What is the Difference Between "Debt" and "Deficit?"
July 18, 2008
The terms "debt" and "deficit" are often used interchangeably in everyday life. But when it comes to our nation's finances, they have very different meanings. So to clear this up once and for all...
The Deficit, simply put, is the amount the government spends each year in excess of its annual revenue. On the flip side, a "balanced budget" is when government only spends what it has raised that year. This has only happened six times in the history of our country. Last year's budget deficit was $162 billion, and this year's is expected to exceed $410 billion.
The National Debt is the sum of all previously incurred national deficits. Right now our national debt is about $9.5 trillion, a figure that appears on the IRS' and other national debt clocks. Because the government keeps spending more than it brings in each year, this accumulating debt demands that an increasing amount of our total budget goes toward paying interest. Consider that last year, $237 billion was spent on interest alone, compared to just $92 billion on education, training and social services and only $72 billion on transportation. The interest on the national debt accounted for a whopping 8.7% of our budget last year. Continuously spending beyond our means has serious consequences!
So what's the REAL national debt? If the national debt is $9.5 trillion, why do we keep talking about a fiscal hole of $53 trillion? This daunting number accounts for the current debts and other financial obligations we have incurred, plus the unfunded promises made to Americans in the form of entitlement benefits, including Social Security, Medicare and Medicaid. For a more detailed explanation, see our page on What is the Real National Debt?
