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Budget Deficit

  A budget deficit, in economics and politics, occurs when receipts for a budget period are less than expenditures. The deficit becomes indebtedness unless sufficient reserves have been built up in earlier periods from which to draw. In US federal finance, the national debt is the current net sum of all federal budget deficits over the years, counting those occasional surpluses as negative deficits.

Federal deficits may be a form of fiscal policy designed to expand economic activity in the economy by providing more government spending when private spending is deemed insufficient. For three decades in the US, however, federal budget deficits continued and grew, because the Administration and Congress were unwilling to raise sufficient funds by fees and taxation to pay for the expenditures they desired to make. The last federal budget surplus ($0.3 billion) was in 1960. Toward the end of the 1980s, deficits had grown to a range of $200-300 billion. The deficits were intended in the sense that they were budgeted, but in many years they were the opposite of appropriate fiscal policy because deficits are inflationary. They made the effort to control inflation by monetary policy much more difficult during the 1980s. TF

See also deficit spending.



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