March 4, 2025 (Salt Lake City) – States and the federal government share a vital fiscal relationship. This data summary, the second in a series on state and federal economic linkages from the Kem C. Gardner Policy Institute, provides insights into the federal deficit and debt.

“States and the federal government both employ sovereign fiscal powers to tax, spend, and borrow, although their fiscal approaches differ starkly,” said Phil Dean, chief economist at the Gardner Institute. “Typical federal budget practices include regular annual deficit spending and debt as a primary contingency management tool. Understanding these debt and deficit policies can help state decision-makers better prepare for future policy changes or cost-cutting measures in Washington, D.C.”

Key findings from the summary include the following:

Budget deficit – The federal government spends 39% more annually than its revenue collections, resulting in a deficit ($1.9 trillion in FY 2024). Most of this spending bypasses a normal annual budget process.

National debt – The accumulated $36.5 trillion in national debt as of February 2025 results from ongoing borrowing to cover annual deficits.

Historical context – The federal government consistently deficit spends, spending more than revenues 46 of the past 50 years. Borrowing to cover this perpetual deficit spending increased the total national debt to about 123% of gross domestic product (GDP), up from about 34% of GDP in 1974.

The complete data summary is available online.