The Growing US Budget Deficit

Insight of the Week

• A government budget deficit and surplus are defined as the difference between government revenue and government spending.
• These deficits/surpluses usually fluctuate based on the health of the economy and governments may increase spending during recession to spur economic recovery, creating even deeper deficits.
• During recession, reduced consumer spending typically leads to less business revenue, which can lead to higher unemployment.
• To dampen these ill effects, governments try to stimulate consumer spending either through tax cuts or fiscal policy, creating more jobs and reducing unemployment.
• When the economy eventually recovers it becomes more self-reliant and needs less government support.
• Less government spending eases the budget deficit.