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What is the Difference Between the U.S. National Debt and the Deficit?

Updated on July 22, 2016

We hear national debt, deficit, and budget bandied about by politicians and others all the time, especially during the presidential campaign season. But what are the differences and how do they affect us?

The national debt is all the debt that has been accrued since the founding of our country. The federal budget is based on the income the government takes in and the expenses that it has from spending. It it takes in more than it spends, it is called a surplus. If it spends more than it takes in, it's called a deficit. If it takes in the same amout it spends, it's called balancing the budget.

National Debt Incurred by Each President

The graph below shows the national debt that has been incurred by each president since this country has been founded. The values at the top of each column are what the national debt was for that president at the end of his term. The numbers above each president's name are the length of time in office. Notice, the values are in billions until we get to Reagan and then they are in trillions. An America Trillion is 1,000 billion. A British Trillion is million billion. I just added that because I know hub pages are read internationally.

National Debt.
National Debt. | Source

The implication in this graph is that each new president inherits the debt and deficit of the previous president. So when presidents say they are going to balance the budget, what are they really talking about?

Update 7/22/2016

The national debt for Obama is now about 19 Trillion. That means that if Hillary or Trump wins the election, they start their first day in office with a national debt of at least 19 trillion dollars.

The Federal Budget

The next three slides show the federal budget. The first one shows both the income and outgo in each category and the deficit. It is somewhat difficult to read in its entirety. Therefore, the second slide is an enlargement of the income side of the equation and third slide is an enlargement of the spending side of the equation.

Notice that the total revenue is 2.57 trillion, while the total spending is 3.83 trillion. This leaves a deficit of 1.27 trillion that gets added to the national debt. To learn about the debt ceiling, read my hub on What is the Fiscal Cliff?

Federal Budget
Federal Budget | Source

Income Side of Federal Budget.

Notice that the biggest sources of income are from individual taxes, corporate taxes and social security and other payroll taxes.

Spending Side of the Equation

Notice the biggest part of spending is for defense, discretionary, and social security. It is also important to note the interest on the debt is 251 billion. That interest gets added to the national debt as well as the deficit of 1.27 trillion is also added to the national debt.

It is important to note that social security is not only on the income side (934 billion) but on the spending side (730 billion). To learn more about social security and the trust fund, read my hub on Understanding Social Security.

One of the ways the Congressional Budget Office (CBO) measures the impact of the National Debt on our economy is by the percentage of national debt to the Gross Domestic Product (GDP). This chart shows that percentage from the time the country was founded to current. It also includes the CBO's projections to 2030. Notice that after World War II, the percentage dropped way off and it was low under Nixon, Carter, and Clinton. There are two projections included. The CBO's Extended Baseline Scenario is the projection if the current legislation stays in place with minor policy changes. The CBO's Alternative Fiscal Scenario is if there are major policy changes as a result of political dynamics.

National Debt Vs Gross Domestic Product

National Debt Vs GDP
National Debt Vs GDP | Source

President Clinton and the Surplus Budget

How did President Clinton have a surplus budget? He did it by raising taxes on upper income tax payers and cutting some discretionary spending. There was also a very powerful influence from the dot com stock boom which brought in additional revenues in the form of capital gains.

Reducing the Deficit

Each president and congress talk about reducing the deficit and/or balancing the budget. There are really only two variables that have to be dealt with: income (taxes) and spending (expenses). But there is one sub-variable on the spending side of the equation and that is interest on the debt. The country is so far in debt that it can't even pay the interest on the debt. It has to take on more debt by issuing different types of bonds to various public, private, and foreign entities.

Various scenarios have been put forth to reduce the deficit. They include the following:

  • Lowering taxes and cutting spending
  • Raising taxes and cutting spending
  • Lowering taxes and raising spending
  • Raising taxes and raising spending

Conclusion

All of these scenarios will have an impact on the economy and job creation. But given the amount of debt that has been created, I don't see any of these being able to reduce the deficit by any great degree. It begs many questions:

  • Have we come to a way of life, where we will live with debt for the foreseeable future?
  • Does it really matter that we have a debt and deficit if the government can issues bonds that create more debt?
  • Are we in a vicious cycle of debt creation?
  • When a person or organization cannot pay their bills, they are bankrupt. Is this country bankrupt, but the government won't tell us?
  • Should the government be compared to a business if it can create money by issuing bonds?

Before I wrote this article, I didn't know the difference between the national debt and the deficit. But after doing the research and creating the article, I have learned a lot about the issues and I hope you have as well. I'm looking forward to your general comments as well as comments regarding the accuracy and facts.

National Debt Clock

All the charts I have presented are based on static information. However, all of these values are dynamic and are ever changing. Here is the a link to the National Debt Clock where you can view all the statistics in real time.

At the Republican National Convention, they showed the national debt as if Obama owned it. Can you imagine who ever becomes president will inherit that debt?

More Information

For more information about the national debt and deficit, read this excellent article by a fellow hubber. http://aufait.hubpages.com/hub/US-national-debt-explained-what-debt-includes-why-it-is-not-a-worry

Comments

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    • Michele Travis profile image

      Michele Travis 4 years ago from U.S.A. Ohio

      This is a very interesting hub. Most of the money goes to defense. But why is that the current President's fault. Did he start the (war)s we are in right now? Will the debt get worse if Mitt Romney becomes President? After all he does plan to increase the Military. That is a huge part of the debt. Yes, he will cut Medicare and Medicaid. He will cut taxes for the rich, and increase taxes for the middle class. His plans make no sense. He talks about them, but does not tell anyone HOW they will work.

    • peoplepower73 profile image
      Author

      Mike Russo 4 years ago from Placentia California

      Michele: It's all about supply side trickle-down economics. Somehow, they think by giving tax breaks to the rich and corporations, it will create jobs and boost the economy. It didn't work under Reagan and both Bushes and now they want to go back and do it again. They say one of the definitions of insanity is doing the same thing multiple times and expecting a different result. Thanks for your comments.

    • Davesworld profile image

      Davesworld 4 years ago from Cottage Grove, MN 55016

      Ooops. When George W. Bush took office in 2001 the National Debt was some $5.6 trillion. The Budget was in a positive state because Congress cheats about the budget deficit. The increase in the National Debt in the last Clinton year I have at $23 billion. Data taken from www.bea.gov. I have hubbed on this, that is how Congress lies about the annual budget deficit. Even when Congress declared a surplus, during the Clinton years, the National Debt continued to rise.

    • peoplepower73 profile image
      Author

      Mike Russo 4 years ago from Placentia California

      Dave: Thanks for pointing out the error on the national debt. I was using the amount of increase, not the actual totals. I changed it to the actual totals. For Clinton's last year, I have 5.66 trillion. You are right about the national debt rising with a surplus. It would take a huge surplus to lower the national debt.

    • LetitiaFT profile image

      LetitiaFT 4 years ago from Paris via California

      Enlightening. So important to get the terms straight, and so few bother to. Thank you. Voted up and shared on Facebook.

    • peoplepower73 profile image
      Author

      Mike Russo 4 years ago from Placentia California

      Letitia: Thank you so much for your comments and sharing.

    • bworthington profile image

      bworthington 4 years ago from Ft. Lauderdale

      @Michelle

      His plans won't work. Which is why Willard has spent as little time as possible giving DETAILS about his economic policy.

      @People

      This is great information. Some one had done a hub some time ago that explained how SSI and Medicare currently income and expenses currently balance each other out and the fallacy that these programs are currently driving the debt. That said, this is great information for anyone looking to understand our nation's current fiscal situation.

      Voted up.

    • peoplepower73 profile image
      Author

      Mike Russo 4 years ago from Placentia California

      bworthington: Thank you for your comments and your vote. It does seem like a vicious cycle of paying off debt with more debt. When these guys say they are going to balance the budget, I think they are just blowing more smoke!

    • bworthington profile image

      bworthington 4 years ago from Ft. Lauderdale

      I would actually say that the guys on one side are blowing smoke. I remember that the debt actually began decreasing in the late 90s. Which means it can be done. We just don't have the political willpower to do it.

    • peoplepower73 profile image
      Author

      Mike Russo 4 years ago from Placentia California

      bworthington: I agree with you.

    • Jo_Goldsmith11 profile image

      Jo_Goldsmith11 4 years ago

      Pretty amazing research. I understood it and I thank you for writing this useful information! :) It appears we do spend more than we have and this is what we get, when we do the same things and expecting different results. Our country credit rating was downgraded.

      In my opinion if the GOP will give it a chance and allow the President his idea for two years. Let's see how it works out?

      We just might have a chance. If it shows doing it the Presidents way it is not working or American people complain, then let's do it the GOP way. Sometimes wonder if we have sent leaders or children to figure out simple math! voted this up and tweeted.

    • peoplepower73 profile image
      Author

      Mike Russo 4 years ago from Placentia California

      Jo_Goldsmith11: Thanks for the comments, and the sharing and votes. Here is a hub page on the Fiscal Cliff that I wrote sometime back. You may be interested in that as well: https://hubpages.com/politics/Super-Committees-Wha...

      Thanks for dropping by.

    • Jillian Barclay profile image

      Jillian Barclay 4 years ago from California, USA

      Your writing never ceases to amaze me! Maybe YOU should be the Secretary of Explaining "Stuff"!

    • peoplepower73 profile image
      Author

      Mike Russo 4 years ago from Placentia California

      Jillian: Oh, thank you so much. Usually, if I have a hard time understanding a concept, I try to break it down so that I can understand it. If I can understand it, then everybody should be able to understand it. Thanks for your comments.

    • cfin profile image

      cfin 4 years ago from The World we live in

      Well put together article! i think many people need the info narrowed down like this. And at least 50% of the people I know could do to give this a read! READ IT PEOPLE!!

    • peoplepower73 profile image
      Author

      Mike Russo 4 years ago from Placentia California

      cfin: Thanks for the comments. I hope this helps.

    • profile image

      Glenda Jacks 3 years ago

      You made this very easy to understand, thank you for that.

    • peoplepower73 profile image
      Author

      Mike Russo 3 years ago from Placentia California

      Glenda Jacks: Well thank you. They can be confusing and I think some politicians use that to their advantage.

    • Shyron E Shenko profile image

      Shyron E Shenko 3 years ago from Texas

      This is an awesome hub peoplepower73 great job on the research and presentation. Voted up, Awesome and will share everyway I can.

    • peoplepower73 profile image
      Author

      Mike Russo 3 years ago from Placentia California

      Shyron E Shenko: Wow, thank you so much for the ratings and sharing. I'm glad you liked it and thanks for stopping by.

    • Au fait profile image

      C E Clark 3 years ago from North Texas

      Another great hub that fits perfectly on my Pinterest board for government and how it works.

    • peoplepower73 profile image
      Author

      Mike Russo 3 years ago from Placentia California

      Au fait: Thank you so much for posting this to Pinterest. I'm honored that you dropped by.

    • Au fait profile image

      C E Clark 3 years ago from North Texas

      I often read your hubs because they're well written and informative. Everyone should read them. I just don't always leave a comment. Just got my Pinterest acct. yesterday, which is why I pinned 2 of your hubs right away.

    • Shyron E Shenko profile image

      Shyron E Shenko 3 years ago from Texas

      Peoplepower, you make it easier to understand our debt and deficit, that is why I have to keep coming back to read this hub so many times.

      Voted up, UAI and pinned

    • peoplepower73 profile image
      Author

      Mike Russo 3 years ago from Placentia California

      Au fait: You are the greatest. I have a Pinterest account, but I don't always post on it. I'll do the same for you. Your comments have made my day.

    • Au fait profile image

      C E Clark 3 years ago from North Texas

      You explain important matters about how our government works so well, and they are confusing to most people. It's hard to talk intelligently without knowing what one is talking about (most people do it anyway) and your hubs help so much. People just need to read them and they will be so much better informed than they were before. I've just now become a follower on your Pinterest acct.

    • peoplepower73 profile image
      Author

      Mike Russo 3 years ago from Placentia California

      Shyron: I know it is a difficult subject to explain when just talking to people. Sometimes, I'll see their eyes glaze over. I think this is a case of a picture being worth a thousand words. There are so many people that have misconceptions of these two terms. Thanks for the comments, the votes and the pinning. I'll do the same for you. Have a great day.

    • peoplepower73 profile image
      Author

      Mike Russo 3 years ago from Placentia California

      Au fait: I know, I have relatives and friends who speak like authorities on these subjects, but really don't have a clue. I think part of the problem is the media mainly presents sounds bites that stick in people's heads, but they don't go deep enough to get to the real issues. Also, many people are too busy to focus and/or do the research and analysis. Thanks again for the interest in my hubs. I'm blown away by your comments. Have a great day!

    • Larry Rankin profile image

      Larry Rankin 2 years ago from Oklahoma

      I found the article very informative. I still don't completely understand the intricacies of national debt, but what I learned here was a good start.

    • peoplepower73 profile image
      Author

      Mike Russo 2 years ago from Placentia California

      Larry: No worries, I don't think Washington does either...thanks for the comment.

    • Au fait profile image

      C E Clark 2 years ago from North Texas

      Put a link to this excellent article on my own article titled: What Makes Up the U.S. National Debt? I know a lot of people prefer to remain uninformed about things like this thinking they don't matter, but in fact an uninformed electorate is exactly what enables politicians to manipulate people to their own advantage. Everyone needs to read this article.

      Voted up, BAUI, already pinned to my 'Politics' board and will pin to Awesome Hubpages too. Posting on FB and sharing with followers.

    • peoplepower73 profile image
      Author

      Mike Russo 2 years ago from Placentia California

      Thank you Au fait. I'm deeply honored that you dropped by. You are such a great writer and I have enjoyed reading your articles. I put a link on my article to yours. I like the way you handle "scare party supporters." Take care.

    • lisavanvorst profile image

      Lisa VanVorst 2 years ago from New Jersey

      This was very informative and educational. I don't believe any politician that says he can balance the budget. We are so in debt and each President inherits that debt, so how can anyone say they can balance the budget? It is all talk just to get elected. I remember Clinton left office on a good note and now I know Nixon. Can we ever get out of debt? I doubt it. Great Hub!

    • peoplepower73 profile image
      Author

      Mike Russo 2 years ago from Placentia California

      Lisa: Thank you for your comments. I agree with you. It's a shell and pea game to confuse the public, so they can manipulate us. Thanks for dropping by.

    • profile image

      veggiechick 16 months ago

      Interesting article. Thanks again for taking a complicated issue and making it understandable! While I did understand this one a little better than the middle east :) It is interesting to take another look. I always listen to the promises of aspiring presidential hopefuls saying how they and "they" only will balance the budget and take us out of debt entirely in a decade or so. I can't say that I would do it any better, however I can't honestly say I would do it any worst!! I am not an economist, nor are any of those who promise the world how they will make the best president, and take us out of debt as well. I do know I would vote for a flat tax and wish for a much smaller tax code, but I believe those may just stay wishes. :) As far as a huge National debt, one can only hope that politics will one day stay out of the equation, as that may be the only way it can be paid, or even started to be really tackled in a meaningful way.

    • peoplepower73 profile image
      Author

      Mike Russo 16 months ago from Placentia California

      veggiechick: Thanks again for reading my articles. I'm not even sure the political candidates have a grasp of the difference between the national debt and the deficit.

    • profile image

      veggiechick 16 months ago

      Im quite sure your right. I have listened to many, watched the debates (for reasons of knowing why people actually believe some of them, and just to keep up), and I don't believe I've heard one candidate who truly has any way to even attempt at attempting to conquer even balancing a budget. Its pretty scary. I haven't heard anyone barely mention anything regarding a financial plan, or even a broad-based idea! Now that we can concentrate on Isis, Isil, or any random acts of terrorism. I believe this is a gift for all of them. They can rant about war, or lack of, and pretend they understand any of it. I think there are very few experts, however I don't believe they are being asked an opinion. (smile). I'll keep reading, listening and paying attention!

    • peoplepower73 profile image
      Author

      Mike Russo 16 months ago from Placentia California

      I know most of the population just reacts to sound bites without doing any critical thinking. That's precisely what the propagandist want.

    • peoplepower73 profile image
      Author

      Mike Russo 9 months ago from Placentia California

      After watching the GOP convention, I thought it would be a good idea to post this article again. It is about the difference in the National Debt and the Deficit and what the winner of this election inherits in debt from the previous president in their first day in office.

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