Public Debt Vs. Public Deficit
With news of the growing federal budget deficit and the United States' multitrillion-dollar national debt, it is often easy to confuse the two. The public deficit results when a government's budgeted expenditures, or outlays, exceed its revenues. The public debt is the sum of all accumulated fiscal deficits over the years. When the government runs a deficit during a given fiscal year, it increases the size of the national debt.
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Public Deficit
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The government passes a budget for each fiscal year, which begins on October 1. The budget includes estimated revenues, or receipts, and budgeted expenditures, also known as outlays. The U.S. government's sources of revenues include individual and corporate income taxes, excise taxes, Social Security and Medicare taxes, and miscellaneous fees. Some of the largest outlays in the federal budget include Social Security, defense and interest on the national debt. When outlays are larger than receipts, the government has a deficit, which the U.S. Department of the Treasury makes up by borrowing to keep the government operating. Treasury borrows by selling government securities, such as bonds, to investors in the U.S. and abroad. For example, if the government's budgeted outlays for a given year are $3 trillion, while its receipts are only $2 trillion, the Treasury must finance a $1 trillion deficit by borrowing.
Budget Surplus
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The government runs a public surplus when its revenues are larger than its outlays. The last time the U.S. ran a budget surplus was in 1998, according to Harvard economist Greg Mankiw, author of "Principles of Economics." Prior to 1998, the last U.S. budget surplus was in 1969.
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Public Debt
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Whenever the Treasury Department borrows money to finance the federal budget deficit, the public debt increases. The website Treasury Direct states that the total public debt represents the principal amount of government securities held around the world. The public debt is subject to a limit, which is the maximum amount the government can borrow. Increasing the public debt ceiling requires approval by Congress.
Size
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According to the website Econedlink, an economics education site operated by the Council for Economic Education, the public debt increases by more than $500 million a day and by more than $1 billion every two days. This happens as interest accumulates on the outstanding debt. As of March 2011, the public debt exceeded $14.1 trillion, according to the U.S. National Debt Clock, which tracks the size of the debt. The Bureau of the Public Debt oversees the national debt.
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