In fiscal year 2023, the federal government spent $6.13 trillion and raised $4.44 trillion, resulting in a $1.70 trillion deficit. The deficit grew by $320 billion from fiscal year 2022[1].
What is a budget deficit?
A budget deficit occurs when government spending exceeds revenue within a given fiscal year. In simpler terms, it’s when the government spends more than it collects in taxes and other revenue sources.
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What is a budget surplus?
A surplus, on the other hand, occurs when government revenue is higher than its spending within a fiscal year. This means that the government has collected more in taxes and other incomes than what it has spent. The last national surplus was in fiscal year 2001.
Why is there a deficit?
According to the Treasury Department, a national deficit or surplus is largely shaped by two factors:
- The health of the economy
- Fiscal policies set by Congress and the president
The health of the national economy is often measured through indicators like the growth in gross domestic product, changing employment rates, and price stability. Put simply, when businesses and people earn less money due to a sluggish economy, government revenue decreases as well. Conversely, when the economy thrives and earnings rise, the government collects more revenue.
The government’s fiscal policies directly influence the deficit. For example, legislation that increases spending on programs such as Social Security, healthcare, and defense without a corresponding revenue increase can lead to a larger deficit.
What is the difference between the national deficit and the national debt?
While both measures are useful indicators, the national deficit and the national debt represent different aspects of the economy. A budget deficit refers to the shortfall in a single fiscal year, like the $1.70 trillion deficit in fiscal year 2023. In contrast, the national debt is the accumulation of these yearly deficits over time. It represents the total amount that the US government owes its creditors, both domestic and foreign. As of October 27, 2023, the national debt is $33.67 trillion.
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[1] The federal fiscal year runs from October 1 to September 30.
