Budget deficit vs national debt.

In plain English

A budget deficit is a flow measured over one fiscal year, while the national debt is a stock, the running total the Treasury has borrowed and not yet repaid. Each year of deficit adds to the debt, and a surplus subtracts from it. The debt is financed by selling Treasury securities, so it carries interest costs that show up in the next year's spending. Because both figures grow with the size of the country, they are usually compared with total output rather than read as raw dollar amounts. A shrinking deficit still increases the debt, just more slowly.

01Why it matters

Interest on the debt competes with every other line in the federal budget, and heavy borrowing can lift the interest rates households pay on mortgages and car loans, which is how a number in Washington reaches a kitchen table.

02The math, step by step

Say a government collects $4 trillion and spends $5 trillion. The deficit is $1 trillion for that year. If the debt started at $30 trillion, it ends at $31 trillion. Cut the next year's deficit to $600 billion and the debt still climbs, to $31.6 trillion.

Illustrative example. The amounts here are hypothetical, chosen to show how the math works, not real quoted rates or figures.

03What this is NOT

04Receipts

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