Deficit vs. Debt vs. Debt-to-Income

A lot of people ask a question like this:

Great video, However, in the video you include Jimmy Carter as reducing the deficit.  As much as I like Jimmy Carter, his administration started out with a deficit left over from Ford of $ 77 billion and ended up with a deficit of $ 85 billion.  If I’m wrong let me know.

The Answer:

Off the top of my head, I think you are, as you say, talking about the deficit. The video is about the debt, and more specifically about the debt as a % of GDP. So I think you are probably right about the deficit. That's how much the debt increases from one year to the next (and there are various definitions of debt--I use the one the Republicans use and put on the national debt sign in NY -- the big one).

OK, so your deficit numbers tell us hat the debt was going up every year -- what gives? Well that's right, but the countries income was going up every year. Under Carter is was going up really fast because of inflation > 10% and normally the economy grew (in a real sense -- inflation is fake growth) by 3%. So over 4 years the economy got much bigger.

So even though the debt was getting bigger,  we were getting bigger much faster. When you are 10 years old, a $1000 debt is a big deal. When you're 30, you many have a $100,000 mortgage and that may be not a problem at all. You are far bigger economically when you are 30, so a much bigger debt is, in effect much smaller.  Watch the first part of video again. It explains a little more.

Also the $85 billion was probably worth a lot less than the $77 billion due to inflation.