Glossary · Economy
Budget deficit
A budget deficit is the amount by which a government’s spending exceeds its revenue in a year; the opposite is a surplus.
Also called: deficit, federal deficit, fiscal deficit, government deficit
About 6.2% of GDP, or $5.46B a day.
25 years ago.
In plain words
A family that earns $60,000 and spends $66,000 has to borrow $6,000. For a government, the gap between what it spends in a year and what it collects in taxes is the budget deficit. If it collects more than it spends, that is a surplus.
The US government’s year, the fiscal year, runs from October to September. In fiscal 2026 the deficit was $1.99T, about 6.2% of GDP.
Every deficit is covered by borrowing, so deficits add up to the national debt. The US last ran a surplus in 2001, at the end of a run of 4 surplus years.
Example
A deficit in a small country
- Spending: $500 billion on pensions, health, defense, schools and interest.
- Revenue: $440 billion from income, payroll, company and other taxes.
- Deficit: $500 billion − $440 billion = $60 billion, borrowed by selling bonds.
- The economy produces $2 trillion a year, so the deficit is 60 ÷ 2,000 = 3% of GDP.
Economists compare deficits with GDP, not in dollars: $60 billion is a lot for a small economy and little for a big one.
One level deeper
Deficits swing with the business cycle. In a recession tax revenue falls and spending on unemployment benefits rises by itself, so the deficit widens; in a boom it narrows. The part left over in normal times is called the structural deficit.
The biggest US deficits came in wars and crises: 26.9% of GDP in fiscal 1943, and 14.7% in 2020, the largest since the 1940s. Since 1950 the federal budget has averaged a deficit of 2.7% of GDP.
The primary deficit leaves out interest payments: it shows whether today’s programs are paid for. When interest rates rise, the gap between the two measures grows.
US surplus or deficit since 1929, % of GDP
Bars below zero are deficits. The deepest came in the Second World War and in 2020; the last surpluses were around 2000.
The numbers behind the chart
| Date | Surplus (+) or deficit (−), % of GDP |
|---|---|
| 1929 | 0.7% |
| 1930 | 0.8% |
| 1940 | −2.8% |
| 1950 | −1.0% |
| 1960 | 0.1% |
| 1970 | −0.3% |
| 1980 | −2.6% |
| 1990 | −3.7% |
| 2000 | 2.3% |
| 2010 | −8.6% |
| 2020 | −14.7% |
| 2021 | −11.7% |
| 2022 | −5.3% |
| 2023 | −6.1% |
| 2024 | −6.2% |
| 2025 | −5.8% |
Why it matters
Deficits decide how fast the national debt grows, and with it the future interest bill.
They can support the economy in a recession, when private spending collapses; most economists think cutting spending sharply in a slump makes it worse.
Large deficits in good times can push up interest rates and leave less room to respond to the next crisis.
A common mistake
Myth: The deficit and the debt are the same thing.
In fact: The deficit is one year’s gap between spending and revenue; the debt is all the borrowing still outstanding. A smaller deficit still adds to the debt; only a surplus reduces it.
Questions people ask
How big is the US budget deficit?
The deficit was $1.99T in fiscal 2026 (October to September), about 6.2% of GDP.
When did the US last have a budget surplus?
In fiscal 2001, the last of 4 surplus years in a row.
Is a budget deficit bad?
Not always. Deficits in recessions and wars are normal and can help. Large deficits in good times mean the debt grows faster than the economy, which most economists see as a risk.
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About the numbers
- The numbers on this page are recalculated from the data every night; the sources are listed at the end of the page.
- Federal surplus or deficit (−), fiscal years: U.S. Office of Management and Budget, Historical Tables (Table 1.1), via FRED, series FYFSD; retrieved from FRED, Federal Reserve Bank of St. Louis.
- Federal surplus or deficit (−) as a percent of GDP, fiscal years: U.S. Office of Management and Budget; Federal Reserve Bank of St. Louis, Historical Tables (Table 1.2), via FRED, series FYFSGDA188S; retrieved from FRED, Federal Reserve Bank of St. Louis.
- Gross domestic product (current dollars): U.S. Bureau of Economic Analysis, National Income and Product Accounts, Table 1.1.5, series GDP; retrieved from FRED, Federal Reserve Bank of St. Louis.
- This page explains a term. It is not investment advice.