Public debt
Public debt is the total sum of money owed by a country’s government,
including its historic debt. Nations with big economies and large tax-
paying populations can carry more debt than those without.31 %
of total global debt
is owed by the US
How it works
The total amount borrowed by a country’s government
(and by all its previous governments) is known as the
public or national debt. This is generally calculated as
the total debt minus the government’s liquid assets.
Interest is due on this debt, and it can be substantial.
If a government spends more than it collects in taxesBig economy
A larger economy,
such as the US,
can safely carry a
larger debt, since it
has more capacity
to raise taxes.in one year, it will be in deficit. Any money it borrows
to cover this is then added to the public debt. When
the government spends less than it collects in taxes in
a year, it has a “surplus”, which can be used to pay off
the debt. Inflation can also help reduce a debt burden.
A state that becomes unable to pay its debt is said to
“default”, and will find it hard to borrow again.DEBTCarrying debt
Governments usually repay debt using
taxes. The more money that they raise,
the faster they can repay it. The larger
a country’s economy, the more debt it
can safely hold, since a bigger economy
is able to gather more taxes.Medium
economy
A smaller
economy can
only support
lighter debts.DEBT DEBT110-111_Public_Debt.indd 110 13/10/2016 15:35