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deficit

A deficit occurs when a government or some other organization spends more than it earns in a given period of time (usually a year).

By standard accounting principles?, a deficit is better known as an operating deficit, because it applies to operating costs, rather than capital costs. In practice, governments do not always account capital costs separately from operating costs, and call it a budget deficit? when outlays are greater than revenues.

In private companies, a deficit is usually called a loss - the opposite of a profit. Businesses incur losses when they are inefficient or when the public becomes less interested in the services they have for sale.

Since the government provides public services and customers don't have a choice as to how much taxes they pay, a government deficit does not necessarily mean it is inefficient or providing too many services (although many politicians on the right will argue this).

According to Keynesian Economics?, it is sound fiscal policy for a government to run a deficit during a recession or in a depression.




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