One hears little today of the US “twin deficits,” a phrase familiar during the 1980s when the US had consistently run both federal budget deficits and international trade deficits. Economists hypothesized at that time that there was a theoretical and/or empirical relationship assuring the two deficits’ increasing or decreasing together. How Do Federal Budget Deficits Arise? Annual federal budget deficits exist whenever federal spending exceeds annual tax revenue. The US has consistently run these deficits in most of the postwar period, except during the Clinton administration in the 1990s. Fiscal year 2001 was the ... (full story)