The Federal Budget Deficit: A Discussion of Recent Trends

Publication Date: March 2005

Publisher: Library of Congress. Congressional Research Service

Author(s):

Research Area: Banking and finance

Type:

Abstract:

The federal budget deficit in FY2004 was 3.6% of gross domestic product (GDP). When the influence of economic conditions and temporary factors is excluded from the measurement of budget balances, the FY2004 deficit was 2.6% of GDP. By either measure, the deficit is above the historical average for the last 50 years. The FY2004 deficit represents a dramatic turnaround from the FY2000 surplus of 2.4% of GDP. Most of this turnaround can be traced to a fall in receipts, from a 50-year high of 20.9% of GDP in FY2000 to a 45-year low of 16.3% of GDP in FY2004. In percentage terms, tax cuts accounted for approximately 45% of the decline in the federal budget balance between FY2000 and FY2004. The downturn in the economy and temporary factors were responsible for about 38% of the deterioration in federal finances, while increases in federal outlays as a percentage of GDP were responsible for another 17%. This report presents historical data and will not be updated.