What is the deficit and why is it important?

The deficit is the amount by which the government’s spending exceeds its revenues for a given period, usually a fiscal year.  Deficits in the short term may not be a problem but continuing deficits over the longer term are a concern. 

When the budget is in deficit, the government borrows from the public and increases the level of debt held by the public.  The federal government—like other borrowers—pays interest on its debt. Interest spending can absorb resources that could be used for other national priorities. It can also limit the government's flexibility to address emerging budget issues, unforeseen challenges—such as another economic downturn or a large-scale natural disaster—or other fiscal exposures that may require future spending.

Also, deficits matter in the long run because they consume savings that otherwise could be productively invested. Therefore, they could reduce economic growth and the standard of living.

Learn more about our Federal Fiscal Outlook

Federal deficits are expected to continue over the longer term under a range of fiscal policy assumptions. Learn more about our federal fiscal outlook.