What the U.S. Federal Budget Deficit Is: The budget deficit is when the government spends more than it receives in revenue. In FY 2007 (which ended September 30), the deficit was $163 billion, the difference between $2.731 trillion in spending and $2.568 trillion in revenue. This was less than the FY 2006 deficit of $248 billion, the difference between $2.654 trillion in spending and $2.407 trillion in revenue. (Source: U.S. Treasury, Budget Results of FY 2007, October 11, 2007)
Why the Government Plans to Overspend: The difference between the U.S. government and you is that the President and Congress plan to overspend. (Hopefully, you don't!) This is for three reasons:
- The more the government spends, the more it stimulates the economy.
- There are many other countries willing to loan us the money.
- Politicians get elected for spending money, not for cutting back.
Why You Should Be Concerned: On a year-by-year basis, a budget deficit is not really a concern. The U.S. government is like the world's best customer -- it buys a lot, and since its economy is strong it has always paid the debt back. However, as the debt continues to increase, eventually someone, somewhere, will get antsy and start to demand their money back. At this point, it could cause a panic, which would be devastating for the global economy...not to mention your finances.
What the Government Is Doing About the Deficit: The government is taking steps towards reducing the deficit, but has no intention of eliminating it. The Congressional Budget Office (CBO) forecasts a deficit through at least 2011. This figure includes so-called supplemental, or off-budget items such as the war in Iraq, which cost $100 billion in FY 2006.
The President's goal was to reduce the budget deficit ($521 billion in 2004) in half by 2009. Since the 2006 deficit was $248 billion, that goal was achieved last year, three years ahead of schedule.
