Budget deficit

A budget deficit occurs when the government spends more than it collects in a fiscal year. The shortfall is financed by borrowing through the sale of Treasury securities, which adds to the national debt. A surplus is the opposite and has occurred only a few times in recent decades, most recently in fiscal 1998 through 2001.

The federal deficit is measured in dollars and as a share of gross domestic product, which lets comparisons across time. Deficits typically rise during recessions and wars as revenue falls and spending rises, a pattern economists see as appropriate, but the U.S. has also run large deficits in economic expansions. The Congressional Budget Office publishes projections.

Perspectives differ. Fiscal conservatives and deficit hawks argue that persistent deficits crowd out private investment, raise interest costs and burden future generations; Keynesians argue that deficits can support the economy during downturns and that the right measure is the debt relative to the economy. Modern monetary theory advocates argue that a currency issuer faces limits from inflation, not solvency. Each party has run up deficits under its own policies. The related constitutional proposal is the balanced budget amendment.