Restraining Spending Is Key to Balancing the Federal Budget

Federal deficits are growing again. The deficit peaked in 2009 to set a new record of $1.4 trillion, a level that was more than three times that of the preceding year. Deficits returned to prerecession levels for only two years, 2014–2015. Since 2015, deficits have been rising again, with the Treasury predicting a deficit of nearly $1 trillion this year.

This increase in deficits is driven by growth in spending. Since 1967 Congress has spent, on average, 20.3 percent of GDP each year. In the same period, from all kinds of federal taxes combined, Congress has collected an average of approximately 17.4 percent of GDP each year. The largest share of GDP collected in federal taxes was 20 percent of GDP in the year 2000. That is, one in every five dollars generated by the US economy that year went toward federal taxes.

Since 1967, there have been only five years in which Congress has spent less than it collected in tax revenues. The long-term trend shows that, on average, Congress spends 2.9 percent of GDP more than it collects in tax revenue.