when a budget deficit is identified current expenses exceed the income received through standard operations to correct its nation s budget deficit often referred to as a fiscal deficit a government may cut back on certain expenditures or increase revenue generating activities 
a budget deficit can lead to higher levels of borrowing higher interest payments and low reinvestment which will result in lower revenue during the following year the opposite of a budget deficit is a budget surplus when a surplus occurs revenue exceeds current expenses resulting in excess funds that can be further allocated when the inflows equal the outflows the budget is considered balanced in the early 20th century few industrialized countries had large fiscal deficits however during the first world war deficits grew as governments borrowed heavily and depleted financial reserves to finance the war and their growth these wartime and growth deficits continued until the 1960s and 1970s when world economic growth rates dropped 1