Definition of Budget Deficit



What is a "budget deficit"? What is the definition of a "budget deficit"? What does the term "budget deficit" mean?

On this site, we talk quite a bit about budget deficits and budget surpluses.

Any entity (business, corporation, individual) that sets a budget can run a budget deficit, but for this definition we will be focusing on government budget deficits.

A government (municipal, federal, etc) will set out a yearly budget. A budget will determine the amount of estimated revenues that a government can expect throughout the year, and from this, the government will determine how much money they will be able to spend on expenses.

Definition of a budget deficitThe goal of every government is to run a balanced budget. This means that revenues would equal expenses.

Many governments (especially when we are talking about federal governments) will run deficits nearly every year.

Deficit spending occurs when a government spends more money than what they take in on an annual basis - or, on other words, expenses > revenues.

So, if the US government spends $4 trillion in a fiscal year but only takes in $3 trillion in revenues, then they will have run a $1 trillion deficit ($4 trillion in expenses - $3 trillion in revenues = $1 trillion in deficit spending).

The United States is expected to run a deficit of about $1.47 trillion this year (2010).


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