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Image: © Gage Skidmore via Wikimedia Commons

Trump’s presidency has built up a big, beautiful… budget deficit

The US budget deficit has risen 17 percent this year to $779 billion, mainly cos Trump is spending more money.

What it means: Okay, first things first. If you’re wondering WTF a budget deficit is, it’s just how much of its debt a government can’t cover with its revenues - i.e. the money it gets from things like taxes and selling stuff they own (governments can own all sorts of stuff, from land to oil to railways).

If a government wants to reduce their deficit they can increase their revenues (i.e. raise taxes or sell more stuff) or they could try and spend less money on things like state pensions or shiny new weapons, giving them more spare change with which to pay down (reduce) their debt (that’s what austerity in the UK was all about). And if they end up having less debt than revenue economists call that a budget surplus.

So, the US currently has the highest budget deficit it’s had for six years. That’s partly because Trump’s administration is spending more money, particularly on defence but also on disaster relief (the US has been hit by a couple of nasty hurricanes this year) and Social Security (financial assistance for poorer people). Trump’s also cut back a lot of taxes so people and businesses are giving the government less money than they were.

Is a big budget deficit like this a bad thing? Most economists would say yes, but with some caveats. Debt isn’t great for governments because they have to pay interest on it, which means they have less money to spend on thing most people think are more important, like building affordable houses or helping people get jobs.

But sometimes taking on debt is the only way to help people when a big economic shock hits - like those hurricanes. And in Trump’s mind, lots of the things that are increasing the deficit in the short term are going to boost the economy (and with it government revenues because there’ll be more wealth to tax, less welfare spending etc.) in the long-term. Lots of people think Trump’s maths here is pretty iffy, but the logic that borrowing now brings big rewards later isn’t uncommon. After all, that’s what things like student loans and mortgages are supposed to be for.

Read our explainer on deficits.

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