Do you keep a budget? If so, two of your top goals are likely to stay out of debt, and have it done on time. If you don’t do these things, you’re not alone: the United States federal government doesn’t need to be balanced, and it’s rarely finalized by Congress on time. Like many of our own budgets, without firm guidelines in place, the federal debt continues its upward spiral.
- The federal debt grew 150% during the Great Depression, considered the beginning of massive federal spending
- The debt and deficit massively expanded and contracted after World War Two, with another boom in the 1970s
- September 11, 2001 kicked off nearly a decade of unprecedented deficit spending
- The federal deficit in the beginning of 2020 is projected to be 25% greater than that of a year prior
Our data comes from The Balance and shows the history of the United States federal deficit and debt change for each year in nominal (or unadjusted) dollars going back to 1929. While the deficit is the annual difference between the government’s revenue and expenses, the debt is the total amount of money the government owes.
To adjust for the influence of inflation in the deficit spending increase, we have analyzed the deficit as a ratio of that year’s gross domestic product (GDP). Our viz is a line chart showing the trend of annual deficit spending and the total federal debt over time. We also include major events happening at the time during each year.
Years with the Highest Deficit/GDP ratios
1943: 26.9% (Defense tripled)
1944: 21.2% (Bretton Woods)
1945: 20.0% (End of WWII)
1942: 12.3% (Battle of Midway)
2009: 9.8% (American Recovery and Reinvestment Act)
Years with the Lowest Deficit/GDP ratios
1948: -4.2% (Recession)
2000: -2.3% (Surplus)
1951: -1.7% (Expansion)
1947: -1.6% (Cold War)
1999: -1.3% (Glass-Steagall repealed)
While the United States government occasionally ran deficits in its early years, the Great Depression is usually considered the beginning of massive public spending programs. The federal debt jumped by 150% between 1930 and 1939, with a further explosion of public spending sustained by World War Two in the early 1940s. In fact, four of the five years with the highest deficit/GDP ratios were during World War Two: this was a time in which government spending at all levels accounted for over half of GDP. However, the years after the war had some of the lowest deficits, with government spending falling by 61% between 1945 and 1947.
While the deficit and debt would stay relatively stable for the next couple of decades, the following two decades between 1970 and 1990. These years saw some of the worst recessions in US history, with massive runs of inflation. However, the 1990s saw a period of unprecedented growth, and the debt and deficit fell.
The tide of the American economy, and the federal debt, turned swiftly on September 11, 2001. At the time, the government had a $128 budget surplus. Compare that to the estimated $1.3 trillion deficit a decade later, in 2011, and a picture emerges of a wildly volatile and expanding government spending.
The federal debt and deficit hit its peak in 2009, in the throes of the Great Recession. In fact, government spending as a percentage of GDP was higher in 2009 than any non-wartime year in American history, coming in at number four on our rankings.
While the debt and deficit haven’t reached those heights in the past decade, there are no signs of slowing: the Treasury Department projected that the federal deficit in the first four months of 2020 will exceed that of the same period a year earlier by 25%. As for future budgets, President Trump’s recently unveiled budget would be unable to eliminate a deficit over the next ten years.
Are you concerned about the federal debt? What do you think of President Trump’s proposed budget? What historial trends in federal spending surprised you? Let us know in the comments and share with your friends.
Data: Table 1.1
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Irena - Editor
