What Is The US Deficit To GDP Ratio?

In fiscal year 2020, the federal government ran a $3.1 trillion deficit, more than double the deficit in fiscal year 2019. The deficit for this year was 15.2 percent of GDP, the highest since 1945 as a percentage of GDP. The deficit as a percentage of GDP increased for the sixth year in a row in FY2020. Revenues in FY2020 declined 1% from the previous year, while outlays increased by 47%.

The FY2020 budget is divided into two parts: before COVID-19 and its economic consequences, and after COVID-19 and its economic consequences. The deficit was 8% higher in the first six months of the fiscal year (October through March) than it was the previous year; in the last six months (April through September), it was eight times higher than it was the previous year.

Revenues were up 6% in March compared to the same month last year, owing to higher earnings and salaries, which increased individual and payroll tax receipts. However, revenues fell 7% between April and September, compared to the second half of FY2019, due to a lack of economic activity and regulations adopted in reaction to the crisis. Many forms of revenue were affected by the second-half pattern of revenue being driven down by economic losses and policy changes. Because of a worse economy with fewer employment and lower salaries, as well as policy reforms that permitted companies to defer payroll tax payments and provided refundable payroll tax credits for paid sick leave, family and medical leave, and employee retention, withheld income and payroll taxes declined by 8%. Nonwithheld income and payroll taxes were also down 7%, while corporate income taxes were down 21%. Both of these drops were the result of a combination of economic losses and legislative measures aimed at reducing tax burdens.

Meanwhile, spending in the first half of FY2020 increased by 7% over the same period last year. Then, from April to September, outlays than doubled from the same months the previous year, a $2 trillion rise. From the first to the second half of the year, the kind of spending rises altered as well. From October through March, mandated programs such as Social Security, Medicare, and Medicaid drove up spending. Spending increased dramatically over the next six months as a result of the pandemic and the recession. Spending increased by: from April to September 2020, compared to the same months in FY2019:

  • The Small Business Administration received $577 billion, mostly for the Paycheck Protection Program.
  • $112 in the Emergency Fund for Public Health and Social Services (which in recent months has mostly reimbursed health care providers for their pandemic-related losses and paid for testing and treatment of COVID-19)
  • In these months, the Coronavirus Relief Fund, a new program that provided aid to state, local, tribal, and territory governments, spent $149 billion.

Tracking the Federal Deficit: September 2020

Individual and corporate income taxes bring in a large amount of money to the government each September, resulting in a monthly surplus. Last September, for example, the federal government reported a $83 billion surplus (or a $31 billion surplus after accounting for a change in the timing of some payments). However, increased spending in response to the epidemic and recession trumped the regular revenue growth this year, and the government ran a $124 billion monthly deficit. This deficit was the difference between $372 billion in revenue and $496 billion in spending.

The loss of economic activity and policy changes that allow some taxes to be delayed or decreased resulted in a 1% drop in revenue in September compared to September last year. Individual income and payroll taxes, for example, were 5% lower than previous year, while corporate income taxes were down 16%. Individual income tax refunds surged by 68 percent, reducing net revenue even further.

Meanwhile, expenditure in September was 70% more than in September of the previous year (albeit only 44 percent greater when accounting for a shift in the timing of some payments). As a result of the economic consequences from COVID-19, spending has largely increased. Unemployment insurance spending, for example, went from $2 billion last September to $35 billion this September. The Department of Homeland Security’s spending increased by $27 billion in September, almost entirely due to spending from its Disaster Relief Fund, which covered some unemployment compensation. The Small Business Administration’s spending increased from $85 million in September of last year to $1.8 billion in September of this year. Outlays from the Public Health and Social Services Emergency Fund, which has largely repaid health care providers for higher costs and decreased revenue due to the pandemic and funded for COVID-19 testing and treatment in recent months, have climbed from $192 million to $7 billion.

Despite the fact that spending on these projects substantially exceeds levels prior to COVID, it has decreased dramatically from earlier in 2020. The $62 billion spent on unemployment insurance in September (including outlays from the Disaster Relief Fund) is down 47% from the $116 billion spent in June. The SBA’s outlays of $1.8 billion are 99.6% lower than their peak of $511 billion in June. The Public Health and Social Services Emergency Fund’s $7 billion in spending is down 82 percent from its April peak of $39 billion. These decreases, of course, only apply to programs that spent considerable sums last month. Economic Impact Payments, airline worker assistance, and the Coronavirus Relief Fund (which delivered money to state and municipal governments) are among the key relief initiatives that no longer account for considerable spending. As the previously legislated federal response to the pandemic and recession began to wind down, September 2020 saw substantially higher spending than September 2019, but much less than earlier this year.

Tracking the Federal Deficit: August 2020

According to the Congressional Budget Office, the federal government had a $198 billion deficit in August, the eleventh month of fiscal year 2020. This deficit, which is the difference between $223 billion in income and $420 billion in outlays, is $3 billion lower than it was in August, though the apparent improvement is due to changes in the scheduling of certain payments. Without these changes in timing, the August deficit would have been $106 billion (72 percent) more than the previous August. The cumulative deficit for FY2020 has grown to $3.0 trillion, up $1.9 trillion from last year at this time.

Analysis of key trends: Total revenue for the fiscal year is down 1% from previous year at this stage, but total outlays are up 46%. August’s asymmetry was replicated, with revenues 2 percent lower than previous August’s and outlays 27 percent greater (after accounting for the above-mentioned time variations).

This year’s income had been running 6% higher than last year’s through March, thanks to a healthy economy. Then came COVID-19, which resulted in a 9 percent drop in revenue from April to August compared to the same period last year, owing to both a drop in economic activity and legislation enacted in response to the epidemic.

When scheduling differences are taken into account, expenditure on unemployment insurance payouts accounted for approximately half of the rise in outlays from last August to this one. While expenditure has increased dramatically since last year, it has decreased significantly since last month. Adjusted for timing variations, unemployment insurance benefit spending soared from $2 billion in August of last year to $110 billion in July of this year, before decreasing to $53 billion in August of this year. Other big expenditures related to COVID-19 and its economic consequences have followed a similar path. The Small Business Association’s recent expendituresmostly loans and guarantees under the Paycheck Protection Programwere $99 million in August of last year, $26 billion in July, and $12 billion in August of this year (also adjusted for timing shifts). Similarly, spending from the Public Health and Social Services Emergency Fundwhich has mostly gone to reimbursing health care providers for COVID-19-related costs or lost revenues, as well as providing money for COVID-19 testing and treatmenthas gone from $183 million in August to $17 billion in July to $8 billion in August (adjusted for timing shifts).

According to the CBO, the total deficit for this fiscal year would be $3.3 trillion, more than quadruple last year’s figure and the highest deficit as a percentage of GDP since 1945.

Tracking the Federal Deficit: July 2020

According to the Congressional Budget Office, the federal government had a $61 billion deficit in July, the ninth month of fiscal year 2020. Although the July deficit was lower than previous July’s $120 billion deficit, the difference is due to a scheduling adjustment rather than an improvement in fiscal position. The non-withheld individual and corporate income tax deadline was moved from April to July this year, resulting in an exceptional increase in July revenue (totaling $563 billion). Even this influx of taxes was offset by monthly outlays that were 68 percent more than last July’s at $624 billion. The total budget deficit for FY2020 is now $2.8 trillion, more than three times what it was at this time last year.

Trends to look out for: Taking a step back from the monthly changes induced by the change in reporting dates, total revenue for the first half of the fiscal year is down 1% from the same period the previous year. Individual and corporate income tax receipts were up 6% in March compared to the same month last fiscal year, as increased individual and business earnings led to higher individual and corporate income tax receipts. Then came the epidemic. Revenues are down 10% from April to July compared to the same months last year, due to a combination of economic harm and legislation that increased tax deductions for people and corporations.

While revenue has decreased from the previous fiscal year, outlays have increased by 51% so far in FY2020 compared to the same period in FY2019. The federal response to the pandemic and its economic consequences has accounted for the majority of this rise, and this was the case again in July. Last July, the federal government spent $3 billion on unemployment benefits; this July, it spent $110 billion. The additional $600 in weekly payments for all recipients accounted for the majority of the increase. Meanwhile, the Small Business Administration’s spending increased from $103 million in July of last year to $26 billion in July of this year, owing primarily to loans issued through the Paycheck Protection Program. Since the start of the government coronavirus response, UI and PPP have seen constant and huge increases in spending: SBA outlays have increased by $564 billion this year over last, while UI benefits have increased by $358 billion. The Public Health and Social Services Emergency Fund, which has seen a boom in coronavirus-related spending in recent months, has primarily gone to reimbursing health care providers for costs or lost profits due to COVID-19, as well as giving money for COVID-19 testing and treatment. Last July, Congress spent $243 million on this fund, but this July, it will spend $17 billion.

Tracking the Federal Deficit: June 2020

The federal government ran a deficit of $864 billion in June, the ninth month of fiscal year 2020, according to the Congressional Budget Office. This month’s deficit is more than 100 times bigger than the $8 billion loss from June of last year. This disparity was due to a significant decline in revenues, which fell 28% from previous June (from $334 billion to $241 billion), as well as a tremendous increase in outlays, which increased 223 percent from last June (from $342 billion to $1.105 trillion). So far this fiscal year, the budget deficit has risen to $2.7 trillion, a $2 trillion increase over the same period last year. The cumulative difference derives from a reduction in revenues13 percent lower than last year at this timeand a significantly larger jump in outlays49 percent higher than last year at this time.

Trends to look out for: Another monthly deficit set a new high in June. The federal government’s response to the COVID-19 emergency has continued to push monthly deficits higher: The biggest budgetary difference between last June and this one was on the spending side, with coronavirus-related programs accounting for the majority of it. The Small Business Administration, which funds the Paycheck Protection Program, increased its spending from $80 million in June of last year to $35 billion in May of this year, totaling $511 billion in June. In June, the SBA accounted for over half of all government spending. Meanwhile, federal spending on unemployment insurance benefits increased from $2 billion in June of last year to $93 billion in May of this year, bringing the total to $116 billion in June. The $600 per month increase in benefit amounts accounted for half of the rise between last June and this June. Finally, the Public Health Social Services Emergency Fund went from $300 million last June to $14 billion this June (down from $27 billion in May), which has reimbursed health care providers for health costs or lost income due to the pandemic, as well as paying for COVID-19 testing and treatments.

The administration deferred the deadline for quarterly tax payments from June 15 to July 15, which resulted in a reduction in revenue between last June and this one. When compared to a year ago, monthly revenue was down $93 billion, with $43 billion coming from deferring corporation tax payments and $42 billion from deferring individual and payroll tax payments. The CBO anticipates that the majority of the delayed money will be collected eventually, though some will be lost when firms fail to meet the new payment dates.

Tracking the Federal Deficit: May 2020

According to the Congressional Budget Office, the federal government had a $399 billion deficit in May, the eighth month of fiscal year 2020. This is nearly double the monthly deficit recorded in May of this year. The budget deficit has risen to $1.88 trillion so far this fiscal year, more than twice as much as it was at this time last year (when it was $739 billion). Total revenues are down 11% ($256 billion) so far this fiscal year compared to the same period last year, while outlays are up 29% ($886 billion).

Analysis of important trends: According to the CBO, the fiscal year so far may be divided into two parts: one before the new coronavirus harmed economic output and federal finances (October through March) and one after the pandemic decimated both (April through September) (April and May). Outlays and income were both greater in the pre-coronavirus period than they were at the same time last year. However, during the previous two months, outlays have surged (up 30% this May compared to last), while income have vanished (25 percent lower this May than last).

Spending on unemployment insurance, for example, increased from $2 billion last May to $93 billion this May; spending on refundable tax credits (at this time, mostly the Economic Impact Payments) increased from $3 billion last May to $53 billion this May; and outlays from the Small Business Administration (at this time, mostly loan guarantees from the Paycheck Protection Program) increased from $3 billion last May to $53 billion this May.

Individual income and payroll taxes, which fell by 24 percent ($51 billion) in May compared to the previous year, account for the majority of the revenue reduction. While much of the decrease is attributable to job losses and lower earnings, part of it is due to the CARES Act’s changes in tax deadlines, such as the possibility for companies to delay payroll taxes until the end of the calendar year.

Tracking the Federal Deficit: April 2020

The federal government had a $737 billion deficit in April, the seventh month of fiscal year 2020, according to the Congressional Budget Office. The $897 billion deficit in April contrasts with the $160 billion surplus in April of the previous year. The April shortfall takes the fiscal year’s total deficit to $1.48 trillion, up 179 percent ($949 billion) from the same period last year. In comparison to the same period last year, total receipts in FY2020 have declined by 10% ($200 billion), while spending has climbed by 29% ($749 billion).

Notable Trends Analysis: The $737 billion deficit in April was by far the highest monthly deficit as a percentage of GDP in the last 40 years (since the data was collected). Similarly, this fiscal year’s $1.48 trillion deficit is on course to be the biggest as a percentage of GDP since World War II. The COVID-19 pandemic and the federal government’s emergency response are reflected in these numbers. In April 2020, federal income and payroll tax collections plummeted by $55 billion ($258 billion) from the previous April, owing to the millions of Americans who were laid off or furloughed. (The income tax decrease is due to the April 15 tax filing deadline being postponed.) Meanwhile, relief programs authorized by Congress pushed federal expenditure up to $976 billion in April, more than doubling from the previous month. Unemployment insurance spending increased from $3 billion in April 2019 to $49 billion this year, demonstrating significant program expansions. Individual households received around $200 billion in Economic Impact Payments, which were just approved. The Coronavirus Relief Fund, which provides relief to state and local governments, increased by $142 billion in April, as did beginning expenditures for the Paycheck Protection Program for small businesses, which increased by $15 billion. Medicare spending has also increased thrice to $152 billion. Finally, the federal government paid an additional $40 billion on COVID-19 relief for health-care providers.

Tracking the Federal Deficit: March 2020

The federal government had a $117 billion deficit in March, the sixth month of fiscal year 2020, according to the Congressional Budget Office. The March deficit is $30 billion lower than the $147 billion shortfall posted in March of last year. (Without certain payment schedule shifts, the March deficit would have been $169 billion, or $22 billion higher than March 2019.) The March shortfall raises the total deficit for the fiscal year to $741 billion, up 7% ($50 billion) from the same period the previous year. In comparison to the same period previous year, total revenues in FY2020 have climbed by 6% ($97 billion), while spending has increased by 7% ($147 billion).

Analysis of Significant Trends in the Current Fiscal Year: Lower short-term interest rates reduced the Federal Reserve’s interest expenses and raised its payments to the Treasury, resulting in a 22 percent ($6 billion) rise in federal reserve remittances in the first six months of FY2020. Increases in military spending (7 percent, or $22 billion), Social Security, Medicare, and Medicaid (6 percent, or $57 billion overall), and net interest on the national debt (5 percent, or $10 billion) all contributed to the increase in spending. Notably, neither the new coronavirus pandemic nor the federal government’s emergency actions in response to it had a substantial impact on the March 2020 report. Those fiscal implications, according to the CBO, will be more obvious in April.

Tracking the Federal Deficit: February 2020

The federal government had a $235 billion deficit in February, the fifth month of fiscal year 2020, according to the Congressional Budget Office. The February deficit is up $1 billion from the $234 billion shortfall recorded in February of last year. (Without certain payment schedule shifts, the February deficit would have been $238 billion, or $4 billion higher than February 2019.) The February shortfall takes the fiscal year’s total deficit to $625 billion, up 15% ($80 billion) from the same period last year (or $28 billion once timing shifts are taken into account). In comparison to the same period previous year, total revenues in FY2020 have climbed by 7% ($88 billion), while spending has increased by 9% ($168 billion). (Spending increased by 6%, or $116 billion, after accounting for timing variations.)

Analysis of Significant Trends in the Current Fiscal Year:

Individual income tax refunds declined by 6% ($5 billion) in the first five months of FY2020, increasing net revenue because refund payments are made at different times each year. Customs taxes increased by 14% ($4 billion), owing in part to tariffs imposed by the present administration, especially on Chinese imports. Because the overall debt burden has increased, net interest on the public debt has climbed by 6% ($10 billion) despite historically low interest rates. Because to rising participation in veterans’ disability compensation, rising average disability payouts, and increased spending on a program that lets veterans receive treatment in non-VA facilities, spending for the Department of Veterans Affairs increased by 7% ($6 billion).

Tracking the Federal Deficit: January 2020

The federal government ran a $32 billion deficit in January, the fourth month of fiscal year 2020, according to the Congressional Budget Office. The January deficit is a $40 billion swing from the $9 billion surplus in January of the previous year. (If some payments had been made at other times, the federal government would have had a $1 billion surplus in January 2020 and a $12 billion deficit in January 2019.) The January shortfall raises the fiscal year’s total deficit to $388 billion, up 25% ($78 billion) from the same period last year (or $23 billion once timing shifts are taken into account). In comparison to the same period previous year, total revenues in FY2020 have climbed by 6% ($67 billion), while spending has increased by 10% ($145 billion). (Spending increased by 6%, or $90 billion, after accounting for timing variations.)

Analysis of Significant Trends in the Current Fiscal Year: Corporate income tax receipts increased by 27% ($16 billion) in the first four months of FY2020. In addition, remittances from the Federal Reserve climbed by 14% ($3 billion), owing to decreased short-term interest rates, which cut interest payments. After accounting for timing variations, total Social Security, Medicare, and Medicaid expenditures increased by 6% ($41 billion). The Department of Defense’s spending increased by 7% ($14 billion), primarily for procurement and research and development.

Tracking the Federal Deficit: December 2019

The federal government ran a $15 billion deficit in December, the third month of fiscal year 2020, according to the Congressional Budget Office. The deficit in December was 7% ($1 billion) larger than the deficit in December of the previous year. (Without certain payment schedule modifications, the December deficit would have been around $42 billion, or $4 billion higher than the adjusted deficit from a year earlier.) The December deficit takes the fiscal year’s total deficit to $358 billion, up 12 percent ($39 billion) from the same period previous year. In comparison to the same period previous year, total revenues in FY2020 have climbed by 5% ($35 billion), while spending has increased by 7% ($74 billion).

Analysis of Significant Trends in the Current Fiscal Year: Excise tax income declined by 33% ($10 billion) in the first three months of FY2020 compared to the same time last year, owing to a one-year moratorium on the tax on health insurance providers (the “Cadillac tax,” which has since been repealed). Customs revenue, on the other hand, surged by 18% ($3 billion) as a result of new tariffs imposed by the present administration, mostly on Chinese imports. Outlays for Department of Defense programs increased by ten percent ($16 billion), primarily for procurement. Additionally, in order to refill their capital reserves, Fannie Mae and Freddie Mac began making lesser payments to the Treasury, resulting in an 88 percent ($7 billion) drop in net payments (recorded in the federal budget as an increase in net outlays).

Tracking the Federal Deficit: November 2019

The federal government ran a $207 billion deficit in November, the second month of fiscal year 2020, according to the Congressional Budget Office. The deficit in November was 1% ($2 billion) larger than the deficit in November of the previous year. (Without certain payment schedule shifts, the November deficit would have been at $158 billion, or $2 billion less than the adjusted deficit from a year earlier.) The November shortfall takes the fiscal year’s total deficit to $342 billion, up 12% ($36 billion) from the same period last year (or $32 billion once scheduling shifts are taken into account). In comparison to the same period previous year, total revenues have climbed by 3% ($12 billion), while spending has increased by 6% ($49 billion).

Analysis of Significant Trends in the Current Fiscal Year: Due to a one-year suspension on the tax on health insurance providers, revenue from excise taxes declined by 40% ($9 billion) in the first two months of FY2020 compared to the same time in 2018. Customs revenue, on the other hand, surged by 32% ($4 billion) as a result of higher tariffs imposed by the present administration, mostly on Chinese imports. On the spending side, outlays for Social Security, Medicare, and Medicaid increased by 7% ($22 billion), while education spending increased by 25% ($3 billion), owing partly to rising federal student loan subsidy costs.

Tracking the Federal Deficit: October 2019

The federal government ran a $133 billion deficit in October, the first month of fiscal year 2020, according to the Congressional Budget Office. The deficit in October was $33 billion higher than the deficit in October of the previous year.

What is the optimum debt-to-GDP ratio?

Applications. The debt-to-GDP ratio is a measure of an economy’s financial leverage. The government debt-to-GDP ratio should be less than 60%, according to one of the Euro convergence criteria.

Is it possible for the United States to ever be debt-free?

Congress has tried numerous times to reduce the national debt, but it has not been successful in reducing the debt’s increase. The federal government’s outstanding debt is known as the US debt.

Is the United States in debt to China?

How much money is owed to China by the United States? China owns around $1.08 trillion in US debt. 2 This sum is subject to change in the market. When China exchanges Treasury securities or when the prices of those bonds fluctuate, the value will fluctuate.

Which country has the most debt?

Venezuela has the highest debt-to-GDP ratio in the world as of December 2020, by a wide margin. Venezuela may have the world’s greatest oil reserves, but the state-owned oil corporation is thought to be poorly managed, and the country’s GDP has fallen in recent years. Simultaneously, Venezuela has taken out large loans, increasing its debt burden, and President Nicolas Maduro has tried dubious measures to curb the country’s spiraling inflation.

What is the cause of America’s massive debt?

The overall federal financial obligation owing to the public and intragovernmental departments is known as the US debt. The US national debt is so large because Congress continues to spend money on deficits while also cutting taxes.

Why is Japan so in debt?

The Japanese public debt is predicted to be around US$12.20 trillion (1.4 quadrillion yen) as of 2022, or 266 percent of GDP, the largest of any developed country. The Bank of Japan holds 45 percent of this debt.

The collapse of Japan’s asset price bubble in 1991 ushered in a long period of economic stagnation known as the “lost decade,” with real GDP decreasing considerably during the 1990s. As a result, in the early 2000s, the Bank of Japan embarked on a non-traditional strategy of quantitative easing to inject liquidity into the market in order to promote economic growth. By 2013, Japan’s public debt had surpassed one quadrillion yen (US$10.46 trillion), more than twice the country’s yearly gross domestic product and already the world’s highest debt ratio.

Japan’s public debt has continued to climb in response to a number of issues, including the Global Financial Crisis in 2007-08, the Tsunami in 2011, and the COVID-19 epidemic, which began in late 2019 and has consequences for Tokyo’s hosting of the 2020 Summer Olympics. In August 2011, Moody’s downgraded Japan’s long-term sovereign debt rating from Aa2 to Aa3 due to the country’s large deficit and high borrowing levels. The ratings drop was influenced by substantial budget deficits and government debt since the global recession of 2008-09, as well as the Tohoku earthquake and tsunami in March 2011. The Yearbook of the Organisation for Economic Co-operation and Development (OECD) noted in 2012 that Japan’s “debt surged above 200 percent of GDP partially as a result of the devastating earthquake and subsequent reconstruction efforts.” Because of the growing debt, former Prime Minister Naoto Kan labeled the issue “urgent.”