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Debt Vs. Deficit

After the major bailouts issued by the U.S. government in 2008, issues regarding the national debt have reemerged. When discussing these issues, pundits often use the phrases "national deb" or "federal budget deficit." While these sound oddly similar, debt and deficit are different.

  1. Type: Deficit

    • A budget deficit refers to the difference between the money a party brings in, also called receipts, and the money it spends. If the U.S. government incurs more costs than it brings in, it must borrow the money needed to cover those costs. This is called a budget deficit. If the federal government collects more receipts than are needed to pay off costs, then we have what is called a surplus.

    Debt

    • Debt is the total amount of money a party has borrowed to make up for any sort of deficit. Think of the national debt as the accrual of all federal budget deficits since the country’s inception.

    Significance

    • The national debt has reached unprecedented levels in recent years. In March of 2009, the national debt hit a new record at $11 trillion.

    Potential

    • Beginning every fiscal year with trillions of dollars of debt is a vicious cycle. One day the American taxpayer will have to foot the bill, as well as any interest incurred.

    Identification

    • Gross debt includes public debt and all intra-governmental debt obligations, e.g., Social Security.

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