What Is the Current Deficit?
The U.S. federal budget deficit for fiscal year 2018 is $440 billion. FY 2018 covers October 1, 2017 through September 30, 2018. The deficit occurs because the U.S. government spending of $4.094 trillion is higher than its revenue of $3.654 trillion. (Source: "2018 Budget. Table 2," Office of Management and Budget, March 16, 2017. “Mid-Session Review Fiscal Year 2017. Table S-5,” OMB, July 15, 2016.)
The Treasury Department reported that the deficit for FY 2017 was $666 billion. Revenue was a record $3.3 trillion, but spending was also a record at almost $ 4 trillion. The deficit was 14 percent higher than the prior year.
Four Reasons for the Budget Deficits
Most people blame the deficits on the 2008 financial crisis. But that's only half the story. These enormous deficits were the result of four factors. Only the last two are related to the recession.
First, the attacks on 9/11 led to the War on Terror. That almost doubled annual military spending. It rose from $437.4 billion in 2003 to a peak of $855.1 billion in 2011. For more, see Military Budget.
Second, mandatory spending has increased. That means benefit payouts for Social Security, Medicare and other mandated programs. It's exceeded $2 trillion a year since FY 2011. These payments consume most of the revenue each year. Only an Act of Congress that amends a program's benefits can change them.
That would require a majority vote in both houses and is unlikely to happen. Any reduction in benefits takes money out of the pockets of current beneficiaries. This powerful demographic of seniors would vote lawmakers out of office.
Third, the $787 billion economic stimulus package added to the 2009 deficit.
That's because it cut taxes and extended unemployment benefits. It also funded public works projects to create jobs. But this expansionary fiscal policy was needed to push the economy out of recession. In fact, it did so in the second quarter of 2009.
Fourth, the recession reduced federal revenue and taxes. As the economy tanked, so did tax revenues. Government income fell from its pre-recession record of $2.57 trillion in FY 2007 to $2.1 trillion in FY 2009. It didn't recover until FY 2013 when it reached $2.78 trillion.
