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Debt deficit distinction | The Economist

Countries around the world are grappling with painful national debt. Although it is thought of as a burden, our cartoonist KAL illustrates the benefits of debt.

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The debt deficit distinction. Countries around the world are now grappling with painful debt. The economics A-Z described the term National Debt as the total outstanding borrowing of a country’s government.

Although it is often darkly described as a burden, debt has its benefits. It is a crucial ingredient of economic growth because it allows governments to make investments they would not otherwise be able to afford. But beware, debt can be dangerous.

Debt incurred by one generation may become a liability for later generations, especially if the money borrowed is not invested wisely.

Debt is distinct from deficit but they are related. A budget deficit is when less money comes into your budget than goes out in one year. Annual budgets deficit can accumulate, creating a substantial national debt.

Tackling debt is not easy. In 1999 the American government celebrated a huge budget surplus yet the country still had a national debt equal to nearly half it’s GDP.

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The Economist offers authoritative insight and opinion on international news, politics, business, finance, science, technology and the connections between them.
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