Accounting for Changes in the U.S. Budget Deficit

December 11th, 2014
in econ_news

from the Kansas City Fed

After rising substantially during the Great Recession, the U.S. federal budget deficit has been declining the past few years. From 2008 through 2012, the deficit measured relative to the size of the economy was larger than in any year since 1945. By 2014, however, the deficit had fallen to where it was no longer unusually large compared with deficits during the previous three decades.

Follow up:

While the cyclical recovery in economic activity has played a role in this improvement, about half of the decline since 2009 is due to an array of temporary factors, particularly Federal Reserve remittances to the U.S. Treasury, dividend payments from Fannie Mae and Freddie Mac, and the unwinding of one-time policies intended to stimulate economic activity following the Great Recession.

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