1. News & Issues

Current U.S. Federal Budget Deficit

How It Impacts the US Economy

By

Presidents Bush and Obama

Presidents Bush and Obama both had large budget deficits.

Photo: Brendan Smialowski / Getty Images
World Trade Towers on fire

Sadly, the 9/11 attack was one cause of record budget deficits.

National Park Service
Doctor examining patient

Mandatory programs like Medicare also contribute to the deficit.

Joe Raedle / Getty Images

What Is the Current Deficit?:

For Fiscal Year 2015  (October 1, 2014 -September 30, 2015) the U.S. Federal budget deficit will be $564 billion. That's because U.S. government spending, budgeted at $3.901 trillion is higher than projected U.S. government revenue, only $3.337 trillion. This is the lowest deficit since the recession, and about a third of the record budget deficit of $1.4 trillion set in FY 2009.

What Caused The Recent Massive Budget Deficits?:

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 in the second quarter of 2009.

Second, the recession reduced Federal income. As the economy tanked, so did tax revenues. Government income fell from its pre-recession record of $2.568 trillion in FY 2007 to $2.1 trillion in FY 2009. It didn't recover until by FY 2013, reaching $2.775 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 - $808.7 billion.
  • FY 2010 - $852.2 billion.
  • FY 2011 - $862.7 billion.
  • FY 2012 - $816.2 billion.
  • FY 2013 - $752.3 billion.
  • FY 2014 - $756.5 billion.
  • FY 2015 - $756.4 billion.

The fourth reason is that mandatory spending has increased. Spending to pay benefits for Social Security, Medicare and other mandated programs has exceeded $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 2015 Budget Summary Table S-5)

Why the Government Overspends:

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. That's because government spending is, itself, a component of GDP.
  2. There are many other countries, like China, willing to lend us the money.
  3. Politicians get elected for creating jobs and growing the economy. They lose elections when unemployment is high and for raising taxes.

When You Should Be Concerned:

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.

It's only when the debt-to-GDP ratio  approaches or exceeds 100% that owners of the debt become concerned. That's because they might wonder whether the U.S will be able to make good on its debt. They also became concerned when tea party Republicans in Congress hinted it might default on its debt, as in 2011 and again in 2013. 

The Deficit Is Being Reduced:

The government has reduced the deficit for the FY 2015 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 2024. 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. Article updated April 6, 2014

U.S. Federal Budget Deficits by Year Since 1960:

  • FY 2014 - $649 billion.
  • FY 2013 - $680 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

Related Definitions

Related Video
Jameson Hsu on Online Gaming and Advertising
  1. About.com
  2. News & Issues
  3. US Economy
  4. Fiscal Policy
  5. U.S. National Debt
  6. Current U.S. Federal Budget Deficit

©2014 About.com. All rights reserved.