Abstract: Abstract:Chinese economy has experienced rise and fall five times after reform. Fiscal deficit has lasted for 20 years since 1986,and the estimated budget deficit is 300 billion Yuan in 2005 .This essay tells the mot of long-run fiscal deficit resided in institutional separation of fiscal revenue and fiscal expenditure, by using ＂stepwise Granger-causality test＂ and ＂variable augmentation approach＂. Also, we give some suggestions for improving fiscal revenue and expenditure decision-making, and controlling fiscal deficit.