A budget deficit occurs when expenses exceed revenue and indicate the financial health of a country. The government generally uses the term budget deficit when referring to spending rather than businesses or individuals.
The federal government ran a deficit of $3.1 trillion in fiscal year 2020, more than triple the deficit for fiscal year 2019. This year's deficit amounted to 15.2% of GDP, the greatest deficit as a share of the economy since 1945. FY2020 was the fifth year in a row that the deficit as a share of the economy grew.
A budget deficit occurs when a government spends more in a given year than it collects in revenues, such as taxes. As a simple example, if a government takes in $10 billion in revenue in a particular year, and its expenditures for the same year are $12 billion, it is running a deficit of $2 billion.
Economists and policy analysts disagree about the impact of fiscal deficits on the economy. ... 2 Others argue that budget deficits crowd out private borrowing, manipulate capital structures and interest rates, decrease net exports, and lead to either higher taxes, higher inflation or both.
Yes. By any measure, the projected 2020 deficit is very large. Deficits over the last 50 years have averaged just 3% of GDP. ... Even though the economy was reasonably strong before the pandemic hit, the deficit was already elevated by historical standards, largely because of the big 2017 tax cut.
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