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The Debt and The Deficit

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The relationship between the debt and the deficit helps us to explain the projected rapid growth in federal debt. The dismal projections described can be attributed to many factors such as: the burden of interest payments, the growth of entitlements, and a lack of necessary revenues. As a result, this video explains the importance of the immense future increase in the deficit, and in turn the national debt.

Discussion Question

  1. Why, when we are referring to debt, do we like to compare it to something else? What are the benefits, as just one example, of assessing U.S. debt as a debt to GDP ratio?​​​​
    • Billions of dollars in debt in a large country with a large economy, like the United States, means much less than billions of dollars in debt in a smaller country like Switzerland. Therefore to fully understand the severity of a country’s debt we like to compare it to another factor—like GDP—to put the debt into perspective. Dividing the debt by GDP gives us a ratio that can help better explain US debt and help us accurately compare what our debt ratio is to other countries.