Fact Check: Federal budget deficits can lead to increased national debt.

Fact Check: "Federal budget deficits can lead to increased national debt."

What We Know

A federal budget deficit occurs when the government's expenditures exceed its revenues during a specific period. To finance this shortfall, the government borrows money by issuing Treasury bonds, bills, and other securities. This borrowing leads to an increase in the national debt, which is the total amount of money the government owes as a result of past borrowing, including interest on those loans (U.S. Treasury Fiscal Data).

In the last 50 years, the U.S. government has only run a budget surplus four times, with the most recent surplus occurring in 2001. Since then, the federal budget has consistently been in deficit, which has contributed to a rising national debt (U.S. Treasury Fiscal Data). The Congressional Budget Office (CBO) has projected that as more Americans become eligible for Social Security, the deficits will continue to increase, further exacerbating the national debt (Brookings Institution).

Analysis

The claim that federal budget deficits can lead to increased national debt is supported by a clear causal relationship outlined in multiple credible sources. The U.S. Treasury explains that when the government spends more than it collects, it must borrow to cover the deficit, which directly contributes to the national debt (U.S. Treasury Fiscal Data). This understanding is echoed by the Center on Budget and Policy Priorities, which states that the deficit for any given year drives the amount of money the government must borrow, thereby increasing the cumulative national debt (Center on Budget and Policy Priorities).

Moreover, the economic implications of persistent deficits are significant. The Brookings Institution highlights that the federal deficit, which was already large before the COVID-19 pandemic, has grown even larger due to increased spending in response to the economic crisis. This growth in deficits has led to a national debt that is at its highest point since World War II (Brookings Institution).

While some sources, such as the OpenStax economics textbook, provide a theoretical framework for understanding the relationship between deficits and national debt, they reinforce the practical realities observed in government finance (OpenStax).

The reliability of these sources is strong, as they come from established institutions like the U.S. Treasury and respected economic research organizations. They provide data-driven insights and analyses that are widely accepted in the field of economics.

Conclusion

The verdict on the claim that "federal budget deficits can lead to increased national debt" is True. The evidence clearly shows that when the federal government runs a budget deficit, it borrows money to cover the gap, which accumulates as national debt. This relationship is well-documented and supported by credible sources, confirming the accuracy of the claim.

Sources

1. National Deficit | U.S. Treasury Fiscal Data
2. National Deficit | U.S. Treasury Fiscal Data
3. How worried should you be about the federal deficit and ...
4. Understanding the National Debt
5. Policy Basics: Deficits, Debt, and Interest - Center on Budget and ...
6. 30.3 Federal Deficits and the National Debt - OpenStax
7. Government Budget Deficits and Government Debt - Econlib