deficit spending

noun

|Updated on: 9 Jul 2018

Definition of deficit spending

: the spending of public funds raised by borrowing rather than by taxation

Recent Examples of deficit spending from the Web

In 1978 West Germany agreed to stimulate its economy with deficit spending to help the U.S. narrow its trade deficit.

— greg ip, WSJ, "U.S. Turns From Uniter to Disrupter on Global Stage," 20 June 2018
At the same time, a great deal of the trade deficit is made possible by U.S. government deficit spending, so reining that in could actually reduce the trade deficit.

— david z. morris, Fortune, "Why American Businesses Should Be 'Terrified' After President Trump's Comments on Trade," 9 June 2018
It’s been developed over the years by a group of unorthodox economists who call their school of thought Modern Monetary Theory, and argue that there’s more room for deficit spending than is widely believed.

— katia dmitrieva, Bloomberg.com, "Leading Democrats Are Backing One of the Most Radical Economic Plans in Years," 18 May 2018
The amendment would ban deficit spending, require that spending not exceed 20 percent of gross domestic product, and require a majority to increase taxes and three-fifths majorities to raise the debt limit.

— tara golshan, Vox, "House Republicans are voting to make deficits unconstitutional after their $1.5 trillion tax cut," 12 Apr. 2018
John Maynard Keynes, perhaps the most influential economist of the 20th century, championed deficit spending during recessions to boost aggregate demand.

— jason pontin, BostonGlobe.com, "Is Boston biotech in a bubble?," 20 Mar. 2018
Tax cuts for the rich funded by deficit spending are unpopular — but ones funded by slashing grandma’s Social Security check is an invitation to guillotines.

— eric levitz, Daily Intelligencer, "Trump Has No Infrastructure Plan. Blame the GOP.," 15 Feb. 2018
After years of deficit spending, Lincoln-Way has been on the state's financial watch since 2015, and coupled with declining enrollment was forced to close Lincoln-Way North High School in June 2016.

— susan demar lafferty, Daily Southtown, "From 'negative' to 'stable': Lincoln-Way's Moody's rating improves," 16 Mar. 2018
Taxes and debt: For years Republicans claimed the high ground on deficit spending.

— dan rodricks, baltimoresun.com, "More than guns, WalkoutWednesday is about the future of the country," 13 Mar. 2018

These example sentences are selected automatically from various online news sources to reflect current usage of the word 'deficit spending.' Views expressed in the examples do not represent the opinion of Merriam-Webster or its editors. Send us feedback.

First Known Use of deficit spending

1938

in the meaning defined above

See Words from the same year

NEW! Time Traveler

Financial Definition of DEFICIT SPENDING

deficit spending

noun

What It Is

Deficit spending is spending that reduces or offsets a surplus. In the business world, the term often refers to situations where expenses exceed revenues, imports exceed exports or liabilities exceed assets.

How It Works

Deficit spending creates fiscal deficits and trade deficits.

Fiscal deficits occur when a government's expenditures exceed its revenue. A government usually borrows money (by issuing Treasury securities or similar instruments) to fill the gap or "fund the deficit."

Trade deficits (also called current account deficits) occur when a country imports more than it exports.

Why It Matters

Deficit spending is controversial. The famous economist John Maynard Keynes argued that it stimulated economies by giving governments the money to purchase goods and services and were thus particularly useful for getting countries out of recessions. However, many scholars also argue that governments should not engage in deficit spending regularly because the mountain of debt they create makes for unsustainable economies in the long run.

Source: Investing Answers