Trump adds $4.1 trillion to national debt. Here's where the money went

Once President Trump signs the budget deal that was passed by the House on Thursday and is expected to be approved by the Senate in a few days, he will have added $4.1 trillion to the national debt, according to the Committee for a Responsible Federal Budget. The total national debt surpassed $22 trillion in February.

This will mark the third time that a major piece of deficit-financed legislation will get Trump’s stamp of approval. Legislation Trump has so far signed since 2017 has added $2.4 trillion to the national debt through 2029, according to CRFB, a nonpartisan public policy group.

Many investors are worried about the ballooning national debt, with 54% naming the political environment and 47% viewing national debt as their top concerns, according to a UBS second-quarter investor sentiment survey. Tax and spending policy are the main reasons for the national debt expansion from 2017 to 2029, according to CRFB.

The biggest contributor to the $4.1 trillion that will be added to the national debt through 2029 is the Tax Cuts and Jobs Act. This signature tax cut legislation signed by Trump in 2017 single-handedly increased the debt by $1.8 trillion, according to CRFB.

“If you were to extend all the expiring provisions from the Tax Cuts and Jobs Act, it would be about a trillion more on top of that, so it’s hugely expensive,” says CRFB’s senior vice president Marc Goldwein. “Some of this is done on a partisan basis, some of this is done on a bipartisan basis. But it’s all part of a culture of no longer worrying about how we’re going to pay for things and just assuming that future generations are going to cover the bill.”

The budget deal that was passed last year added $445 billion to the national debt. And when he signs the 2019 Bipartisan Budget Act after it goes to the Senate next week, Trump will make spending increases in the legislation permanent, growing the national debt by $1.7 trillion through 2029.

The remaining $155 billion of debt added during Trump’s first term comes from other legislation, including disaster relief, emergency spending bills, and delays in three Affordable Care Act taxes, according to CRFB.

Impact to GDP

U.S. GDP growth fell to 2.1% in the second quarter. CRFB estimates that the new budget deal will bring debt to 97% of GDP in 2029 once that $4.1 trillion figure is added to the existing $16.2 trillion in debt and $9.8 trillion projected to be borrowed over the next 10 years.

“We are the most powerful economy in the world and we’re the world’s reserve currency and we borrow at our own currency. And for those three reasons we’re not going to default on our debt, but that doesn’t mean that we can borrow without consequences,” says Goldwein.

The ballooning national debt will cause GDP growth to slow down further, he says. “The more we borrow, the more we have to count on capital from abroad, or else no capital at all to fund our investments and the slower growth is going to be over time. We’re already headed towards 2% growth on the current basis, and the higher our debt is, the lower that will be.”

Related: The 10 U.S. states with the most debt

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The 10 US states with the most debt
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The 10 US states with the most debt

1. California

California has the highest debt-to-income ratio in the country. Residents of the Golden State make about $28,000 annually on average, according to U.S. Census Bureau data. The New York Federal Reserve Bank shows that Californians have a per resident debt balance of $65,740. This gives Californians a debt-to-income ratio of 2.34 on average. Like many other states, most of Californians’ debt is held up in their mortgages. Californians owe about $51,190 on their mortgages on a per capita basis. 

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2. Hawaii

Hawaii comes in second with a debt-to-income ratio of 2.1. On average Hawaiians make slightly more than Golden State residents. The median income in Hawaii is $31,905 as compared to $28,068 in California. Residents of Hawaii also have slightly more debt per capita than those in California: $67,010 to $65,740. Hawaiians have the second-highest proportion of debt tied up in mortgage. In total, $51,770 out of the total $67,010 in per capita debt that Hawaiians hold is owed on mortgages. That means 77% of per capita debt is mortgage debt. 

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3. Virginia

Virginia comes in third with a debt-to-income ratio just below 2. The average Virginian makes about $31,557 and has $62,520 in debt. One reason why lenders may feel safe lending to Virginians, allowing them to have a high debt-to-income ratio, is their low delinquency rates. Only 1.27% of mortgage debt in Virginia is delinquent by at least 90 days. That is the 13th-lowest rate in the country. Virginia also has a relatively high proportion of its debt in student loans (7.76%).

Photo credit: Getty

4. Colorado

Of Colorado’s total debt, 6.85% is tied up in automobile debt. That’s the second-highest rate in the top 10. However it is quite a bit lower than the national average of 9.57%. Overall there is not much separating Colorado from Virginia: Colorado has a debt-to-income ratio of 1.96. The median income in Colorado is $31,664 and the per capita debt is $62,200.

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5. Utah

Like the rest of the top 10, Utah residents have the vast majority of their debt tied up in mortgages. Utah residents have $52,150 in per capita debt, $38,240 of which is mortgage debt. The state also has one of the lowest delinquency rates for mortgage debt. Only 1.05% of mortgage debt is 90 days past due in Utah. Again this may partially explain why lenders are so willing to lend to Utahans looking for mortgages. 

Photo credit: Getty 

6. Washington, D.C.

Almost 15% of all debt held in the nation’s capital is owed on student loan debt. All that higher education may be paying off though. D.C. has the highest median income in the country and over half of the population over the age of 25 has at least a bachelor’s degree. In fact, there are more people over the age of 25 in D.C. with a graduate degree (32.3%) than there are with only a bachelor’s degree (23.8%). The capital also has the lowest percent of debt in the country tied up in auto loans (3.35%), probably due to the accessible public transportation available in the area. 

Photo credit: Getty 

7. Oregon

Oregon has a debt-to-income ratio of 1.89. On average Oregonians make less than many other states in the top 10. The median income in the Beaver State is $26,188, according the U.S. Census Bureau. Oregon also has the least per capita debt in the top 10, at $49,550 per resident. For the most part Oregonians choose to go into debt to buy homes. Over 72% of overall debt is held in mortgages. One area where Oregonians struggle is in paying off credit card debt. Just over 7% of all credit card debt in the state is delinquent. One way to eliminate credit card debt is using a balance transfer credit card. With a balance transfer credit card, new users typically have a limited time to make no-interest payments. 

Photo credit: Getty 

8. Washington

Washington, Oregon’s northwest neighbor, comes in eighth for highest debt-to-income ratio. The state has the third-lowest percent of debt tied up in student loans (6.29%) but the third-highest percent of debt tied up in mortgages (75.35%). Washingtonians also tend to be some of the most responsible holders of debt in the country. They rank above average in delinquency rates on all types of debt and rank in the top 10 for lowest rates of auto loan delinquency and credit card delinquency. 

Photo credit: Getty 

9. Massachusetts

On average Massachusetts residents earn about $32,352 per year and have about $59,820 in debt per capita. That works out to a debt-to-income ratio of 1.84. Once again, like other states, the majority of that debt is mortgage debt. About 72% of per capita debt in the Bay State is mortgage debt. The state’s residents don’t take on as much credit card debt as other states do. About 5.45% of per capita is tied up in credit card debt

Photo credit: Getty 

10. Maryland

The Old Line State rounds out our top 10 states with the highest debt-to-income ratios. Maryland residents are some of the most well-off in the country, with an average individual income of $36,316. In terms of debt, Maryland residents have $67,020 in per capita debt, meaning their debt-to-income ratio is 1.84.

Photo credit: Getty 

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