This commentary was written by Dr. Daniel Thornton of D.L. Thornton Economics. Thornton spent over three decades at the St. Louis Fed as vice president and economic advisor.

The U.S. Deficit History: Just the Facts!  - 08.14.2020 debt cartoon  2

I have heard a lot of discussions about the Federal deficit that are factually incorrect, so I thought I would present the facts.

The fact is that until the late 1960s, the federal deficits were small with the exception of world wars and the Great Depression. However, since the late 1960s deficits have been trending up with the exception of the four years under the Clinton administration, when there were historically large surpluses.

Moreover, the trend has accelerated since the early 1970s. Indeed, deficits have become increasingly massive by historical standards during periods of economic expansions, when historically there were small deficits or even some small surpluses.

These facts are true no matter if the deficit is in current dollars (Figure 1), real dollars (adjusted for inflation, Figure 2), per capita real dollars (Figure 3) or as a percent of GDP (Figure 4).

There are three things that may have contributed to the increased reliance on deficit spending. The first is the massive increase in Great Society legislation passed under the Johnson administration. The second is the passage of the Congressional Budget Act of 1974 which gave Congress more control over the budget, while limiting the power of the president. The third is the rise of Keynesian economics to economic orthodoxy.

These are all worthy of consideration.

Figure 1: Federal Surplus/Deficit in Current Dollars, 1913 to 2020

The U.S. Deficit History: Just the Facts!  - thor1

The U.S. Deficit History: Just the Facts!  - thor2

The U.S. Deficit History: Just the Facts!  - thor3

(**Population data are available only since 1929)

Figure 4: Federal Surplus/Deficit as Percent of GDP, 1929 to 2020

The U.S. Deficit History: Just the Facts!  - thor4


This is a Hedgeye Guest Contributor piece written by Dr. Daniel Thornton. During his 33-year career at the St. Louis Fed, Thornton served as vice president and economic advisor. He currently runs D.L. Thornton Economics, an economic research consultancy. This piece does not necessarily reflect the opinion of Hedgeye.