Atlas Macro

Economy

Deficits and Debt

The gap between what a government spends and what it collects in taxes in a year. Each year's deficit adds to the national debt, the total amount the government owes.

Key points

  • US deficit typically widens in recessions.
  • High debt can crowd out private investment.
  • Debt-to-GDP ratio measures sustainability.

Example

A $1.6T deficit (~6% of GDP) during solid growth can keep Treasury supply heavy and steepen the yield curve even without Fed action.

In history

US federal debt held by the public rose from about 79% of GDP in 2019 to about 100% in 2020 after pandemic stimulus, raising long-term sustainability concerns.

Related terms