The deficit is $2 trillion more than the $1.08 trillion budgeted. The president’s budget planned to spend $4.79 trillion and take in revenue of $3.71 trillion. The details below compare actual revenue, spending, and the deficit to the budget. It reveals how the COVID-19 pandemic affected the federal government’s plans.
Revenue
Out of the $3.42 trillion in revenue, income taxes, at $1.61 trillion, contributed almost half (47%). Income tax receipts were $203 billion lower than the $1.81 trillion budget estimates. Payroll taxes, including Social Security and Medicare, contributed $1.31 trillion or 38%. Corporate taxes added $212 billion, contributing just 6%. The remaining $289 billion in revenue comes from excise taxes ($87 billion), customs duties ($69 billion), estate taxes ($18 billion), and other miscellaneous sources ($117 billion).
Spending
The federal government spent $6.55 trillion in FY 2020. That’s $1.76 trillion more than the $4.79 trillion budgeted. The CARES Act and three other stimulus measures were responsible for most of this increase. The table below compares the actual FY 2020 spending for major federal departments compared to what was budgeted. It combines both discretionary (agency) outlays with mandatory (benefits) spending. Other agencies that protect our nation include: Veterans Affairs ($218 billion), Homeland Security ($92 billion), the State Department ($33 billion), and the National Nuclear Security Administration in the Department of Energy ($15 billion). That’s $374 billion not necessarily accounted for in defense spending.
Interest on the Debt
Interest payments owed on the national debt are $523 billion. That’s the interest the Department of the U.S. Treasury must pay. Even though the debt keeps rising, the interest payments remain moderate. That’s because interest rates remain low.
Deficit
The U.S. budget deficit is how much more the federal government spends than it receives in revenue each year. For FY 2020, it was a record $3.13 trillion. That’s three times as much as the $984 billion deficit in FY 2019. The increase was due to spending to combat the effects of the COVID-19 pandemic. The 2020 recession also reduced tax receipts. The FY 2020 deficit was budgeted to be $1.08 trillion. Even before the pandemic, it was the largest budgeted deficit since FY 2011. Congress increased the deficit to pay for record-high levels of military spending.
Background
Government spending has three components: mandatory, discretionary, and interest on the debt. The mandatory budget estimates how much it will cost to provide certain federal benefits. These include Social Security, Medicare, and Medicaid. All mandatory programs were authorized by previous Acts of Congress. For that reason, the mandatory budget is an estimate, not an appropriation, meaning Congress can’t change benefit payments as part of the normal budget process. A new Act of Congress is required to change spending on mandatory programs such as Social Security and Medicare. Discretionary spending is the part of the budget that Congress appropriates funds for each year. For example, the Department of Health and Human Services manages Medicare and Medicaid. The department’s operations are funded out of the discretionary budget. The benefits that it administers are funded from the mandatory budget.
