U.S. Presidents With the Largest Budget Deficits

Reviewed by Michael J BoyleFact checked by Michael LoganReviewed by Michael J BoyleFact checked by Michael Logan

U.S. presidents inherit their predecessors’ federal budget and budget deficit when they take office. This is due to the fact that they take office in January, whereas the federal fiscal year runs from October 1 to September 30.

Almost every U.S. president in the last half-century has run a record budget deficit at one time or another.

Key Takeaways

• As of the end of fiscal year 2023, the deficit was $1.7 trillion.
• The U.S. government has run a budget deficit for nearly all of the last 60 years.
• A president’s influence over a budget deficit doesn’t begin until after the federal fiscal year ends on September 30 of their first year in office.

How the Budget Process Works

A president proposes an annual budget, but Congress must approve all spending so a president’s power over the budget is never absolute. That power can be severely limited if the opposition party holds a majority in either the House of Representatives or the Senate, and particularly if they hold the majority in both.

Discretionary spending accounts for only about one-third of the typical U.S. budget. The majority of the budget is mandatory spending that’s dictated by law. The most significant sources of mandatory spending are Medicare and Social Security.

Another key factor in shaping the budget is that the federal fiscal year runs from October 1 to September 30. So a budget that’s passed during a predecessor’s term may strongly influence a president’s first year in office. Incoming administrations may request additional spending upon taking office, as needed.

20th Century Deficits

The largest budget deficits during the first half of the 20th century were seen during the two world wars. The largest deficits in history relative to the size of the economy occurred during World War II. The United States has run a budget deficit nearly every year since 1961, but the deficits began to balloon during the 1970s and 1980s.

President Ronald Reagan vowed to limit the size of government when he took office in 1981 but the nation’s deficit roughly doubled and topped $200 billion several times during his eight years in office. George H.W. Bush, Reagan’s successor, also presided over a record-breaking deficit of $290 billion in 1992.

Achieving a Budget Surplus

President Bill Clinton agreed to consistently cut the deficit under pressure from Republicans in Congress. He eventually oversaw the first budget surplus in decades.

The surplus stood at $236 billion in 2000, Clinton’s final year in office. The $128 billion surplus recorded in 2001 was the last time a surplus had been seen in this century.

Bush’s Budget Deficit

President George W. Bush cited the Clinton surplus as evidence that taxes were too high when he took office in 2001. He pushed through significant tax cuts and oversaw an increase in spending. The combination again drove the U.S. budget into the red.

The deficit reached a record $458 billion in 2008, Bush’s last year in office. It would triple the following year as the Bush and Obama administrations faced a global financial crisis.

Obama’s Budget Deficit

The U.S. budget deficit exploded in fiscal year 2009, ultimately reaching $1.4 trillion under President George W. Bush. The incoming Obama administration struggled to contain the economic fallout from the financial crisis. Most of that deficit was created under Bush’s watch, but Obama and the Democratic-controlled Congress added hundreds of billions of dollars to it in early 2009.

The deficit would remain above $1 trillion throughout the 2012 fiscal year, but it was slashed to as low as $440 billion in the later years of Obama’s presidency.

Important

The biggest U.S. deficits in history relative to the size of the nation’s economy were seen during World War II.

Trump’s Budget Deficit

President Trump continued the trend of pushing the deficit higher as he sought massive tax cuts and increased defense spending. His first budget for the 2018 fiscal year recorded a deficit of $779 billion.

The deficit reached $984 billion in 2019 under Trump and it hit more than $1 trillion in 2020 before Congress passed a $2 trillion stimulus package to fight the economic fallout from the coronavirus pandemic.

Biden’s Budget Deficit

One of President Biden’s campaign promises was to reduce the federal deficit. The Congressional Budget Office (CBO) estimated that the federal budget deficit was $475 billion in the first five months of fiscal year 2022, which represented an amount less than the deficits for the same period in years 2021 and 2020.

“It is less than half the shortfall recorded for the same months of fiscal year 2021 ($1,047 billion) and three-quarters of the deficit recorded in 2020 ($624 billion), just before the start of the coronavirus pandemic,” the CBO stated. “From October 2021 through February 2022, revenues were $371 billion (or 26 percent) higher and outlays were $201 billion (or 8 percent) lower than they were during the same period a year ago.”

The CBO reported in November 2022 that the budget deficit for FY 2022 was nearly $1.4 trillion, down from nearly $2.8 trillion in 2021. “The marked decline in the deficit from the previous year reflected waning spending in response to the coronavirus pandemic and increased revenues driven by higher inflation and the continued recovery of economic activity,” the CBO reported.

The CBO noted that the deficit, though lower than the prior fiscal year, was still higher than originally projected. The agency attributed this in part to programs aimed at student debt forgiveness and the COVID-19 emergency deferment that was scheduled to end on December 31, 2022. It was extended until the end of June 2023 when President Biden proposed that the U.S. Secretary of Education had authority under the Higher Education Relief Opportunities for Students Act of 2003 (HEROES Act) to cancel approximately $430 billion in student loan debt principal.

This would have eliminated the debts of approximately 20 million borrowers, but the Supreme Court ruled otherwise on June 30, 2023, in a decision intended to control and reduce the deficit. President Biden subsequently announced the Saving on a Valuable Education (SAVE) plan. On August 22, 2023, the Biden Administration launched SAVE, which is an income-driven assistance program. It aims at cutting undergraduate student loan payments in half to 5% of borrowers’ discretionary income while other qualifying borrowers may see their payments brought down to $0 per month.

On July 18, 2024, a federal appeals court blocked the SAVE plan pending the resolution of two court cases involving the plan. The Department of Education moved borrowers enrolled in SAVE into an interest-free forbearance while the litigation is ongoing.

FY 2023 ended with a deficit of $1.7 trillion, a $320 billion increase from the prior year.

What Is a Budget Deficit?

A budget deficit occurs when expenses exceed revenue. It indicates the financial health of a country. The government, rather than businesses or individuals, generally uses the term budget deficit when referring to spending. Accrued deficits form national debt.

What Is a Budget Surplus?

A budget surplus occurs when income exceeds expenditures. The term often refers to a government’s financial state because individuals have “savings” rather than a budget surplus. A surplus is an indication that a government’s finances are being effectively managed.

How Much Was the Deficit Left by President Reagan?

The deficit was 5% of the economy and interest payments on the debt were $169 billion in 1989 when President Reagan left office after serving two terms.

The Bottom Line

The U.S. government has run a budget deficit for nearly all of the last six decades. A president’s influence over this metric depends on numerous factors, including the legacy of preceding administrations and the influence of Congress. Budget figures can respond significantly to present-day challenges, including war and policies like student debt relief, reflecting their dynamism.

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