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When a government spends more than it collects in a given year.
A deficit happens when spending is greater than income over a period. For a government, the budget deficit is how much more it spends than it collects in taxes in a year; it borrows the difference by issuing bonds.
A government that collects $4 trillion and spends $5.8 trillion runs a $1.8 trillion deficit that year.
Large, persistent deficits increase government debt. That can push interest rates up and is watched closely by bond investors.