U.S. Deficit by Year: Compared to GDP, Increase in Debt and Events

Deficit by year
President George W. Bush (C) meets with President-elect Barack Obama (2nd-L), former President Bill Clinton (2nd-R), former President Jimmy Carter (R) and former President George H.W. Bush (L) in the Oval Office January 7, 2009 in Washington, DC. 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 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. Since then, it's declined to less than $500 billion. That's still at historically high levels. For more, see Current U.S. Budget Deficit.

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 $45 billion. But it was 45 percent of total economic output as the country geared up for World War II. The record-setting 2009 deficit was only t 9.8 percent of GDP. That seems more reasonable when compared to the 1945 deficit. But it's still much higher than the 2-4 percent average.

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.  That's because 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 instead of issuing new Treasury notes.

(Source: "Social Security Income, Outgo and Asset Reserves," The Social Security Administration.)

Deficit by Year Since 1929

In the table below, the deficit is compared to the increase in the debt, GDP and national events since 1929. Please note that the debt and GDP are given as of the end of the third quarter (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 20.8%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  0.4%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  1.9%Wage price controls. Gold standard suspended.
1972$23$29  1.9%Stagflation
1973$15$31  1.8%End of gold standard.
1974$6$17  1.0%Budget process created
1975$53$58  0.4%First Ford budget. 
1976$74$87  3.1%Stagflation
1977$54$78  3.9%Stagflation
1978$59$73  2.5%First Carter budget.
1979$41$55  1.5%Volcker chairs Fed. 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  3.2%JGTRRA
2004$413$596  3.3% 
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  4.1%Sequester. Government shutdown
2014$485$1,086  2.8%Debt ceiling.
2015$438$327  2.4%Defense = $736.4 b.
2016 $600$1,423  3.5%Defense = $767.3 b.
2017 $441NA  NADefense = $773.5 b.

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