National Debt

National debt is the total a government owes. Spending more than it collects in tax means issuing bonds to cover the gap, and those accumulate into the debt stock.

It is judged as a ratio to gross domestic product rather than by absolute size, since a larger economy can carry more debt — the same logic as comparing a person's borrowing to their income.

Debt itself is not the problem. Government borrowing supports the economy in a downturn, and infrastructure spending raises future productivity. What matters is the scale, the use, and whether the interest is affordable.

As debt grows, interest payments crowd out the budget. Money that would fund education or welfare goes to interest, forcing more borrowing — and a credit downgrade raises the rate as well.

Whether the borrowing is in domestic currency matters too. Local-currency debt can, at worst, be repaid by printing money, though prices surge. Foreign-currency debt allows no such escape and is far more dangerous.