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How a Yearly Budget Deficit Becomes National Debt

A federal deficit is the amount by which spending exceeds revenue during a period. Treasury borrows to cover the shortfall, and repeated borrowing adds to outstanding debt. Deficits are yearly flows; debt is the accumulated balance, including associated interest owed to holders of Treasury securities.

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What the National Debt Measures—and What It Leaves Out

The national debt is the federal government’s accumulated outstanding borrowing, including associated interest owed. It reflects borrowing across time; a deficit measures a shortfall over a particular period. The national measure excludes state, local, household, and business debts.