Congressional Budget Office

The experience of the US deficit and debt held by the public since 1962 is summarized inFigure 14.2 “US Surplus and Debt, 1962–2010”. The surplus is shown in the upper figure, and the level of debt is shown in the lower figure. All values are in current dollars. At the far left of the graph, we see that the US government ran relatively small deficits (negative surpluses) in the 1960s and early 1970s. As a result, the debt increased slowly. From the mid- 1970s to the mid-1990s, deficits were substantial, so the amount of debt outstanding grew rapidly. As we saw earlier, there was a brief period of surplus in the late 1990s and a corresponding decrease in the debt, but deficit spending recommenced during the George W. Bush administration. The debt increased again. Although an analysis of deficits and debt is often presented using data similar to those inFigure 14.2 “US Surplus and Debt, 1962–2010”, this figure is incomplete in two ways: (1) these numbers are not corrected for inflation (they are current dollar figures), and (2) there is no sense of how large the deficit and the debt are relative to the aggregate economy. Figure 14.3 “US Surplus and Debt as a Fraction of GDP, 1962–2010” remedies both defects by showing the surplus and the debt as a fraction of nominal GDP. Because nominal GDP is also measured in dollars, these ratios are just numbers. We see that the deficit has been a relatively stable fraction of GDP, averaging about 2.7 percent of GDP. The debt level has averaged about 36 percent over the period.