Here’s the difference between the debt and the deficit

There’s not much time left for Congress to raise the federal debt ceiling and prevent the US government from defaulting on its financial obligations – an event economists agree would have dire consequences for the economy. economy.

The approaching deadline has pushed the debate over how to handle the national deficit and debt into the spotlight; it was even a highlight of President Biden’s State of the Union address.

Some VERIFY viewers have expressed confusion about the difference between debt and deficit, as they are similar in terms of similar concepts.

Are debt and deficit the same?

No, debt and deficit are not the same.

The deficit is a matter of the federal budget, authorized annually by Congress. If the government spends more than it takes in, then the difference is a deficit.

According to the US Treasury Department, the deficit for the last fiscal year, 2022, was $1.38 trillion. Fiscal year 2023 started in October and so far this year’s deficit is $460 billion.

When the government runs a deficit, it still needs to pay its bills. To do that, it borrows money. That creates debt.

Every time the government borrows money, it adds to the debt the United States already has, which means that the debt will continue to grow over time, as long as the government continues to run annual budget deficits.

When the government borrows money, it has to pay back the interest. The longer it takes, the larger the interest payments, the larger the national debt.

Deficits are calculated for a specific period of time – usually a financial year. Debts, however, are cumulative. In other words, if Congress passed a balanced budget, the deficit would be eliminated, but the debt would remain.

According to the US Treasury Department, the national debt currently stands at $31.5 trillion.