History of the US Federal Budget Deficit

The budget deficit is the difference between the money the federal government takes in, called receipts, and what it spends, called outlays each year. The U.S. government has run a multibillion-dollar deficit almost every year in modern history, spending much more than it takes in.

The opposite of a budget deficit, a budget surplus, occurs when the government’s revenue exceeds current expenditures resulting in an excess of money that can be used as needed.

In fact, the government has recorded budget surpluses in only five years since 1969, most of them under Democratic President Bill Clinton.

 In all-too-rare times when revenue equals spending, the budget is called “balanced.” 

Adds to National Debt

Running a budget deficit adds to the national debt and, in the past, has forced Congress to increase the debt ceiling under numerous presidential administrations, both Republican and Democrat, to allow the government to meet its statutory obligations.

Although federal deficits have shrunk markedly in recent years, the Congressional Budget Office (CBO) projects that under current law increased spending for Social Security and major health care programs, like Medicare, along with increasing interest costs will cause the national debt to rise steadily over the long term.

The larger deficits would cause federal debt to grow faster than the economy. By 2040, the CBO projects, the national debt will be more than 100% of the nation’s Gross Domestic Product (GDP) and continue on an upward path— “a trend that cannot be sustained indefinitely,” notes the CBO. 

Notice particularly the sudden jump in the deficit from $162 billion in 2007, to $1.4 trillion in 2009. This increase was due primarily to spending for special, temporary government programs intended to re-stimulate the economy during the "great recession" of that period.

Budget deficits eventually tapered back down into the billions by 2013. But in August 2019, the CBO predicted the deficit would again surpass $1 trillion in 2020—three years earlier than it had originally expected.

Here is the actual and projected budget deficit or surplus by fiscal year, according to CBO data for modern history.

• 2024 - $921 billion budget deficit (projected)
• 2023 - $908 billion budget deficit (projected)
• 2022 - $1.4 trillion budget deficit
• 2021 - $2.8 trillion budget deficit
• 2020 - $3.1 trillion budget deficit
• 2019 - $984 billion budget deficit
• 2018 - $779 billion budget deficit
• 2017 - $665 billion budget deficit
• 2016 - $585 billion budget deficit
• 2015 - $439 billion budget deficit
• 2014 - $514 billion budget deficit
• 2013 - $719 billion budget deficit
• 2012 - $1.1 trillion budget deficit
• 2011 - $1.3 trillion budget deficit
• 2010 - $1.3 trillion budget deficit
• 2009 - $1.4 trillion budget deficit
• 2008 - $455 billion budget deficit
• 2007 - $162 billion budget deficit
• 2006 - $248.2 billion budget deficit
• 2005 - $319 billion budget deficit
• 2004 - $412.7 billion budget deficit
• 2003 - $377.6 billion budget deficit
• 2002 - $157.8 billion budget deficit
• 2001 - $128.2 billion budget surplus
• 2000 - $236.2 billion budget surplus
• 1999 - $125.6 billion budget surplus
• 1998 - $69.3 billion budget surplus
• 1997 - $21.9 billion budget deficit
• 1996 - $107.4 billion budget deficit
• 1995 - $164 billion budget deficit
• 1994 - $203.2 billion budget deficit
• 1993 - $255.1 billion budget deficit
• 1992 - $290.3 billion budget deficit
• 1991 - $269.2 billion budget deficit
• 1990 - $221 billion budget deficit
• 1989 - $152.6 billion budget deficit
• 1988 - $155.2 billion budget deficit
• 1987 - $149.7 billion budget deficit
• 1986 - $221.2 billion budget deficit
• 1985 - $212.3 billion budget deficit
• 1984 - $185.4 billion budget deficit
• 1983 - $207.8 billion budget deficit
• 1982 - $128 billion budget deficit
• 1981 - $79 billion budget deficit
• 1980 - $73.8 billion budget deficit
• 1979 - $40.7 billion budget deficit
• 1978 - $59.2 billion budget deficit
• 1977 - $53.7 billion budget deficit
• 1976 - $73.7 billion budget deficit
• 1975 - $53.2 billion budget deficit
• 1974 - $6.1 billion budget deficit
• 1973 - $14.9 billion budget deficit
• 1972 - $23.4 billion budget deficit
• 1971 - $23 billion budget deficit
• 1970 - $2.8 billion budget deficit
• 1969 - $3.2 billion budget surplus

For fiscal year 2022, the budget deficit was sliced in half, the largest drop in history following two years of huge COVID-related government spending.

Though still large in historical terms, the budget shortfall declined to $1.375 trillion, compared to the 2021 deficit of $2.776 trillion.

The decline would have been steeper had it not been for the Biden administration’s student loan forgiveness program. Education spending totaled $639.4 billion for the fiscal year, $408 billion higher than estimated.

The 2022 fiscal year saw $4.896 trillion in revenue against $6.272 trillion in outlays. The outlays number represented about a $550 billion decline in spending but an $850 billion increase in revenue. The revenue total is by far the highest ever for the U.S. government.

Deficits in the previous two years soared as Congress allocated massive sums to combat the pandemic.

Legislation increasing spending on Social Security, health care, and defense that outpace revenue can increase the deficit. While revenue increased during the COVID-19 pandemic, from approximately $3.5 trillion in 2019 to $4 trillion in 2021, increased government spending related to widespread unemployment and health care caused spikes in the deficit.

National Deficit vs. National Debt

The terms national deficit and national debt are frequently used when discussing the nation’s finances and are often confused with one another.

To pay for a deficit, the federal government borrows money by selling Treasury bonds, bills, and other securities. The national debt is the accumulation of this borrowing along with associated interest owed to the investors who purchased these securities. As the federal government experiences reoccurring deficits, which are common, the national debt grows. 

In reality, the U.S. government must pay interest on the national debt. This interest expense increases spending each year, increasing spending (and thus, deficits) as the debt grows.

Deficit as a Percent of GDP

To put the federal deficit into proper perspective, it must be viewed in terms of the government’s ability to pay it back. Economists do this by comparing the deficit to Gross Domestic Product (GDP)—the measure of the overall size and strength of the U.S. economy.

This “debt-to-GDP ratio” is a ratio between the cumulative government debt and the GDP over time. A low debt-to-GDP ratio indicates that the nation’s economy is producing and selling enough goods and services to pay back the federal deficit without incurring further debt.

In simple terms, a larger economy can sustain a larger budget, and thus a larger budget deficit.

According to the Senate Budget Committee, in the fiscal year 2017, the federal deficit was 3.4% of GDP. For the fiscal year 2018, when the U.S. government operated under its largest budget in history, the deficit was estimated to be 4.2% of GDP. Remember, the lower the debt-to-GDP percentage, the better.

Clearly, the more you spend, the harder it is to pay back your debts.

Is the Budget Deficit a Crisis?

Many people consider the federal budget deficit to be a monumental crisis. However, if kept in check, it actually triggers economic growth. The expenditures that cause the deficit, such as tax cuts and credits, put money in pockets, allowing businesses and families to spend money, which results in a stronger economy. However, economists warn that if the debt-to-GDP ratio exceeds 77% for an extended period of time, the deficit will begin to drag the economy down.