Deficit

A budget deficit occurs whenever the federal government spends more in a fiscal year than it collects in tax and other revenue; a surplus is the reverse. The federal government has run a deficit in the overwhelming majority of years since World War II, financing the gap by borrowing — issuing Treasury securities — rather than raising taxes or cutting spending enough to close it.

The deficit is frequently confused with the debt, but they measure fundamentally different things: the deficit is a flow, measuring one year’s imbalance, while the debt is a stock, the cumulative total of every year’s deficits (minus any surpluses) added together over the government’s entire history. A single year with an unusually large deficit — driven by a recession, a war, or emergency spending like COVID-19 relief — adds directly to the debt, but a smaller deficit the following year still adds to the debt too, just by a smaller amount; only an actual surplus would reduce the total debt.

Common misconception: people often use “deficit” and “debt” interchangeably, treating a shrinking deficit as if it means the government is paying down its debt. As long as there’s any deficit at all — even a much smaller one than the year before — the total national debt keeps growing; the debt only shrinks in years with an actual budget surplus, which the federal government has run only a handful of times in the past half-century.