Primary vs total deficit

The US federal government maintains a deficit. That is, it borrows during periods when it collects less in taxes than it spends. There are two main measures of deficits. Our first FRED graph, above, plots the total deficit (solid blue line) and the primary deficit (dashed green line). What’s the difference?

The total deficit is equal to the difference between government revenues and expenditures. It represents the amount of new borrowing in a given period. The primary deficit is the difference between revenues and noninterest outlays. Or, equivalently, the total deficit excluding interest payments on existing federal debt. This means we look at only current revenues and current expenditures, setting aside this period’s interest payments on its past debt.

The primary deficit is often a more useful metric for assessing fiscal policy because it focuses on today’s budgetary choices rather than reflecting on the burden of past decisions.

Three observations from the historical record

Our second FRED graph, above, plots the total and primary deficits as a share of GDP. Note that deficit and interest data are reported for a fiscal year, while GDP is reported on a calendar year.

Expressing deficits as a percentage of GDP provides crucial context by showing us how large the deficit is relative to the overall economy. Three patterns stand out in the historical data:

1. The WWII spike and recovery: Both the primary and total deficits spiked dramatically during World War II as the government borrowed heavily to finance the war effort. When military spending declined after the war’s end, the two deficits fell accordingly. Notably, in some of the immediate postwar years, both deficits became negative, which we’d refer to as a primary surplus and a total surplus. During those years, the federal government was partly paying down the war debt it had accumulated.
2. The most recent surplus episode: The one other post-WWII episode with an extended surplus (that is, an extended negative primary deficit) was during the 1990s. This period had strong economic growth, rising revenues, and restrained growth in federal spending.
3. The gap narrows when interest rates are low: The difference between the primary and total deficit depends importantly on the interest rates on government debt. When rates are low, interest payments typically shrink and the two deficit measures converge at least somewhat. When those interest rates rise, the gap tends to widen. Maturity also matters here: If much of the debt is short-term or coming due soon, higher interest rates pass through to federal interest payments faster than if most debt is locked in at longer maturities.

How these graphs were created: First graph: Search FRED for “Federal Surplus or Deficit” and select the Annual, Millions of Dollars, Not Seasonally Adjusted series. Under “Customize data,” enter the formula -a. Click on the Edit Graph button and select the “Add Line” tab to search for “Federal Surplus or Deficit” again. Don’t forget to click on “Add data series.” Next, under “Customize data,” search for “Federal Outlays: Interest” and add it to the graph. Then enter the formula -(a+b). Second graph: Repeat the steps for the first graph. Under “Customize data,” search for “Gross Domestic Product” and add it to each series. Then enter the formula -a/(b*1000)*100 for the first line and -(a+b)/(c*1000)*100 for the second.

Suggested by Bill Dupor and Melanie LeTourneau.

The FRED Blog recently discussed who holds Treasury securities in the US and abroad. Today, we answer a related question: How do Treasury securities fit into the overall portfolio of US financial assets held overseas?

Our FRED graph above uses data from the Treasury International Capital (TIC) system to show the class shares of US financial assets held overseas. In April 2026, those asset classes were (in descending order)

1. Equities (blue area). Common stock, preferred stock, and fund shares of US corporations made up 59.4% of the overall portfolio of US financial assets held overseas
2. Long-term Treasury securities (pink area). Bonds issued by the US Treasury and maturing more than a year into the future amount to 19.9%
3. Long-term corporate bonds (purple area). This category also includes state and local governments bonds (including municipal bonds) and it represents 13.3%
4. Short-term Treasury securities (orange area). Bills issued by the US Treasury that mature in less than one year amount to 3.8%
5. Long-term agency bonds (green area). Those bonds are issued by US federal agencies Fannie Mae, Freddie Mac, and Ginnie Mae, representing 3.6% of the overall portfolio of US financial assets held overseas

The graph also shows a shifting mix of asset holdings. Between 1984 and 2008, equities made up roughly one third of foreign portfolios of US assets. But the 2007-2009 Great Recession greatly boosted holdings of risk-free Treasury securities, and those peaked at 36.5% in 2009. Between then and the time of this writing, equities gradually reclaimed their lion’s share of foreign portfolios of US assets, amounting to more than half of their overall value.

To learn more about this topic, check out this May 2026 FEDS Note.

How this graph was created: Search FRED for and select “Foreign Portfolio Holdings of U.S. Equity Securities: All Countries.” Click on the “Edit Graph” button and select the “Add Line” tab to search for “Foreign Portfolio Holdings of U.S. Long-Term Agency Bonds: All Countries.” Don’t forget to click on “Add data series.” Repeat the last two steps to add data on “U.S. Long-Term Corporate Bonds,” “U.S. Long-Term Treasury Securities,” and “U.S. Short-Term Treasury Securities.” Next, select he “Format” tab and select “Graph type: Area” and “Stacking: Percent.”

Suggested by Diego Mendez-Carbajo.

The takeaway

When tariffs were relatively stable, prices for durable goods such as appliances, electronics, and furniture were declining by as much as 3% year-over-year. But in 2025, the effective tariff rate surged to over 11% and durable goods prices began increasing by 2% to 3%.

Dramatic shifts in durable goods prices and trade policy

In our FRED graph above, the solid blue line shows the year-over-year percent change in durable goods prices, and the dashed green line shows the effective tariff rate on imports. (Btw, the effective tariff rate is total tariff revenue collected by the government divided by the total value of all imported goods.)

For most of the period shown, durable goods prices were actually falling. Deflation was the norm from mid-2023 through early 2025, with prices declining by as much as 3% year-over-year. Meanwhile, effective tariffs remained relatively stable at around 2.5% through 2024.

The picture changed sharply in 2025. The effective tariff rate surged from roughly 2.5% to over 11%, more than quadrupling in about a year. Shortly after, durable goods deflation reversed course, from declines to increases of around 2% to 3% by early 2026.

While the timing is striking, this relationship is complex: Durable goods prices reflect many factors beyond import tariffs. Still, the coinciding tariff spike and price acceleration suggest import taxes may be playing a role in ending the deflation consumers experienced with durable goods such as appliances, electronics, and furniture.

The current trend

Notably, effective tariffs appear to have peaked in late 2025 and have since begun declining. If this trend continues, we could see a corresponding moderation in durable goods inflation and potentially even a return to the price declines that characterized the earlier period.

How this graph was created: Search FRED for and select “Personal consumption expenditures: Durable goods (chain-type price index).” Click “Edit Graph” and change the units to “Percent Change from Year Ago.” Next, click “Add Line,” search for and select “Federal government current tax receipts: Taxes on production and imports: Customs duties,” and click “Add Data Series.” Click “Edit Graph,” use “Customize data” to search for “Current payments to the rest of the world: Imports of goods,” and click “Add.” Input the formula a/b*100 and click “Apply.”

Suggested by Maximiliano Dvorkin and Melanie LeTourneau.