How is national debt calculated?


Quick Answer

The national debt is calculated by subtracting the nation's cumulative budget surpluses from the cumulative budget deficits. The national debt was first reported in 1783.

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How is national debt calculated?
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Full Answer

The national debt is the sum of all money owed by the federal government to outside entities. Each year, the government develops a budget. Revenues include money collected from taxpayers. Expenses include entitlement payments, interest on the debt and defense spending.

When the government spends more money than it takes in, it borrows the excess of expenses over revenues. This is called running a deficit. When more money is taken in than is expended, it runs a surplus. Spending exactly what is taken in is called a balanced budget. The federal government rarely balances the budget. The issue of national debt has become a key point of contention between Democrats and Republicans.

The government borrows money by issuing treasury bonds, bills and notes at public auctions held four times per year: in February, May, August and November. The largest holders of U.S. debt are China, Japan and Belgium. Other holders of U.S. debt include domestic private investors, federal governmental agencies, the Federal Reserve Bank, state and local governments and other entities. U.S. debt is considered to be among the most stable in the world.

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