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What Is The Current Deficit

Tracking The Federal Deficit: March 2021

What is the current account deficit?

The Congressional Budget Office estimates that the federal government ran a deficit of $658 billion in March 2021, the sixth month of fiscal year 2021. This months deficitthe difference between $267 billion in revenue and $925 billion in spendingwas $487 billion greater than last Marchs . The federal deficit has now swelled to $1.7 trillion in fiscal year 2021, 129% higher than at this point last year. While revenues have grown 6% year-over-year, cumulative spending has surged 45% above last years pacelargely a result of the COVID-19 pandemic, its economic fallout, and the federal governments fiscal response.

Analysis of Notable Trends: Adjusted for timing shifts, outlays in March 2021 were $517 billion greater than last March, an increase of 127%. Unemployment insurance, refundable tax credits, and the Small Business Administrations Paycheck Protection Program accounted for most of the increaseboth from March to March and from last fiscal year to this one. Spending on refundable tax credits was $346 billion higher in March 2021 than March 2020, mostly due to the payment of pandemic recovery rebates authorized by the Consolidated Appropriations Act and American Rescue Plan Act..

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.

Tracking The Federal Deficit: June 2020

The Congressional Budget Office reported that the federal government ran a deficit of $864 billion in June, the ninth month of fiscal year 2020. This monthly deficit is more than 100 times larger than last Junes deficit of $8 billion. This difference came from a sizable drop in revenues, which were down 28% from last June , and especially from a massive increase in outlays, up 223% from last June . The budget deficit so far this fiscal year has surged to $2.7 trillion, $2 trillion more than at the same point last year. As exemplified by June, the cumulative difference stems from a drop in revenues13% lower than at the same point last yearand a much bigger leap in outlays49% higher than at this time last year.

The drop in revenue between last June and this one was due almost entirely to the administration delaying the deadline for quarterly tax payments from June 15 to July 15. Monthly revenue was down $93 billion compared to a year ago, of which $43 billion came from delaying corporate tax payments while $42 billion came from delaying individual and payroll tax payments. CBO expects most of this delayed revenue to eventually be collected, although some will be lost as businesses fail before the new payment deadlines.

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Tracking The Federal Deficit: January 2022

The Congressional Budget Office estimates that the federal government ran a surplus of $119 billion in January 2022, the fourth month of fiscal year 2022. Januarys surplus was the first recorded since September 2019, and it was the difference between $467 billion in revenues and $348 billion in spending. In comparison, last January, the federal government ran a $163 billion deficit. Additionally, both this year and last year, the timing of the New Years Day federal holiday shifted some payments that would have normally been due at the beginning of January into December. In the absence of these timing shifts, the federal government would have run a smaller monthly surplus in January 2022 of $95 billion.

Analysis of notable trends: In the first four months of FY2022, the federal government ran a deficit of $259 billion, $477 billion less than at this point in FY2021. It is noteworthy, however, that the cumulative deficit for FY2022 thus far compares favorably to that of FY2020 , prior to the onset of COVID-19.

Notably, net interest on the public debt rose 22% to $140 billion for the fiscal year to date, primarily reflecting the impact of rising inflation on adjustments to the principal of inflation-protected securities.

Lower Returns On Your Investments

Federal budget deficit  Washington University Political Review

Bonds issued by the Treasury are typically seen as low-risk investments. When interest rates rise, the yield on these low-risk investments also rises, making them more attractive investments for income-minded investors over other riskier income-generating investments like corporate bonds.

This could leave companies that typically rely on bonds short on the loans they need to finance expansions and operations and translate into lower returns for equity investors when companies fail to meet revenue targets.

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Tracking The Federal Deficit: September 2020

Each September, the government receives substantial revenue from individual and corporate income taxes, which generally produces a monthly surplus. For example, the federal government recorded an $83 billion surplus last September . This year, however, greater spending in response to the pandemic and recession dominated the usual revenue increase, and the government ran a monthly deficit of $124 billion. This deficit was the difference between revenues of $372 billion and spending of $496 billion.

Revenue this September fell 1% from last September, the result of lost economic activity and policy changes allowing some taxes to be deferred or reduced. For instance, individual income and payroll taxes were 5% below last years level, while corporate income taxes fell 16%. Individual income tax refunds also increased by 68%, further lowering net revenue.

Tracking The Federal Deficit: March 2019

The Congressional Budget Office reported that the federal government generated a $149 billion deficit in March, the sixth month of Fiscal Year 2019, for a total deficit of $693 billion so far this fiscal year. Marchs deficit is 29 percent less than the deficit recorded a year earlier in March 2018. If not for timing shifts of certain payments, the deficit would have been 9 percent smaller than the deficit in March 2018. Total revenues so far in Fiscal Year 2019 increased by 0.6 percent , while spending increased by 5 percent , compared to the same period last year.

Analysis of Notable Trends this Fiscal Year to Date: Customs duties increased by 86 percent compared to last year. On the spending side, outlays for Social Security, Medicare, and Medicaid increased by a combined 4 percent . Department of Defense spending rose by 9 percent , and net interest payments on the national debt were up by 13 percent , largely due to interest rates on short term debt being substantially higher now than they were during the first half of Fiscal Year 2018.

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Effects Of Current Account Deficit

A current account deficit does not directly indicate an existing economic problem. In fact, some countries have been in deficit for so long but their economies remain relatively afloat. Note that the United States has been in twin deficitsâbudget and current account deficits.

The deficit can be sustainable if its underlying causes have positive effects on future economic growth. However, it is considered unsustainable if it is caused by macroeconomic imbalances that would result in disruptive adjustments in the future.

Tracking The Federal Deficit: November 2018

U.S. Economy 101: national debt vs. national deficit | Just The FAQs

The Congressional Budget Office reported that the federal government generated a $203 billion deficit in November, the second month of Fiscal Year 2019, for a total deficit of $303 billion so far this fiscal year. If not for timing shifts of certain payments, the deficit in November would have been roughly $158 billion, according to CBO. Novembers deficit is 46 percent higher than the deficit recorded a year earlier in November 2017. Total revenues so far in Fiscal Year 2019 increased by 3 percent , while spending increased by 18 percent , compared to the same period last year.

Analysis of Notable Trends in November 2018: Department of Homeland Security spending fell by 46 percent relative to November 2017, reflecting a decrease in spending on disaster relief. Conversely, Social Security spending increased by 5 percent compared to November 2017.

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Understand Inflation And How It Affects You

Rapidly growing deficits as far as the eye can see are not good for wages, economic growth or our ability to invest in the future for the next generation, said Michael A. Peterson, the chief executive officer of the Peter G. Peterson Foundation, which promotes deficit reduction.

Maya MacGuineas, president of the Committee for a Responsible Federal Budget, lamented that trillion-dollar deficits appeared to be here to stay and that by 2031 the annual shortfall would be back to $2 trillion, according to the C.B.O.

This is no time to break out the champagne glasses, Ms. MacGuineas said.

Is A Current Account Deficit A Good Or Bad Thing

A current account deficit isn’t always a bad thing.

A country may have a deficit because it is importing large quantities of the raw materials it needs to produce goods and services it will export in the future. Its long-term strategy is to create a current account surplus, which ultimately makes it an attractive investment opportunity for foreigners.

The deficit may be problematic, though, if a country allows continued overspending on imports when it could be spending money on domestic production.

At the most basic level, a deficit means that more cash is going out than is coming in. And that money has to be made up from some other source, whether it is higher taxes or more debt.

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Tracking The Federal Deficit: May 2021

The Congressional Budget Office estimates that the federal government ran a deficit of $132 billion in May, the eighth month of fiscal year 2021. Mays deficit was the difference between $463 billion of revenue and $596 billion of spending. To note, May spending was impacted by May 1 falling on a weekend, shifting certain payments into April that are normally paid at the beginning of May. If not for these timing shifts, the May deficit would have been $192 billion.

So far this fiscal year, the federal government has run a cumulative deficit of $2.1 trillion, the difference between $2.6 trillion of revenue and $4.7 trillion of spending. This deficit is 10% greater than at the same point in FY2020when only three months of pandemic-related spending had occurredand 179% greater than at this point in FY2019.

Analysis of notable trends: The pandemic response continues to disrupt normal spending and revenue patterns. Individual income taxes are usually paid in April however, in both 2020 and 2021, the federal government pushed back Tax Day due to COVID-19. This year, individual income taxes were due on May 17, compared to July 15 in 2020. Additionally, this year, estimated quarterly tax payments were due in April, whereas they were due in July in 2020. These shifting dates must be taken into account when considering year-over-year deficit comparisons.

Budget Deficit By Year Since 1929

Federal budget deficit 2018: Why the US government

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 notedspecifically, 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.


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Federal Surplus Or Deficit As Percent Of Gross Domestic Product


Data in this graph are copyrighted. Please review the copyright information in the series notes before sharing.

Release: Debt to Gross Domestic Product Ratios

Units: Percent of GDP, Not Seasonally Adjusted

Frequency: Annual


Federal Surplus or Deficit as Percent of Gross Domestic Product was first constructed by the Federal Reserve Bank of St. Louis in October 2012. It is calculated using Federal Surplus or Deficit and Gross Domestic Product :FYFSGDA188S = /GDPA)*100

Below Are The Specific Causes And Their Respective Overview:

1. Economic Growth: The expansion and peak stages of the business cycle often bring in improved consumer spending powers due to an increase in the national income and an increase in demand for goods and services. However, if domestic producers are not able to meet the domestic demand, consumers will have to resort to purchasing goods and services abroad. Furthermore, demand for imported products also increases whenever people have more disposable income.

2. Overvalued Currency: Currency overvaluation often results when a local currency is highly demanded by foreigners or if a central bank raises internal interest rates and demand in the foreign exchange markets increases. Nevertheless, an overvalued currency makes imports artificially cheaper and exports more expensive. The demand for imported products increases because they are cheaper than their counterpart domestic products. In addition, exports become more unattractive in the international market.

3. High Inflation Rate: Rising inflation rate can be another cause of current account deficit. High inflation can affect how domestic firms operate, especially the cost of doing business. Furthermore, it also reflects the domestic price of their goods and services compared with the prices of counterparts and substitutes from abroad. Hence, if the inflation rate in a particular country rises faster than in other countries, it will make exports less competitive and imports more competitive.

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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.

Tracking The Federal Deficit: January 2021

What is a deficit?

The Congressional Budget Office estimates that the federal government ran a deficit of $165 billion in January, the fourth month of fiscal year 2021. This months deficitthe difference between $552 billion of spending and $387 billion of revenuewas $132 billion greater than last Januarys. But federal finances deteriorated more than the raw numbers suggest. Adjusting for shifts in the timing of some payments, the deficit this January would have been $211 billion greater than last Januarys. The federal deficit has now reached $738 billion so far this fiscal year, an increase of 120% over the same point last year . Compared to the same point last fiscal year, cumulative revenues have ticked up 1%, but cumulative spending has surged 27%mostly due to the COVID-19 pandemic and the federal response to it.

Increased spending so far this fiscal year has likewise mostly resulted from pandemic relief. About 60% of the increase in cumulative year-to-date spending has come from refundable tax credits and unemployment insurance benefits . Outlays from the Public Health and Social Services Emergency Fund are also up $26 billion compared to the first four months of fiscal year 2020, and Medicaid spending is $29 billion greater.

Revenues rose 4% from last January, thanks to greater revenue from individual income, payroll, and corporate income tax revenue.

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Us Deficit Will Shrink To $1t This Year Before Soaring Federal Forecasters Say

At the same time, inflation is likely to persist throughout the year and then ease as economic growth slows, says Congress nonpartisan scorekeeper.

A Peterson Foundation billboard displaying the national debt is pictured on 18th Street on February 08, 2022 in downtown Washington, D.C. | Jemal Countess/Getty Images for Peter G. Peterson Foundation

05/25/2022 04:16 PM EDT

The U.S. deficit will shrink to $1 trillion this year, before beginning to soar in 2024, just as Americans prepare to elect the next president, Congress nonpartisan budget forecaster predicted Wednesday.

While the nations shortfall has substantially declined following last years $2.8 trillion deficit, the Congressional Budget Office estimates the gap between spending and revenue will grow starting in 2024, reaching more than 6 percent of GDP a decade from now. The U.S. has only run greater deficits than that six times since 1946, CBO noted.

The Biden administration stressed the upside. It wasnt automatic or inevitable that the U.S. has notched the single largest nominal reduction in the federal deficit in American history, White House budget director Shalanda Young said.

Its because this administration has responsibly managed the pandemic, Young said, which allowed us to wind down emergency measures, combined with a significant increase in revenues stemming from an historically strong economic recovery.

Brian Faler contributed to this report.

Tracking The Federal Deficit: October 2020

The Congressional Budget Office estimates that the federal government ran a deficit of $284 billion in October, the first month of fiscal year 2021. This deficit is the difference between $238 billion of revenue and $522 billion of outlays. Because November 1 fell on a weekend this year, however, certain payments that would normally be made in November were instead shifted to October, increasing the size of this months deficit. Without those payments, Octobers deficit would have been $230 billion.

Either way, this Octobers deficit is a large increase from last Octobers figure of $134 billion. The year-over-year surge in the deficit is the sum of slightly lower revenues3% lower than last October, mostly due to lower receipts of individual income taxesand much greater outlays37% greater than last October , mainly because of the ongoing response to the COVID-19 pandemic and its economic fallout.

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