5.2.3—National debt

National debt is the outstanding stock of government borrowing. Persistent deficits add to it; surpluses can reduce it, although interest and refinancing also matter.

Debt is often judged relative to GDP because a larger economy has a larger potential tax base. The burden depends on interest rates, growth, maturity, currency, and what the borrowing financed—not simply on the headline amount.

A government can run a deficit of 5 this year and add roughly that flow to debt, while debt-to-GDP still falls if nominal GDP grows faster than the debt stock.

Debt is not the same as the annual deficit, and borrowing for productive investment need not have the same consequences as borrowing for persistent current spending.