Hovde debt claim true, meaningless

Eric Hovde, a businessman who is the first Republican candidate to announce a challenge to Democratic U.S. Sen. Tammy Baldwin this November, says reining in the national debt will be one of his top priorities.

Hovde has talked about the size of the national debt on his campaign website, in his first speeches to supporters, and now in a clip published on March 4 that's part of his video series called “Just Facts.”

Perhaps the most eye-popping claim Hovde makes is on his website, which he's paraphrased elsewhere:

“Since the end of the 2020 fiscal year, President Biden and Senator Baldwin have added over $7.3 trillion of debt, more than the first 228 years of our nation's history combined,” his website says.

The national debt is a complicated subject, so we called in two economics experts to explain it as Hovde's campaign kicks into gear.

Here's what we found.

Numbers are correct, but size of economy has grown dramatically over history

Let's start by looking at Hovde's raw numbers. He says $7.3 trillion has been added since the end of the 2020 fiscal year, and it took 228 years for the debt to reach that same number.

One point right off the bat: The 2020 fiscal year ended in September 2020, which means the numbers include the last few months of former President Donald Trump's time in office.

Overall, Hovde is “pretty close on the actual numbers,” said Menzie Chinn, a professor of public affairs and economics at the University of Wisconsin-Madison.

However, Chinn said, “the basic point is that the numbers are meaningless.”

Part of that is because prices have increased over time. Something that cost $1 in 1776 costs over 30 times as much in 2023, Chinn said.

And the economy has just gotten much bigger. The first estimate from 1790 shows the economy is now 141,750 times larger, so using plain dollar comparisons doesn't make sense, Chinn said.

“It's not a fair comparison,” agreed Kundan Kishor, chair of the economics department at the University of Wisconsin-Milwaukee.

“The size of the economy is much bigger now than it used to be, and the average price level is also increasing,” he said.

So while Hovde's numbers look correct, economists say it's not fair to compare them to earlier in history, when the U.S. economy was smaller and prices were lower.

Another measurement did spike during pandemic, but continues high trend

Economists say a better measurement is the debt-to-GDP ratio. Gross domestic product refers to how much a country produces and gives a picture of how the economy is doing.

“Think about your credit card debt,” Kishor said. If you have more income, your capacity to pay off debts is much easier.

Currently, the debt-to-GDP ratio is around 121%, according to data from the Federal Reserve Bank of St. Louis.

For context, when Trump took office, the ratio was around 102%. The ratio peaked around the start of the COVID-19 pandemic, reaching nearly 133%.

The ratio has been going up since it was at 30% in 1981, Kishor said, apart from a dip around 2000 toward the end of the Clinton administration.

So if the debt-to-GDP ratio has been increasing for at least 20 years, how much are Biden and Baldwin responsible for?

Pandemic-era policies led to spike in debt-to-GDP ratio

Let's look into a last element in Hovde's claim: that his opponent, and Biden, are responsible for debt increases.

In his video, Hovde is clear in who he blames for the increase in the debt: “Joe Biden and his Democratic allies take the cake for the damage that they have done.” It includes a side-by-side photo of Biden and Baldwin.

Earlier in the video, though, Hovde acknowledges that politicians over the last 15 to 20 years are also to blame for government finances. The numbers from the St. Louis Fed support that.

Ben Voelkel, Hovde's campaign spokesperson, pointed to policies like the American Rescue Plan and the Infrastructure Investment and Jobs Act, which Baldwin voted for and Biden signed into law.

The second bill, known as the Bipartisan Infrastructure Law, was also supported by 32 Republicans — and Baldwin is just one vote in Congress. ARPA's goal was to stimulate the economy during COVID-19.

When “something unanticipated” like the pandemic happens, Kishor said, “the government has to step in, and that leads to a temporary increase.” The same thing happened during the 2008 financial crisis.

So, Hovde is correct that pandemicera spending packages supported by Baldwin and Biden led to a spike.

And while the ratio has since cooled off, the deficit — which is related but different to the national debt — remains above pre-pandemic levels, PolitiFact National found.

But regardless of the large increase during the pandemic, the trend of higher debt-to-GDP ratios has been around during other administrations.

“What people usually lose track of is the fact that this is a long-run problem. One particular president or one particular party is not responsible for it,” Kishor said.

Finally, the economists do agree that the national debt is a problem. If the government has to make very high interest payments, that would come at the expense of other spending, Kishor said.

The national debt does need to be reined in, Chinn said, through spending cuts and changes to entitlement programs like Social Security, which are driving the debt-to-GDP ratio up over the long-term.

Our ruling

On his campaign website — and elsewhere — Hovde says “since the end of the 2020 fiscal year, President Biden and Senator Baldwin have added over $7.3 trillion of debt, more than the first 228 years of our nation's history combined.”

Hovde's raw numbers look correct, apart from including some of the last months of Trump's presidency.

But economists say it's not meaningful to compare present-day numbers to far back in U.S. history, when the economy was much smaller and prices were lower.

Instead, it's better to look at the debtto-GDP ratio, which did spike under Biden when the government spent more money to respond to the pandemic.

Still, that ratio has been increasing under other administrations, so it's not only the fault of Biden and Baldwin. Some Republicans also voted for the infrastructure law Hovde's campaign mentioned.

Our definition of Half True is “the statement is partially accurate but leaves out important details or takes things out of context.” That fits here.