National Debt vs. Budget Deficit

Among the long list of facts that most Americans do not know about government is the difference between Debt and Deficit. The two words often seem to be used interchangeably, though they have distinct meanings and implications.

Every year the government forms a budget (funded from taxes and other forms of revenue) that goes to finance government programs like Medicare. Often times the government spends more than it brings in. This is deficit spending. The government borrows money (yes, sometimes from China and Russia) to cover the deficit. Then that money owed becomes part of the National Debt. So the deficit is the annual budget's shortfall, and the debt is carried over year-to-year.

Summation: Buying new curtains from Ikea on your credit card (Deficit spending). Money you owe to AmEx (Debt).

Implication: Cutting deficit spending will not help lower the national debt; however, continued deficit spending will add to the national debt.

2009 Deficit: $1.75 Trillion (estimated)

Total National Debt: $12.3 Trillion