What the U.S. Federal Budget Deficit Is:
The budget deficit is when the government spends more than it receives in revenue. In FY 2010 the deficit is projected to be $1.17 trillion, the difference between $3.55 trillion in spending and $2.38 trillion in revenue. This will be less than the FY 2009 deficit of $1.75 trillion, the difference between $3.94 trillion in spending and $2.18 trillion in revenue. (Source: OMB Table S-4)
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 saving jobs. They lose elections for allowing unemployment to continue or raising taxes.
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 Office of Management and Budget (OMB) forecasts a deficit of at least $500 billion through at least 2019.
