National debt

National debt is the total money a national government owes to domestic and foreign creditors accumulated through annual budget deficits when spending exceeds tax revenue. Governments fund deficits by issuing bonds and the total value of outstanding bonds forms the national debt. Headlines often focus on the absolute figure, such as $25 trillion for the US. But the debt to GDP ratio offers a clearer perspective on a country's capacity to manage and repay its debt. A high debt can be manageable for a large, growing economy but problematic for a smaller, stagnant one. When discussing national debt, it's important to clarify terminology as definitions vary by country. In the United States, gross federal debt is often used interchangeably with national debt while debt held by the public excludes amounts owed within government accounts like Social Security. The United Kingdom commonly uses as public sector net debt. Debt is also divided into external debt, which is owed to foreign entities and internal debt, which is held domestically. Unlike individuals, governments can refinance debt indefinitely and if they issue their own currency, can create money to meet obligations. Though this carries inflation risks. Borrowing allows governments to respond to downturns, finance public investment, and support services. However, persistent deficits and growing debt require regular interest payments which can crowd out other government spending.