Current U.S. Federal Budget Deficit

For FY 2014, the U.S. Federal budget deficit is projected to be $744 billion. That's because U.S. government spending is budgeted at $3.778 trillion, while U.S. government revenue will only be $3.034 trillion. Although this deficit is huge, it's almost half of the record budget deficit of $1.4 trillion set in FY 2009.

Most people blame the deficits on the 2008 financial crisis. However, that's only half the real story. These huge deficits were a result of four factors, and only the first two were related to the recession.

First, the $787 billion economic stimulus package was launched by newly-elected President Obama in March 2009. It cut taxes, extended unemployment benefits, and funded public works projects to create jobs directly. This expansionary fiscal policy was needed to kick-start the economy out of recession, which it did by the second quarter of 2009.

The recession -- the second reason for these deficits -- reduced Federal income. As the economy tanked, so did tax revenues. Government income fell from its all-time record of $2.568 trillion in FY 2007 to $2.1 trillion in FY 2009. It still hadn't recovered by FY 2012, reaching only $2.45 trillion.

The third reason has more to do with the attacks on 9/11 than the recession. The War on Terror drove military spending to a pre-recession record of $671 billion in FY 2007. Despite declines in revenue from the recession, defense and security-related spending increased as follows:

• FY 2008 - $686 billion.
• FY 2009 - $782 billion.
• FY 2010 - $846 billion.
• FY 2011 - $838 billion.
• FY 2012 - $909 billion.
• FY 2013 - $780.7 billion.
• FY 2014 - $745.2 billion.

The fourth reason is that mandatory spending has increased. Spending to pay benefits for Social Security, Medicare and other mandated programs has been more than $2 trillion a year since FY 2011. These payments consume most of the revenue in each year. They cannot be changed without an act of Congress. This is difficult to do politically, since any benefits that are cut will take money out of the pockets of current beneficiaries.(Source: U.S. Office of Management and Budget, FY 2014 Budget Summary Table S-12)

The difference between the U.S. government and you is that the President and Congress plan to overspend. (Hopefully, you don't!) This is for three reasons:

1. The more the government spends, the more it stimulates the economy.
2. There are many other countries, like China, willing to lend us the money.
3. Politicians get elected for saving jobs. They lose elections for allowing unemployment to continue or raising taxes.

A recession makes the incentive to overspend even greater. No elected official wants to risk being blamed for throwing the economy back into recession.

On a year-by-year basis, a budget deficit is not really a concern. The U.S. government is like the world's best customer -- it buys a lot, and since its economy has been one of the world's strongest, it has always paid the debt back. However, now that the debt-to-GDP ratio is above the critical 90% benchmark, it's more likely our creditors will get antsy and start to demand their money back. This is exactly what happened to create the eurozone debt crisis.

The government has reduced the deficit for the FY 2014 budget. However, it has no intention of eliminating it. The Office of Management and Budget (OMB) forecasts a deficit of at least $400 billion a year through FY 2023. Although it's an improvement, and necessitates painful and hotly disputed spending cuts and tax hikes, it's still not a surplus and will add to the debt. (Updated April 18, 2013)

• FY 2014 - $744 billion.
• FY 2013 - $973 billion.
• FY 2012 - $1.087 trillion.
• FY 2011 - $1.299 trillion.
• FY 2010 - $1.294 trillion.
• FY 2009 - $1.413 trillion.
• FY 2008 - $459 billion.
• FY 2007 - $161 billion.
• FY 2006 - $248 billion.
• FY 2005 - $318 billion.
• FY 2004 - $413 billion.
• FY 2003 - $378 billion.
• FY 2002 - $158 billion.
• FY 2001 - $128 billion surplus.
• FY 2000 - $236 billion surplus.
• FY 1999 - $126 billion surplus.
• FY 1998 - $69 billion surplus.
• FY 1997 - $22 billion.
• FY 1996 - $107 billion.
• FY 1995 - $164 billion.
• FY 1994 - $203 billion.
• FY 1993 - $255 billion.
• FY 1992 - $290 billion.
• FY 1991 - $269 billion.
• FY 1990 - $221 billion.
• FY 1989 - $153 billion.
• FY 1988 - $155 billion.
• FY 1987 - $150 billion.
• FY 1986 - $221 billion.
• FY 1985 - $212 billion.
• FY 1984 - $185 billion.
• FY 1983 - $208 billion.
• FY 1982 - $128 billion.
• FY 1981 - $79 billion.
• FY 1980 - $74 billion.
• FY 1979 - $41 billion.
• FY 1978 - $59 billion.
• FY 1977 - $54 billion.
• FY 1976 - $74 billion.
• FY 1975 - $53 billion.
• FY 1974 - $6 billion.
• FY 1973 - $15 billion.
• FY 1972 - $23 billion.
• FY 1971 - $23 billion.
• FY 1970 - $3 billion.
• FY 1969 - $3 billion surplus.
• FY 1968 - $25 billion.
• FY 1967 - $9 billion.
• FY 1966 - $4 billion.
• FY 1965 - $1 billion.
• FY 1964 - $6 billion.
• FY 1963 - $5 billion.
• FY 1962 - $7 billion.
• FY 1961 - $3 billion.
• FY 1960 - $.3 billion surplus.
• FY 1789-FY 1959 - $232 billion net deficit.

(Source: OMB, Table 1.1—Summary of Receipts, Outlays, and Surpluses or Deficits (-): 1789–2017)

Understand the Current Federal Budget

• Economic Report of the President
• Current Federal Budget Breakdown
• Revenue and Taxes
• Spending
• Mandatory
• Discretionary
• Defense
• Current Deficit

Related Definitions

• Who's Who in the Budget Process
• What Is a Budget Deficit?
• How Does Fiscal Policy Work?
• What's the Difference the Deficit and the Debt?