A History of Budget Surpluses in the United States
Given the current budget situation in the United States (two consecutive $1 trillion+ deficits and massive projected deficits as far as the eye can see), it can sometimes be easy to forget that the country actually posted a budget SURPLUS just ten years ago.
That's right - in 2001, the United States posted a budget surplus of $127.3 billion dollars. Imagine that.
As a matter of fact, the United States managed to string together four consecutive budget surpluses from 1998-2001. The highest surplus came in 2000, when the country managed to bring in $236.4 billion MORE than what it spent.
Let that sink in for a second - from a $236.4 billion surplus to a $1.4 trillion deficit in just a decade.
Prior to 1998, the United States posted an unbroken string of 28 consecutive budget deficits. As far as I know, this is the longest such streak in the history of the United States.
The string started in 1970 ($2.8 billion deficit) and ended in 1997 ($22 billion deficit).
If we don't post a budget surplus between now and 2030, we'll break this record. Given how unbelievably out of balance our budget currently is, I would say that this is a strong likelihood that this streak will be broken. After all, the White House is currently projecting eye-poppingly high deficits between now and 2020, so that will only leave ten years for the country to swing back into the green.
Since 1940, the United States has posted just 12 budget surpluses:
1947 - $4 billion ($38.08 billion inflation adjusted)
1948 - $11.8 billion ($104 billion inflation adjusted)
1949 - $0.6 billion ($5.35 billion inflation adjusted)
1951 - $6.1 billion ($49.78 billion inflation adjusted)
1956 - $3.9 billion ($30.42 billion inflation adjusted)
1957 - $3.4 billion ($25.67 billion inflation adjusted)
1960 - $0.3 billion ($2.15 billion inflation adjusted)
1969 - $3.2 billion ($18.5 billion inflation adjusted)
1998 - $69.2 billion ($89.96 billion inflation adjusted)
1999 - $125.6 billion ($159.5 billion inflation adjusted)
2000 - $236.4 billion ($290.7 billion inflation adjusted)
2001 - $127.3 billion ($152.76 billion inflation adjusted)
When the United States shut their war machine down after WWII, the country quickly swung back into the green, buoyed by a significant decline in government expenses.
From 1951-1960, the United States posted four budget surpluses thanks to strong economic activity and extremely low unemployment rates. For instance, in 1953, the country posted an AVERAGE unemployment rate of just 2.93% for the year, with two months (May, June 1953) coming in at an obscenely low 2.5%. Given the fact that the national unemployment rate in the United States is now nearly 10%, a 2.5% rate is pretty hard to fathom.
As you probably could have guessed, the government tends to post surpluses during years when the unemployment is fairly low. Here are the average unemployment rates in years when the US government has posted a surplus since 1948:
1948 - 3.75%
1949 - 6.05%
1951 - 3.28%
1956 - 4.13%
1957 - 4.3%
1960 - 5.54%
1969 - 3.5%
1998 - 4.5%
1999 - 4.22%
2000 - 3.97%
2001 - 4.74%
Now let's go a bit further back in time..
From 1901 to 1939, the United States managed to post a total of 19 budget surpluses. This included a run of 11 straight surpluses that ran from 1920 ($291 million) to 1930 ($738 million).
The Great Depression and the country's entry into WWII then conspired to create a string of red years that ran from 1931 ($462 million) to 1946 ($15.9 billion).
Fast forward back to 2010.
How far away is the US government from posting a budget surplus?
Sure, you've heard that the country is going to post a deficit of around $1.2 trillion in 2010, but what does that mean?
Total Revenues in fiscal 2010 are expected to be around $2.38 trillion, while total expenditures are expected to come in at $3.55 trillion. That leaves a gap of around $1.2 trillion.
So, in order to close the budget gap, either:
-revenues will need to increase over 49%, assuming that expenses remain flat
-expenses will need to fall 34%, assuming that revenues remain flat
Now, obviously revenues are expected to rebound strongly once the economy picks up and unemployment starts to drop, but you can clearly see the yawning chasm that currently lies between us and a balanced budget.
A few more surplus notes for you:
-from 1789 to 1849, the United States posted a cumulative surplus of $70 million
-the largest surplus in the history of the United States in inflation adjusted terms? $290.77 billion, posted in 2000 (height of the dot com bubble, unemployment rate of just 4.0%)
Source: A History of Deficits and Surpluses in the United States
Source: Historical Unemployment Rates in the United States
Filed under: General Knowledge