Budget Surplus
When a government collects more revenue than it spends in a given fiscal year.
What is Budget Surplus?
A budget surplus occurs when a government's revenues — primarily from taxes — exceed its total expenditures in a fiscal year. A surplus allows a government to pay down existing national debt, build reserves, or cut taxes in future periods. Budget surpluses are relatively rare, typically occurring during periods of strong economic growth when tax revenues are high and automatic spending on unemployment benefits is low. While surpluses reduce national debt, running a surplus during a recession is generally considered contractionary: it withdraws money from the economy at a time when additional support may be needed.
Example
The US ran budget surpluses from 1998 to 2001 — the only four consecutive surplus years since the 1960s — driven by strong economic growth, capital gains taxes from the dot-com boom, and spending restraint under the Budget Enforcement Act. The 2000 surplus was approximately $236 billion.
Source: Congressional Budget Office — Historical Budget Data