Understanding The Federal Debt and Deficit

What precisely is the national debt?

It's the total amount of funds that the federal government has borrowed over the years

and not yet repaid.

And what about the deficit?

That's the amount that the government spends each year in excess of what its tax,

tariff, and fee revenues bring in. The government then must borrow to make up the

difference. It's the accumulation of deficits year after year that makes up the total

national debt.

Why do we have deficits?

Because the government makes commitments to spending programs without raising

enough revenue to pay for them. Therefore, the government has to borrow.

How does the government borrow money? Does it just go to the bank?

No. The U.S. Treasury issues securities, or IOUs, such as savings bonds and

Treasury bills, notes, and bonds. Lenders buy these securities and the money goes

to the government. In return, the government pays interest to the owners of the

securities.

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