Money For the Rest of Us · Wednesday, August 26, 2026
The U.S. budget deficit as a percentage of GDP remains elevated at 5.7%, higher than the historical average of 3.5%, even without a recession. The primary driver of this is the increase in payments to individuals, largely due to rising Medicare and Medicaid costs, and Social Security as more baby boomers retire.
“The budget deficit to GDP is 5.7%. The average going back to the 1940s is 3 and a half percent. So we're definitely higher than average.”
“We're not in a recession. And yet the budget deficit to GDP has remained elevated under the Biden administration and also under the Trump administration. It's not shrinking. Why is that?”
“The largest increase has been payment to individuals. As a percent of GDP, that is 16%. That has continued to grow.”
“What are those payments? They are Medicare and Medicaid. That's increasing. Social Security has started to grow also as you've seen more baby boomers retire. But it really is Medicare and Medicaid. That's increasing.”