Governments aim to balance deficits during economic downturns with surpluses in prosperous times. However, the U.S. federal government has consistently run deficits. To understand how the national debt nearly reached $40 trillion, it is helpful to review historical fiscal trends starting from 1962.
1962: The Beginning
In the 1960s, federal spending was predominantly discretionary, with entitlement programs like Social Security accounting for a smaller portion of the budget.
1966: Launch of Medicare and Medicaid
Medicare and Medicaid started providing benefits, marking a shift in spending priorities.
1973-1975: Recession Impact
A recession led to a surge in deficits, reflecting economic challenges.
1980s: Defense Buildup
Increased defense spending and lowered tax rates contributed to higher deficits during this decade.
1992: Post-Cold War Adjustments
Defense spending decreased after the Cold War ended.
1998: Surplus Period
The late 1990s saw budget surpluses due to strong economic growth, high revenue, and controlled spending.
2002: Return to Deficits
Recession, tax cuts, and post-Sept. 11 wars led to a resumption of deficits.
2009-2011: The Great Recession
This period witnessed soaring deficits due to severe economic downturns.
2015: Economic Recovery
With economic recovery and controlled discretionary spending, deficits decreased to a recent low.
2020: Pandemic Spending
The COVID-19 pandemic and emergency stimulus spending resulted in record deficits.
2026: Elevated Deficits
Deficits are projected to remain high due to growing entitlement commitments and interest payments.
The debt is anticipated to equal 101 percent of GDP by 2026.