Understanding terms: deficit and debt

Talk about federal budgets can be confusing. Most states (including Texas, thankfully) have constitutional requirements for balanced budgets each year. Therefore, states don’t go into debt like the federal government does. The feds can run deficit budgets and therefore increase debt, and that is what happens year after year. A budget, and the resulting deficit, is a one-year-at-a-time proposition, yet we often hear people use the term deficit and national debt interchangeably — which they are not. The national debt is a cumulative figure and, sadly, often ignored in the discussion.

The debt figure is important for the fact that it accrues interest — increasingly payble to the Chinese and other foreign governments — and is an ever-increasing burden building into the future. Here are two charts that demonstrate (a) the medium term effect of current deficit budget proposals and (b) the effect on the resulting debt from the deficits. Frame those for your children and grandchildren.

Medium-term deficit projections
Medium-term deficit projections
... and here is the resulting debt ...
... and here is the resulting debt ...

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