What is a Budget Deficit/Surplus?

When the Federal Government’s spending exceeds its revenue within a set period, they’re experiencing a budget deficit. It’s important to note that budget deficits can occur in any organization with revenue and expenses, not just governments. Budget deficits are significant because they tend to cause an uptick in government debt. If debt persists over a relatively long period, it could lead to tax increases to help repay the debt. Budget deficits can also signal how well a country’s economy is doing. What Happens During A Budget Deficit? When the government has a budget deficit, it borrows money to keep programs running. This money is borrowed by means of selling U.S. Treasury bonds, bills, and other securities. The debt governments accumulate when borrowing this money via selling securities in addition to the interest they owe contributes to the national debt. Investors who buy bonds, bills and other securities from the government are essentially loaning them money plus interest. When the government needs to borrow robust amounts of money through securities, they tend to offer investors higher interest rates. Budget deficits can have a negative impact on