National Debt Definition
The national debt is a government’s sum of all deficits minus the sum of all surpluses from this and previous years. The more a government borrows each year, the more the national debt rises.
Example of a National Debt Calculation
If, hypothetically, a country is running a deficit in year 1 of $250 billion, in year 2 of $300 billion, in year 3 of $200 billion, and in year 4, a surplus of $100 billion, then (assuming no other deficits or surpluses) the country’s total national debt is
$250 + $300 + $200 -$100 = $650 billion
United States National Debt Data
In the United States, at the beginning of the Reagan administration in 1980, the national debt was “only” $930 billion (see table below). It then grew to $2,600 billion by the end of his administration in 1988, an almost three-fold increase. It has continued to increase thereafter at a rapid pace during most years. Currently, in the United States, the increasing burden of the Social Security program, rising costs of health and medical programs, defense-related spending, and rising interest payments on the national debt are putting a strain on the government’s purse. This year the United States national debt will be in excess of $23 trillion. For an up-to-the-minute account of our national debt, please click here: US National Debt Clock.
For a table with United States National Debt figures for selected years since 1945, see below. This table also includes the debt as a percentage of the size of our economy (as measured by nominal GDP). The percentage has fluctuated from a World War II (1945) high of 116% to a post-World War II low of 33% (1980).
|Year||Total National Debt (held by the public and the Federal Reserve, and foreign, state and local governments, rounded to the nearest billion dollar – December 31).||Nominal GDP
(rounded to the nearest billion dollar)
|National Debt as a Percentage of Nominal GDP (rounded to the nearest whole number)|
National Debt Source: U.S. Treasury Department.
Nominal GDP Source: Bureau of Economic Analysis.
Interest on the Debt
When a country borrows money from its citizens and from foreign investors, it pays interest each year to them. The interest is similar to a finance charge you pay on a credit card balance if you don’t pay it off at the end of the month. Below is a table with United States federal government total interest expenses in selected years (this figure does not include interest the federal government receives on its own investments). In some years, the total debt increases, while the total interest expense decreases, and vice versa. This is due to interest rate fluctuations. During years when market interest rates are lower, the government can finance its debt at more favorable conditions. Recently, interest rates have been relatively low in the United States and other industrialized countries. This has allowed these governments to borrow at low rates and has allowed them to pay less interest than would have been the case at higher rates. With rising national debts, and likely higher interest rates in the future, the total interest expense is expected to rise considerably in future years.
|Year||Total United States Interest Expense (on Treasury debt securities; rounded to the nearest billion dollar, as per fiscal year end)|
Source: U.S. Treasury Department (http://www.treasurydirect.gov/govt/reports/ir/ir_expense.htm).