deficit still exceeds the largest deficit from President George H. W. Bush in 1992--twenty years earlier.  Part of the reason for the for the smaller budget deficit is the controversial sequestration process that enforces across-the-board budget reductions in spending growth.

Our Rating

We rate the President's claim as "technically true but misleading."  The President is making claims that omit the full context for his claims.

Unfortunately, this isn't the first time that we've found President Obama's claims to be factually correct but misleading.  He, or somebody on his staff, is apparently a fan of the classic book, How to Lie with Statistics.  For another example, see President Obama's claims "... that Ho Chi Minh was actually inspired by the U.S. Declaration of Independence and Constitution, and the words of Thomas Jefferson.”.  Based on Ho's actions, however, Ho apparently read a cheap knock-off translation of these works.

See also ...

• Digging Deeper Into President Obama's Manufacturing Jobs Claim
• What Does the Obama Job Chart Really Mean?

Misconceptions

We received the following tweet that originally alerted us to President Obama's deficit claim. Unfortunately, many of the President's supporters do not actually understand what the President claimed.

The United States government, in no way, shape, or form is the "smallest government in 50 years." The Twitterer is potentially mistaking a claim that we have the lowest percentage of people employed by the government in 45 years. Likewise, the President has not "reduced debt faster than any other President in history."  The President's claim is about deficit reduction, not debt reduction.  Here's a quick tutorial on the difference between deficit and debt, courtesy of the United States Treasury.

In order to have actual debt reduction, we must first run a budget surplus ... and we're in no danger of doing that any time soon.  However, based on changes to policy, it is possible to reduce the forecasted future debt while currently running a deficit.

The President's claim also covers the last 60 years (actually, 64-65 years), not all of U.S. history. There were much bigger improvements to deficits immediately following the end of World War II.

Sorry, we don't "Ignorant much" around these parts.

Methods

According to PolitiFact, the Obama Administration makes this claim using the annual budget deficit measured as a percentage of the U.S. gross domestic product (GDP).  They then measure the difference over a four-year time frame (YEAR(n) - YEAR(n-4).  The deficit as a percentage of GDP data is available directly from the White House web site as Table 1.2.  Use the field "Surplus or Deficit" under "Total".  We used the mid-year updated figures from the White House for 2013, which is not included in Table 1.2.  The updated values are -4.7% and $795 billion, which are to the benefit of the President's claim.

Data Sources

White House: Office of Management and Budget: Historical Tables

Table 1.2—Summary of Receipts, Outlays, and Surpluses or Deficits (-): 1789–2018 (Total Surplus or Deficit as a Percentage of U.S. GDP)
Table 1.1—Summary of Receipts, Outlays, and Surpluses or Deficits (-) as Percentages of GDP: 1930–2018 (Total Surplus or Deficit in Current Dollars)
www.whitehouse.gov/omb/budget/historicals

Wall Street Journal: White House Sees Smaller Budget Deficit in 2013 (Lower, revised 2013 deficit numbers based on mid-year update)

online.wsj.com/article/SB10001424127887323368704578594020152453486.html

PolitiFact: Obama says deficit is falling at the fastest rate in 60 years
www.politifact.com/truth-o-meter/statements/2013/jul/25/barack-obama/obama-says-deficit-falling-fastest-rate-60-years

FactCheck.org: Deficits Falling (From Way Up)
http://www.factcheck.org/2013/08/deficits-falling-from-way-up/