General Discussion
In reply to the discussion: Should the Bush tax cuts be allowed to expire? [View all]cthulu2016
(10,960 posts)The deficit is how much we have to borrow in a given year to cover our spending.
The debt is the total amount of money owed from all past borrowing.
So the two are not interchangeable, but they often getting conflated in conversation.
Say we had instituted a tax that increased government revenue by $500 billion in 2014, and we changed nothing else. The deficit in 2014 would be $500 billion less.
That's all I meant.
That wouldn't address any existing debt, but it would reduce how much we will borrow in 2014.
If I was sloppy and said debt instead of deficit I apologize.
In a theoretical world where we had no deficit and a budget surplus we could pay down outstanding debt, but it would make little sense to do so. Our bonds are not like paying the minimum on a credit card where it will never be paid off. They are paid back in such a way that they are discharged entirely in ten years or thirty years -- whatever the term of the bond is.
If we did, for some unwise reason, decide to pay outstanding debt ahead of schedule we would just buy bonds on the open market and then we would be paying off the bonds to ourselves. (Tearing up the bond would have the same effect... since we are paying off the bond to ourselves the net transaction equals zero.)
If we did that (we never will, but if) it would not reduce the amount of dollars, just redirect where they were going. It would be deflationary, but not for money-supply reasons.
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