Federal Deficit, Surplus, and National Debt

From the National Priorities Project

With a national debt of about $8 trillion, it is clear why this issue has assumed such political and economic significance. Yet, there are some popular misconceptions both in terms of meaning and importance. For starters, debt is sometimes confused with the term deficit. A deficit is where spending exceeds revenues for one year. A surplus is the opposite: revenues exceed spending. The gross federal debt is the total of all federal borrowing over the course of years.

Numbers
Gross Federal Debt:
$8 trillion

Debt Held by the Public:
$4.7 trillion

Federal Deficit, FY2005:
$333 billion

Federal Deficit without Social Security Surplus, FY2005:
$508 billion

Net Interest on Debt, FY2005:
$183 billion

Sources: Budget of the U.S. Government, FY2006, Historical Tables and Mid-session Review. [1] Bureau of the Public Debt. [2]

The gross federal debt is broken down into two parts: debt held by federal entities and debt held by the public. Government trust funds, such as Social Security, are typically required by law to put any surpluses into treasury securities (which represent shares of debt). In other words, some of the government's debt is actually owned by government trust funds. Intragovernmental holdings also include other federal entity holdings such as revolving funds, special funds and Federal Financing Bank securities, as well as other government accounts.
The other part of the gross federal debt is held by the public - individuals, corporations, local, state and foreign governments - any entity that is not the U.S. federal government. The Federal Reserve System, a federal entity, is an exception. It holds debt which is classified as public. In order to conduct monetary policy, it buys and sells federal securities. If the debt is ever completely eliminated, it will purchase other types of securities to conduct policy.
Debt held by the public dropped as the Social Security Trust Fund surpluses increased significantly during the 1990s. In other words, less of the debt needed to be publicly held, because a trust fund was able, and needed to, purchase securities .... Read the Entire Article

Publisher's Note: Current figures on the national debt are widely published at $9.2 trillion as of this posting.