From: Federal Budget Spending, Deficits, and the National Debt
--- "Deficit" vs. "Debt"---
Suppose you spend more money this month than your income. This situation is called a "budget deficit". So you borrow (ie; use your credit card). The amount you borrowed (and now owe) is called your debt. You have to pay interest on your debt. If next month you spend more than your income, another deficit, you must borrow some more, and you'll still have to pay the interest on your debt (now larger). If you have a deficit every month, you keep borrowing and your debt grows. Soon the interest payment on your loan is bigger than any other item in your budget. Eventually, all you can do is pay the interest payment, and you don't have any money left over for anything else. This situation is known as bankruptcy.
If the DEFICIT is any amount more than ZERO, we have to borrow more and the DEBT grows. "Reducing the deficit" is a meaningless soundbite.
Each year since 1969, Congress has spent more money than its income. The Treasury Department has to borrow money to meet Congress's appropriations. Here is historical deficits chart. We have to pay interest* on that huge, growing debt; and it cuts into our budget big time.
Some suggest "tax the rich to make up the deficit". As of the end of 2010, the total worth of all American billionaires is $1.3 Trillion. We could take ALL their worth, not just high taxes, but ALL their WORTH; and it wouldn't dent our national debt. It wouldn't even pay this year deficit! And if we did take their money to pay some of this year's deficit, what would we we do next year?
The debt, and Interest payments on the rising debt will be paid by our children and grandchildren through much higher taxes. Is that Child Abuse?