Uploaded September 2026 | Updated September 2026, 1 week ago
National Debt vs. Budget Deficit: What's the Difference?
This video explains the difference between national debt and the annual budget deficit, why economists scale both by GDP, and what current U.S. trends look like.
Key terms covered:
- National debt — The total amount of money owed by the federal government at any point in time; the sum of all past obligations. As of July 2026, U.S. national debt was $39.3 trillion.
- Deficit — The difference in a given year between federal spending and federal revenue. A deficit occurs when spending exceeds revenue.
- Surplus — When revenue exceeds spending in a given year, the opposite of a deficit. (This is rare for the modern federal government.)
- GDP (gross domestic product) — A measure of the size of a country's overall economy, used to scale debt and interest payments so they can be compared meaningfully across time or between countries.
- Debt-to-GDP ratio — National debt divided by GDP; adjusts the debt figure for the size of the economy, similar to comparing debt levels between a low-income and high-income individual.
- Interest payments (on the debt) — Payments the government makes on its borrowed money; these grow as the debt grows.
Example used in the video:
A simple analogy–comparing debt to water already in a bathtub and deficit to water flowing in–illustrates how deficits accumulate into debt, and how a spending reduction or surplus can be used to pay debt down.
Teachers: this video is part of our FREE Fiscal Policy unit plan: pages.mru.org/lesson-plans/fiscal-policy-unit
Learners: explore our full Principles of Macroeconomics course: youtube.com/playlist?list=PL-uRhZ_p-BM52EbMG1NR1ZfG9tEvcxE4u
National Debt vs. Budget Deficit: What's the Difference?
This video explains the difference between national debt and the annual budget deficit, why economists scale both by GDP, and what current U.S. trends look like.
Key terms covered:
- National debt — The total amount of money owed by the federal government at any point in time; the sum of all past obligations. As of July 2026, U.S. national debt was $39.3 trillion.
- Deficit — The difference in a given year between federal spending and federal revenue. A deficit occurs when spending exceeds revenue.
- Surplus — When revenue exceeds spending in a given year, the opposite of a deficit. (This is rare for the modern federal government.)
- GDP (gross domestic product) — A measure of the size of a country's overall economy, used to scale debt and interest payments so they can be compared meaningfully across time or between countries.
- Debt-to-GDP ratio — National debt divided by GDP; adjusts the debt figure for the size of the economy, similar to comparing debt levels between a low-income and high-income individual.
- Interest payments (on the debt) — Payments the government makes on its borrowed money; these grow as the debt grows.
Example used in the video:
A simple analogy–comparing debt to water already in a bathtub and deficit to water flowing in–illustrates how deficits accumulate into debt, and how a spending reduction or surplus can be used to pay debt down.
Teachers: this video is part of our FREE Fiscal Policy unit plan: pages.mru.org/lesson-plans/fiscal-policy-unit
Learners: explore our full Principles of Macroeconomics course: youtube.com/playlist?list=PL-uRhZ_p-BM52EbMG1NR1ZfG9tEvcxE4u
