US Budget Deficit by Year, Compared to GDP, Debt Increase, and Events

Is the U.S. Deficit Really That Bad?

Deficit by year
••• Photo by Ron Sachs-Pool/Getty Images

The U.S. budget deficit by year is how much more the federal government spends than it receives in revenue annually. The Fiscal Year 2018 U.S. budget deficit is $833 billion. That's at historically high levels.

The deficit hit a record of $1.4 trillion in the fiscal year 2009. That was due to both deficit spending to combat the 2008 financial crisis and lower tax receipts. 

Deficit Trends

The deficit should be compared to the country's ability to pay it back.

That ability is measured by gross domestic product. For example, the deficit in 1945 was only $48 billion. But it was 20.8 percent of total economic output as the country geared up for World War II. The record-setting 2009 deficit was only 9.8 percent of GDP. That seems more reasonable when compared to the 1945 deficit. But it's still much higher than the average of between 2 percent to 4 percent.

Each year's deficit adds to the national debt. That comparison is called the debt-to-GDP ratio. If the ratio is more than 77 percent, then the country reaches a tipping point. That's where lenders start worrying whether it's safe to buy the country's bonds. High deficits push the country toward that tipping point.

Since 1987, the deficit has been a lot less than the increase in the debt. Congress began borrowing from a surplus in the Social Security Trust Fund. The surplus was created by the baby boomer generation.

While they were in their 20s and 30s, there were more working people than retirees. Their payroll tax contributions were greater than Social Security spending.  The Fund invested the extra revenue in bonds. Congress spent that so it wouldn't have to issue as many new Treasury notes

Deficit by Year Since 1929

In the table below, the deficit is compared to the increase in the debt, nominal GDP, and national events since 1929.

Please note that the debt and GDP are given as of the end of the third quarter, specifically September 30, in each year. That coincides with the budget deficit's fiscal year. But GDP in the years up to 1947 are not available for the third quarter, so year-end figures are used.  

U.S. Deficit Since 1929 Compared to Increase in Debt, Deficit/GDP, and Major Events

Fiscal Year Deficit   (in billions)Debt Increase (by FY) Deficit /GDPEvents Affecting Deficit
1929($1)($1) (0.7%)Market crash.
1930($1)($1) (0.8%)Smoot-Hawley.
1931$0$1  0.6%Dust Bowl.
1932$3$3  4.5%Hoover tax hike.
1933$3$3  4.5%FDR New Deal.
1934$4$5  5.4%GDP up 10.8%.
1935$3$2  3.8%Social Security. WPA.
1936$4$5  5.1%Tax hikes renewed depression.
1937$2$3  2.4%
1938$0$1  0.1%Depression ended.
1939$3$3  3.0%Dust Bowl ended.
1940$3$3  2.8%Defense increased.
1941$5$6  3.8%Pearl Harbor.
1942$21$23 12.3%Defense tripled.
1943$55$64 26.9%
1944$48$64 21.2%Bretton-Woods.
1945$48$58 20.%WWII ended.
1946$16$11  7.0%Recession.
1947($4)($11) (1.6%)Cold War.
1948($12)($6) (4.2%)Recession.
1949($1)$0 (0.2%)
1950$3$5  1.0%Korean War.
1951($6)($2) (1.7%) 
1952$2$4  0.4% 
1953$6$7  1.7%Korean War ended. 
1954$1$5  0.3%Recession.
1955$3$3  0.7% 
1956($4)($2) (0.9%) 
1957($3)($2) (0.7%)Recession.
1958$3$6  0.6% 
1959$13$8  2.4%Fed raised rates.
1960$0$2 (0.1%)Recession.
1961$3$3  0.6%JFK & Bay of Pigs. 
1962$7$10  1.2%Cuban Missile Crisis.
1963$5$7  0.7%U.S. aids Vietnam.  JFK killed.
1964$6$6  0.9%LBJ War on Poverty.
1965$1$6  0.2%Medicare. Medicaid.
1966$4$3  0.5%Vietnam War.
1967$9$6  1.0% 
1968$25$21  2.6%Moon landing.
1969($3)$6 (0.3%)Nixon took office.
1970$3$17  0.3%Recession.
1971$23$27  2.0%Wage-price controls. 
1972$23$29  1.8%Stagflation.
1973$15$31  1.0%End of gold standard.
1974$6$17  0.4%Budget process created.
1975$53$58  3.1%First Ford budget. 
1976$74$87  3.9%Stagflation.
1977$54$78  2.5%Stagflation.
1978$59$73  2.5%First Carter budget.
1979$41$55  1.5%Volcker raised rates to 20%.
1980$74$81  2.6%Recession. Iran oil embargo.
1981$79$90  2.4%Reagan tax cut.
1982$128$144  3.8%Reagan's 1st budget.
1983$208$235  5.6%Jobless rate 10.8%.
1984$185$195  4.5%Increased defense spending.
1985$212$256  4.8%
1986$221$297  4.8%Tax cut.
1987$150$225  3.1%Market crash
1988$155$252  2.9%Fed raised rates.
1989$153$255  2.7%S&L Crisis.
1990$221$376  3.7%Desert Storm.
1991$269$432  4.3%Recession.
1992$290$399  4.4% 
1993$255$347  3.7%Clinton signed Balanced Budget Act.
1994$203$281  2.8%First Clinton budget.
1995$164$281  2.1% 
1996$107$251  1.3%Welfare reform.
1997$22$188  0.3% 
1998($69)$113 (0.8%)LTCM crisis.
1999($126)$130 (1.3%)Glass-Steagall repealed.
2000($236)$18 (2.3%)Surplus.
2001($128)$133 (1.2%)9/11 attacks. EGTRRA.
2002$158$421  1.4%War on Terror.  
2003$378$555  3.3%JGTRRA.
2004$413$596  3.4% 
2005$318$554  2.4%Katrina. Bankruptcy Act.
2006$248$574  1.8%Bernanke chairs Fed.
2007$161$501  1.1%Iraq War cost.
2008$459$1,017  3.1%Bank bailout. QE.
2009$1,413$1,632  9.8%Stimulus Act.
2010$1,294$1,905  8.6%Obama tax cutsACA. Simpson-Bowles.
2011$1,300$1,229  8.3%Debt crisis.
2012$1,087$1,276  6.7%Fiscal cliff
2013$679$672  4.0%Sequester. Government shutdown
2014$485$1,086  2.7%Debt ceiling.
2015$438$327  2.4%Defense = $736.4 b.
2016 $585$1,423  3.1%Defense = $767.3 b.
2017$665$672  3.4%Defense = $812.3 b.
2018 (est)$833$1,271  4.0%Defense = $824.7 b.
2019 (est)$984$1,187  NA 
2020 (est)$987$1,198  NA 
2021 (est)$916$1,119  NA 

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