The US Federal Budget
- The United States is facing significant and fundamental budgetary challenges. The federal government's budget deficit for fiscal year 2011 was $1.3 trillion, at 8.7% of gross domestic product (GDP), that deficit was the
third-largest shortfall in the past 40 years. (GDP is the sum of all income earned in the domestic production of goods and services. In 2011, it totaled $15.0 trillion). In 2011, federal spending (outlays) exceeded 24% of
GDP, the third-highest level in the past 40 years, while federal revenues were just over 15% of GDP, the third-lowest level during that period. If economic conditions improve, spending will decline relative to GDP and
revenues will rise. But even so, under current policies, a large gap between spending and revenues will persist. Annual budget deficits occur when spending exceeds revenues, the government must borrow to cover such a
shortfall. Federal debt held by the public is the total value of outstanding Treasury bills, notes, bonds. and other debt instruments (including Treasury securities held by the Federal Reserve) that have accumulated over time
to finance the government's activities. At the end of fiscal year 2011, debt held by the public amounted to $10.1 trillion, or 67% of GDP. Another $4.6 trillion in Treasury securities were held by other government accounts,
representing amounts that one part of the government (mostly the Social Security Administration) had lent to another (the Treasury).
- In 2011, the US government spent $3.6 trillion on a range of activities and programs.
- Net interest: 1.5% of GDP, $227 billion.
- Discretionary spending: 9.0% of GDP, $1.3 trillion.
- Mandatory spending: 13.5% of GDP, $2.0 trillion.
- Defence: 4.7% of GDP, $700 billion.
- Nondefense: 4.3% of GDP, $646 billion. Consists of spending on programs related to health, income security, education, veterans' benefits, transportation, and other activities.
- Other: 3.6% of GDP, $545 billion. Consists of spending on unemployment compensation, federal civilian and military retirement, veterans' benefits, the earned income tax credit, food stamps, and other programs.
- Medicare: 3.2% of GDP, $480 billion.
- Medicaid: 1.8% of GDP, $275 billion.
- Social security: 4.8% of GDP, $725 billion.
- In 2011, the US government received $2.3 trillion in revenues.
- Individual income taxes: 7.3% of GDP, $1.1 trillion.
- Corporate income taxes: 1.2% of GDP, $181 billion.
- Social insurance taxes: 5.5% of GDP, $819 billion. Consists of payroll taxes that fund social insurance programs, primarily social security and medicare's hospital insurance programs.
- Other: 1.4% of GDP, $211 billion. Consists of excise taxes, estate and gift taxes, customs duties, and miscellaneous receipts.
Facts about the budget
- $3.6 trillion: Amount of spending by the federal government in fiscal year 2011. $2.3 trillion: Amount of revenues received by the federal government in fiscal year.
- Mandatory spending: Consists primarily of benefit programs for which the Congress sets eligibility rules and benefit formulas.
- Discretionary spending: Consists of spending that lawmakers control through annual appropriation acts.
- Net interest. Consists of the government's interest payments on debt held by the public, offset by interest income the government receives.
- Revenues: Funds collected from the public that arise from the government's exercise of its sovereign or governmental powers.
The federal budget (1971-2011) (Percentage of GDP) (Keys: Spending; Deficit; Revenues): 1) 1971: Spending ~ 20%; Deficit ~ 2%; Revenues ~ 18%; 2) 1976: Spending ~ 22%; Deficit ~ 4%; Revenues ~ 18%;
3) 1981: Spending ~ 23%; Deficit ~ 2%; Revenues ~ 22%; 4) 1986: Spending ~ 23%; Deficit ~ 5%; Revenues ~ 18%; 5) 1991: Spending ~ 22%; Deficit ~ 4%; Revenues ~ 18%; 6) 1996: Spending ~ 20%; Deficit ~
2%; Revenues ~ 18%; 7) 2001 (surplus): Spending ~ 20%; Revenues ~ 20%; 8) 2006: Spending ~ 21%; Deficit ~ 2%; Revenues ~ 19%; 9) 2011: Spending ~ 25%; Deficit ~ 8%; Revenues ~ 17%.
- Annual deficit or surplus = revenues - outlays. To fund government spending in years of deficits, the government borrows from individuals, businesses, or other countries by selling them Treasury securities.
Deficits and the debt
- 21% - spending as a share of GDP, on average, over the past 40 years.
- 18% - revenues as a share of GDP, on average, over the past 40 years.
- 8.7% - annual deficit in 2011 as a share of GDP, the third-highest level in the past 40 years.
- 38% - debt held by the public as a share of GDP, on average, over the past 40 years.
- 67% - debt held by the public as a share of GDP at the end of 2011, the highest level in the past 40 years.
- The US debt (1971-2011) (Percentage of GDP): 1) 1971 - 28%; 2) 1976 - 27%; 3) 1981 - 26%; 4) 1986 - 40%; 5) 1991 - 45%; 6) 1996 - 48%; 7) 2001 - 32%; 8) 2006 - 37%; 9) 2011 - 67%.
- Debt held by the public is roughly equal to the sum of annual deficits and surpluses. Other factors, such as borrowing to fund student loans and other federal credit programs, can also affect debt held by the public.
All of the numbers in this figure are for federal fiscal years, which run from October 1 to September 30 | Authors: Jonathan Schwabish and Courtney Griffith | Source: Congressional Budget Office.