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

Learn how budget deficits impact the national debt

Updated on April 5, 2022

Reviewed by

Fact checked by J.R. Duren

Image shows four multi-cultural people in business garb climbing a graph indicating that the deficit has been increasing. Bottom of the graph shows years 2006-2019 — Photo:
The Balance / Daniel Fishel

The U.S. budget deficit is how much more the federal government spends annually than it receives in revenue during that same time period.

The federal government's budget for fiscal year 2022 estimated that the fiscal year 2022 budget deficit would be $1.15 trillion. The Congressional Budget Office (CBO) estimated by July 2021 that the fiscal year 2021 deficit would be $3 trillion. The budget deficit in 2020 was about $3.1 trillion, the largest in U.S. history.

The national debt was at $28.4 trillion when fiscal year 2022 began on Oct. 1, 2021. On Feb. 14, 2022, the debt hit $30 trillion for the first time. Budget deficits add to the national debt; if that debt grows faster than gross domestic product (GDP), the debt-to-GDP ratio may get too large. Since a county's debt-to-GDP ratio is often used to measure economic growth, a ballooning ratio could indicate a potentially destabilized economy.

Key Takeaways

Budget deficits add to the national debt, while budget surpluses help to reduce the debt.
It can destabilize the economy when a country's debt-to-GDP ratio gets too big.
The debt is higher than the deficit because Congress borrows from retirement funds.
Looking at budget deficits by year shows how events are influenced the government's need to borrow and spend money.

Budget Deficit Trends in the US

The budget deficit should be compared to the country's ability to pay it back. That ability is measured by dividing the deficit by gross domestic product (GDP). The deficit-to-GDP ratio set a record of -26.68% in 1943. The deficit was then only about $55 billion, and GDP was only $203 billion, both much lower than 2022 numbers.

The deficit-to-GDP ratio is much lower in 2022, even though the country is working with trillions of dollars in budget deficits and GDP. That's because GDP is much higher than it was in 1943. GDP was nearly $24 trillion at the end of 2021.

Note

Each year's budget deficit adds to the national debt, but Congress caps the debt limit. It increased the limit by $2.5 trillion in December 2021.

The national debt can negatively impact the economy if it gets too large. The level of debt is also compared to GDP to determine whether there's too much debt for the economy to handle.

This comparison is called the debt-to-GDP ratio (debt divided by GDP). The country reaches a tipping point if the ratio is more than 77%. That's when lenders begin to worry about whether it's safe to buy the country's bonds. They think the government may not be able to pay back its debt. The debt-to-GDP ratio spiked to more than 135% in 2021.

Why the Deficit Is Less Than the Increase in the Debt

There's an important difference between the deficit and debt. The deficit has been less than the increase in debt for years because Congress borrows from the Social Security Trust Fund surplus. The surplus emerged back in the 1980s when there were more people working than there were retirees. As such, payroll tax contributions were greater than Social Security spending, allowing the fund to invest the extra revenue in special Treasury bonds. Congress spent some of the surplus so it wouldn't have to issue as many new Treasury bonds.

Budget Deficit by Year Since 1929

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

The national debt and GDP are given as of the end of the third quarter of each year unless otherwise noted—specifically, September 30. The date coincides with the budget deficit's fiscal year-end. GDP for years up to 1947 isn't available for the third quarter, so annual figures are used.

The first column represents the fiscal year, followed by the deficit for that year in billions. The next column is how much the debt increased for that fiscal year, also in billions. The third column calculates the deficit-to-GDP ratio. It indicates that there was a surplus if numbers are in parentheses. The fourth column describes events that affected the deficit and debt.

GDP is as of June 30, 2021, for 2021. The national debt increase is from October 1, 2020, to June 30, 2021. The estimated fiscal year budget deficit is from the CBO and was released on July 1, 2021.

FY	Deficit (in billions)	Debt Increase (in billions)	Deficit-to-GDP Ratio
1929	($1)	($1)	(0.7%)
1930	($1)	($1)	(0.8%)
1931	$0	$1	0.6%
1932	$3	$2	4.6%
1933	$3	$3	4.6%
1934	$4	$5	5.4%
1935	$3	$2	3.8%
1936	$4	$5	5.1%
1937	$2	$3	2.4%
1938	$0	$1	0.1%
1939	$3	$3	3.0%
1940	$3	$3	2.8%
1941	$5	$6	3.8%
1942	$21	$23	12.4%
1943	$55	$64	26.9%
1944	$48	$64	21.2%
1945	$48	$58	20.9%
1946	$16	$10	7.0%
1947	($4)	($11)	(1.6%)
1948	($12)	($6)	(4.3%)
1949	($1)	$0	(0.2%)
1950	$3	$5	1.0%
1951	($6)	($2)	(1.8%)
1952	$2	$4	0.4%
1953	$6	$7	1.7%
1954	$1	$5	0.3%
1955	$3	$3	0.7%
1956	($4)	($2)	(0.9%)
1957	($3)	($2)	(0.7%)
1958	$3	$6	0.6%
1959	$13	$8	2.5%
1960	$0	$2	(0.1%)
1961	$3	$3	0.6%
1962	$7	$9	1.2%
1963	$5	$8	0.7%
1964	$6	$6	0.9%
1965	$1	$6	0.2%
1966	$4	$3	0.5%
1967	$9	$6	1.0%
1968	$25	$21	2.7%
1969	($3)	$6	(0.3%)
1970	$3	$17	0.3%
1971	$23	$27	2.0%
1972	$23	$29	1.8%
1973	$15	$31	1.0%
1974	$6	$17	0.4%
1975	$53	$58	3.2%
1976	$74	$87	3.9%
1977	$54	$78	2.6%
1978	$59	$73	2.5%
1979	$41	$55	1.6%
1980	$74	$81	2.6%
1981	$79	$90	2.5%
1982	$128	$144	3.8%
1983	$208	$235	5.7%
1984	$185	$195	4.6%
1985	$212	$251	4.9%
1986	$221	$302	4.8%
1987	$150	$225	3.1%
1988	$155	$252	3.0%
1989	$153	$255	2.7%
1990	$221	$376	3.7%
1991	$269	$432	4.4%
1992	$290	$399	4.5%
1993	$255	$347	3.7%
1994	$203	$281	2.8%
1995	$164	$281	2.1%
1996	$107	$251	1.3%
1997	$22	$188	0.3%
1998	($69)	$113	(0.8%)
1999	($126)	$130	(1.3%)
2000	($236)	$18	(2.3%)
2001	($128)	$133	(1.2%)
2002	$158	$421	1.4%
2003	$378	$555	3.3%
2004	$413	$596	3.4%
2005	$318	$554	2.4%
2006	$248	$574	1.8%
2007	$161	$501	1.1%
2008	$459	$1,017	3.1%
2009	$1,413	$1,885	9.8%
2010	$1,294	$1,652	8.6%
2011	$1,300	$1,229	8.3%
2012	$1,077	$1,276	6.6%
2013	$680	$672	4.0%
2014	$485	$1,086	2.8%
2015	$442	$327	2.4%
2016	$585	$1,423	3.1%
2017	$665	$671	3.4%
2018	$779	$1,271	3.8%
2019	$984	$1,203	4.6%
2020	$3,132	$4,226	15.0%
2021	$2,772	$1,484	12.1%

Why the Budget Deficit Matters

The federal deficit and debt are concerns for the country because the majority of the national debt is held by those who have purchased Treasury notes and other securities. A continuous deficit adds to the national debt, increasing the amount owed to security holders.

The concern is that the country won't be able to pay its debt off. Debt holders demand higher interest to compensate for the higher risk when that happens. This increases the cost of all interest rates and can cause a recession.

Frequently Asked Questions (FAQs)

When is it considered good policy for the government to run a budget deficit?

Economists debate the merits of running a budget deficit, so there isn't one agreed-upon situation where a deficit is considered good or bad. Generally, a deficit is a byproduct of expansionary fiscal policy, which is designed to stimulate the economy and create jobs. If deficit spending achieves that goal within reasonable parameters, many economists would argue that it's been successful.

How can the government reduce the deficit?

The government can reduce the deficit by increasing revenues, decreasing spending, or both. It's a fine line, however. If the government pushes too far on either, its efforts can backfire and have the opposite effect.

Updated by Hilarey Gould

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Sources

The Balance uses only high-quality sources, including peer-reviewed studies, to support the facts within our articles. Read our editorial process to learn more about how we fact-check and keep our content accurate, reliable, and trustworthy.

Congressional Budget Office. "An Update to the Budget and Economic Outlook: 2021 to 2031."
Department of Treasury. "Debt to the Penny."
Federal Reserve Bank of St. Louis. "Federal Surplus or Deficit [-] as Percent of Gross Domestic Product."
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Bureau of Economic Analysis. "Gross Domestic Product, (Third Estimate), GDP by Industry, and Corporate Profits (Revised)."
Congress.gov. “S.J.Res.33 – A Joint Resolution Relating to Increasing the Debt Limit.”
The World Bank. "Finding the Tipping Point—When Sovereign Debt Turns Bad."
Federal Reserve Bank of St. Louis. "Federal Debt: Total Public Debt as Percent of Gross Domestic Product."
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