national debt - Investment & Finance Definition
The amount of money owed by a federal government. Typically, a government’s debt is comprised of obligations such as Treasury bonds, notes, and bills. The U.S. Congress has put limits (or a ceiling) on how much debt the United States can undertake. If those limits are exceeded, then Congress either has to raise them, or, as has happened occasionally in the past, threaten to shut down the government as a way to keep spending under control. As the economy performs well and individuals and businesses make more money and pay more taxes, the debt can disappear and turn into a surplus. When the economy slows and profits fall and unemployment rises, the amount of money the government receives decreases, which can lead to a budget deficit. When the deficit is significant, interest expense on the debt is one of the larger budget outlays. The national debt is distinct from a budget deficit, which is the difference of the amount of money raised and spent for one year.