Scaling the Deficit

[BRIEFING.COM - Robert V. Green]  The total US debt and federal deficit have become the focus of much debate, but many discussions fail to put the scale of the deficit into perspective. Here is some background information on the US federal deficit and total debt presented in charts to help visualize the scale of the US government spending and debt situation.

Federal Deficit and Debt Defined

The federal deficit is the difference between what the US federal government brings in as revenue each year and what the federal government spends.

When the federal government spends more than it takes in, the difference is accounted for by the issuance of US Treasury bonds. The total amount of federal bonds outstanding at any given time is the federal debt.

The following charts illustrate US federal government spending, the deficit, and debt levels.

Charts

In the following sections, we present a variety of charts to help give some perspective on the size of both the federal deficit and federal debt in the US.

In all of these charts, the data for 2010 comes from the president's budget documents and are estimates only. Data for 2009 are preliminary and may be adjusted in the future.

However, for the purpose of this article, which is to provide some scale for the magnitude of these numbers, the imprecision of the 2010 estimates and possible revisions to 2009 data are not significant.

The source for all data, except the inflation-adjusted data, are US government offices, including the Federal Treasury (TreasuryDirect.gov), the Bureau of Economic Analysis, Bureau of Labor Statistics, and the Census Bureau.

Federal Spending Over Time

The following chart illustrates total federal spending, in absolute dollars, since 1950.

Federal Spending In Real Dollars

This chart shows federal spending, but using real dollars, with 2005 as the inflation base data. (This means that all data are adjusted to be comparable to a 2005 dollar.)

Federal Spending As A Percentage of Total GDP

The following chart illustrates federal spending as a percentage of total GDP, since 1950.

The chart is not adjusted for inflation.

Federal Annual Deficit Over Time

The following chart shows the federal deficit, in absolute dollars, since 1950.

Federal Deficit In Real Dollars

This chart shows the annual federal deficit, but using real dollars, with 2005 as the inflation base data. (This means that all data is adjusted to be comparable to a 2005 dollar.)

Federal Deficit As A Percentage of Total GDP

This chart illustrates the federal deficit as a percentage of total GDP since 1950.

This chart clearly illustrates how sharply the federal deficit has increased in 2009 (due to stimulus spending) and will actually increase in 2010 (according to budget estimates).

Although not shown, the deficit percentage in 1942 -- the first year of WWII -- was just 12.0%, only slightly higher than the projected percentage for 2010. The peak deficit spending during WWII was in 1943 when the deficit was 28.1% of total GDP.

Federal Debt Over Time

The following chart shows the total federal debt, in billions, at the end of each year shown, since 1950.

Federal Debt As A Percentage Of Total GDP

The following chart shows the total federal debt, at the end of each year, as a percentage of GDP.

The high point during WWII for this statistic was 1946 when federal debt was 121% of GDP.

The budget estimate for 2010 is 94%.

It should be noted that this statistic is for federal debt only. State and municipal government debt is not included nor is personal or business debt. There are some research estimates that indicate total debt, which is all public debt plus all private debt, is currently approximately 300% of GDP, or nearly three times the nation's gross domestic output.

Conclusions

In this article our objective was simply to provide a means of visualizing the trends in US government spending, the deficit, and overall debt loads.

Analysis of the impact of these trends, as well as a comparison of the US debt situation to that of other nations, will be addressed in upcoming Ahead of the Curve columns.