Monthly Budget Review: Summary for Fiscal Year 2021

In fiscal year 2021, which ended on September 30, the federal budget deficit totaled nearly $2.8 trillion—about $360 billion less than the deficit in 2020, but nearly triple the shortfall incurred in 2019. During the past two years, deficits were much larger than they have been historically because of the economic effects of the coronavirus pandemic and legislation enacted in response.

In 2021, the deficit was equal to 12.4 percent of the nation’s gross domestic product (GDP), down from 15.0 percent in 2020, but up from 4.7 percent in 2019. The 2021 deficit was the second largest as a percentage of GDP since 1945 (the largest occurred in 2020).

Compared with the size of the economy, federal debt held by the public fell slightly—to 99.7 percent of GDP in 2021 from 100.3 percent of GDP at the end of fiscal year 2020. That decline occurred—despite the large deficit—because GDP increased by a larger percentage than the debt. Debt held by the public in both years was significantly higher than at the end of 2019—when it stood at 79.4 percent of GDP—primarily because of borrowing to finance the deficits.

The deficit for 2021 was $231 billion smaller than the shortfall CBO estimated in its most recent baseline projections, mostly because income tax receipts were greater than CBO projected.