Deficits (or surpluses), debt, and interest are three central budget concepts. For any given year, the federal budget deficit is the amount of money the federal government spends minus the amount of revenue it takes in. The deficit drives the amount of money the government must borrow in any single year, while the debt is the cumulative amount of money the government has borrowed throughout our nation’s history — the net amount of all government deficits and surpluses. The interest paid on this debt is the cost of government borrowing.
