National debt vs. Budget Deficit

As a common people, when I read economic news, I get a number of difficult words. My lecturers in my majority, Accounting, are very rare talking about international economic. They are more interest in corruption issues, the biggest issue in my country. So, maybe I’ll write some articles containing definition of some economic terms to assist me understanding world’s economic issues, and I hope it will give advantage for you too, my beloved reader. Ok, as you read the title, I intend to distinguish Budget deficit and National Debt.

The Federal Budget Deficit is the federal spending that exceeds tax collection in a single year. The simple example to describe it is, in 2012 the federal revenue is approximately $2.2 trillion, and spending approximately $ 3.1 trillion, leaving a budget deficit of approximately $ 0.9 trillion. To cover it strap, the government needs to borrow $ 0.9 trillion to meet its entire projected obligation in that year.

Meanwhile, the National Debt has different definition; it is the cumulative running total of the federal government’s outstanding debt since the inception of the nation. The simple illustration is, in 2012 the federal revenue and tax collection is approximately $2.2 trillion, and expenditure approximately $ 3.1 trillion, leaving a budget deficit of approximately $ 0.9 trillion. This shortfall usually coped by borrowing from public through selling government bonds or the other debt instruments. The total of the $ 0.9 trillion that government must borrow, adding by all of previous year debt is called National Debt.

In conclusion, Federal Budget Deficit is the debt for the year but National Debt is the total debt since the establishment of the country.

http://thenationaldebtcrisis.com