Sean asked in Social ScienceEconomics · 7 years ago

What are the differences between a deficit and a debt?

From information I read in various sources on the web, Obama has increased the debt by 5-6 trillion dollars, however, he's reduced the deficit from 1.6 trillion to 1.2 trillion... Does that make any sense, or have I misread the information?

2 Answers

Relevance
  • 7 years ago
    Best Answer

    A deficit is the shortfall between revenues and expenses. If you're paid $1900 this month, but your monthly expenses are $2000, you have a monthly deficit of $100. So a deficit is just a mathematical difference during a time period (month or year) ... expenses minus income.

    So you have to borrow $100 to make up for that deficit and pay your bills, right? But if you keep borrowing every month, then the amount of debt you owe accumulates -- $100, then $200, then $300 ... pretty soon you're in debt by $1000 ... because you had a deficit (and borrowed) $100 a month for 10 months and haven't paid back the debt. DEBT is an accumulation that piles on month after month.

    Suppose you fill a swimming pool using a bucket, pouring in one bucket of water at a time. Analogy -- "deficit" is like one bucket of water. "Debt" is like the whole pool full of accumulated water.

    So under Obama, the US government debt increased from about $10 trillion to $16 trillion. But the claim is that he inherited a $1.6 trillion annual deficit, and now it's decreased to $1.2 trillion deficit for this year. That's not a very accurate or meaningful claim. The $1.6 trillion deficit was finalized after Obama had already been in office for 9 months. George bush's last full year in office, the deficit was about $460 billion, the last sub-trillion deficit we had.

    I don't blame Obama for the $1.6 trillion 2009 deficit, nor Bush either. That was an unavoidable one-time anomaly resulting from the 2008 financial crisis (which was certainly not Bush's fault either.)

    However, the deficit SHOULD have returned to something more normal after 2009. That we've kept running trillion dollar deficits under Obama, and have every expectation of continuing that, is surprising, unexpected, and quite disturbing.

  • 7 years ago

    a debt can never be repaid by the individual because the government is generating the money that person owes. a deficit is almost like a lacking in revenue, or the money the government is able to generate. just so you know, the obama and romney administrations are lying about their roles in these markers..

Still have questions? Get your answers by asking now.