The Basics: Debt, Deficit, and GDP
Before you go on a Google spree and read every article you can about the Government Deficit and how high it may be in dollars, take a second to educate yourself on the basics. Everything from the difference between the deficit and debt to what context you should look at it. Today I’ll take 5 minutes to do just that.
What is a deficit? Back in 1790 when the United States Government had its first year as an independent nation, it ran a deficit. This means that the U.S. spent more than it earned in taxes. It’s been that way ever since and we’re still here.
Where does the government get the money to cover the deficit? The U.S. will borrow from domestic and international investors with the promise of paying them back with interest. Stay with me now we’re halfway through.
What is the National Debt? The debt is the total money owed by the U.S. from each year’s cumulative deficit.
Will the deficit steer the economy towards a recession? There are arguments on both sides of this debate. A better indicator of how the deficit will affect the economy is comparing it to the GDP. As of September 30th,2018, the end of the U.S. Government’s 2018 fiscal year, the most recent deficit was $779 billion.
What is the total U.S. Government’s debt? As of July 31st,2018, the total Government debt was 21 trillion.
Before you start hoarding supplies and saving cash under your mattress, know that the 2018 U.S. GDP was 20.66 trillion (as of the 3rdquarter of that fiscal year).
So how big is the total debt relative to the economy? The total U.S. debt of 21 trillion is slightly higher than the total GDP of 20.66 trillion. Now you are primed to begin reading more about what this means and the implications that will arise. Stay tuned here to RecessionNews.org for more. 
