The Federal Deficit

The Federal Deficit
The deficit is the annual amount needed to pay for spending when revenue is not sufficient. Revenue for spending is in the form of taxes: personal income taxes, corporate income taxes, payroll taxes for social benefits, and other taxes.

Historical Perspective of the United States’ Deficit
The most recent federal surplus was in 2001 (Clinton administration): $128 billion in surplus.

Generally, the deficit is around 3% of the US’s GDP for any given year. During the Great Recession, this figure reached 9.8% of GDP (in 2009). The highest proportion of deficit to GDP was in 1943 nearly 30%.

Federal Spending
Federal spending helps to demonstrate why deficits often occur.

Generally the United States government has three levels of spending: Mandatory spending, discretionary spending, and interest payments.

Mandatory Spending
Benefit programs required by law. These include Social Security, Medicaid (health insurance for low income individuals and families), Medicare (health insurance for Americans aged 65 and older), unemployment compensation, and the Supplemental Nutrition Assistance Program.

Congress does not appropriate these programs annually, largely because they are eligibility-based: individuals have to meet certain requirements to benefit from many of these services.

Major categories of mandatory spending for the 2015 fiscal year can be seen in the graphic below:

Discretionary Spending
Set by annual Congressional appropriations. These programs include defense spending, education, veterans’ benefits, and housing.

Major categories of discretionary spending for the 2015 fiscal year can be seen in the graphic below:

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