Final answer:
Cancelled appropriations return to the Treasury and can help reduce the federal deficit. Unused or rescinded allocations lead to increased funds in the Treasury, and the PAYGO Act necessitates offsetting increases in the deficit with equivalent savings.
Step-by-step explanation:
After an appropriation is cancelled, the funds essentially return to the Treasury and reduce the deficit since they are no longer allocated to be spent. In the federal budget process, if the allocations or appropriations for a fiscal year are not used or are rescinded, these funds lose their availability for expenditure and thus result in increased funds in the Treasury, which can help in controlling the federal deficit. Furthermore, to prevent increase in the federal deficit, legislation like the PAYGO (Pay-As-You-Go) Act requires that any increases in multi-year deficits caused by legislative changes to taxes or mandatory spending have to be offset by equivalent deficit-reducing measures.