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Video:What Is the National Debt?

with Zach Toombs

What's the difference between the national deficit and the national debt? Watch this About.com video to see an overview of the national debt.See Transcript

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Transcript:What Is the National Debt?

Hi, I'm Zach Toombs from About.com and today I'll be covering the national debt. First, let me clear up the difference between the national deficit and the national debt. The national debt is made up of each year's national deficit or surplus, therefore a deficit is just a unit within the total debt.

Calculating the National Debt

While the national debt is not easy to calculate, it is fairly simple to understand from a macro perspective. The national debt is simply the total amount of money the federal government owes in private and public debt. Private debt is money the government owes itself from borrowing against pools of money like the Social Security fund.

US Public Debt

Public debt on the other hand makes up about 65% of the total national debt. When the government has a budget deficit in any given year, it sells treasury bills and bonds to individual investors, foreign countries and even financial companies. The government then pays interest on the money it loans through these T-Bills each year.

Current U.S. National Debt Outstanding

In 2012, the total U.S. national debt topped $16 trillion dollars. The interest on that $16 trillion dollars amounts to roughly $360 billion per year and subject to change per interest rates. The U.S. national debt is the highest in the world, both in terms of the dollar amount and in terms of a percentage of Gross Domestic Product.

Total Amount of U.S. Government Debt

Here's a look at the total amount of U.S. government debt owed:

  • Japan $1.1 trillion
  • Savings bonds $1.1 trillion
  • China $1.2 trillion
  • U.S. Federal Reserve $1.7 trillion
  • Social Security Fund $2.7 trillion

Biggest Debt Contributors

The debt has gotten larger each year due to a number of factors but most recently some big contributors have been:

  • The War in Afghanistan
  • The Iraq War
  • Government bailouts issued to banks and automakers after the financial crisis of 2008

Budget Control Act of 2011

To help address the ballooning debt, President Obama signed the Budget Control Act of 2011, which put into place several components to help curb the debt. Among them are provisions for ongoing debt reduction and also the establishment of a federal debt limit. In 1982, the national debt was $1.2 trillion. Thirty years later in 2012, it is $16 trillion.

That's a quick look at the national debt. Thanks for watching. 

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