Public Debt

Public debt: debt that’s yours, but not just yours. It’s all of ours.

Public debt isn’t the same thing as “the deficit.” It’s much bigger. Public debt is the accumulation of a nation’s debt over the years. Each year, the government can run a surplus or a deficit. Those who run deficits are trickling IOUs into the public debt. Those who run surpluses are pulling some of those IOUs out and paying them off.

A year where the public debt didn’t change means the government spent the same amount it raised in tax revenues. Public debt is also called sovereign debt, or national debt (it never includes state and local municipality debts, nor what the private sector owes abroad). All the debts.

You want some? You can buy them. Maybe you already have, if you own a federal government bond. They’re really boring, but boring means "safe" in finance. And they’re great since they allow the government to inject value into the economy and toward the people now, rather than later. Like all loans.

That’s why politicians often spend more than they have. People love them for it. They enjoy the benefits...until they don’t, when the public debt gets too big. Cue: sovereign debt crisis.

For instance, Greece. They took on too much public debt, and asked the EU to pay the loans, like an unemployed child asking parents to help with their rent. The EU then said "have some austerity measures," cutting spending to pay for its loans. However, this slowed the economy and tax revenues...not good. Not good for Greece, but also not good for the EU.