Federal Budget Deficit
The shortfall when a government spends more than it collects in revenue in a given year.
What is Budget Deficit?
A federal budget deficit occurs when a government's total expenditures exceed its total revenues — primarily taxes — during a fiscal year. The deficit must be financed by borrowing, typically through issuing government bonds (Treasury securities). Deficits are common: governments often spend beyond revenues to stimulate growth during recessions, fund wars, or finance long-term investments. Chronic deficits accumulate into national debt. Economists debate how much deficit spending is sustainable and appropriate, with some (Keynesian) economists viewing countercyclical deficits as beneficial, while others argue large structural deficits crowd out private investment and burden future generations.
Example
The US federal budget deficit for fiscal year 2023 was $1.7 trillion — approximately 6.3% of GDP — driven by elevated spending on Social Security, Medicare, interest on the national debt, and defense, while revenues declined. This was well above the pre-pandemic average of roughly 3% of GDP.
Source: Congressional Budget Office — Budget and Economic Outlook