Deficit reduction refers to the process of decreasing the gap between a government's expenditures and its revenues. When a government spends more money than it collects through taxes and other income, it runs a deficit. Reducing this deficit can involve cutting spending, increasing taxes, or a combination of both to achieve a balanced budget. Effective deficit reduction is important for maintaining economic stability and ensuring that a government can meet its financial obligations. It can help improve a country's credit rating, lower interest rates, and foster a healthier economy, benefiting citizens and businesses alike.