DEFINITION: With respect to the federal government, the “budget deficit” is the difference between expenditures and revenues during a given budget cycle in which the former exceed the latter.
If revenues exceed expenditures, then there is said to be a “budget surplus.”
ETYMOLOGY: The word “deficit” derives, via the French word déficit, from the Latin word dēficit, which is the third person singular form of the Latin verb, dēficio, dēficere, meaning “to fail” or “to run short.”
The word “budget” derives, via Middle English, from the Middle French word bougette, the diminutive of the word bouge, meaning a “leather bag.”
Bougette, in turn,derives from the Late Latin word bulga, bulgae, meaning “bag.”
Bulga is thought to have entered Latin from Gaulish. It is also akin to the Middle Irish word, bolg, and the Middle English word, bælg, both with the same meaning.
USAGE: The concept of the “budget deficit” must be clearly distinguished from that of the “national debt.” It is the former which creates the latter, bit by bit, over a long period of time.
In the political rhetoric surrounding the budget deficit and the national debt, one must be on one’s guard against the claim that the national debt is being “reduced” or “cut,” when what is actually happening is that the size of the budget deficit is being reduced.
In order to cut the national debt, one would of course have to run a government budget surplus over a long period of time and apply the extra funds to paying down the debt.
The concept of a budget is quite simple. It is familiar to anyone who has ever run a business—or even a family unit, for that matter.
For individual businesses and families, it is intuitively obvious that consistently running a budget deficit creates a debt that is unsustainable.
In essence, budget deficits—whether familial, commercial, or governmental—can continue to be run only so long as someone can be found to extend credit. However, in the case of families and businesses, a time must inevitably come when one’s credit card maxes out or one’s bank will no longer increase one’s line of credit.
After that, one of three things must happen: the family or business must either (1) find a way to generate more income, or (2) reduce its spending, or (3) declare bankruptcy.
Progressives are fundamentally unconcerned with national budget deficits and the resulting national debt due to their belief in Keynesian economics and Modern Monetary Theory, which basically say that sovereign nations cannot go bankrupt.
This hypothesis is likely to be tested in the real world, sooner rather than later.