CNN: We’ve spent years and years in US politics worrying about the national debt, which is going to hit $22 trillion any day. $22 trillion sounds like so much money and the rate at which the debt has been increasing seems to be speeding up. Why is this not such a big deal?

Kelton: Few people understand what the national debt is, and most people tend to conflate government deficits with the national debt. So let’s start by clarifying these terms. The national debt is nothing more than a historical record of all the dollars that were spent by government but not taxed back. When the government spends more than it collects in the form of taxes (and other payments), we label it “deficit spending.” But that’s only part of the story. To complete the picture, suppose the government spends $100 into the economy but only taxes $90 back out. The result is a surplus equal to $10 that shows up somewhere in the non-government part of the economy. In other words, the government’s “red ink” becomes our “black ink.” Their deficits are our financial surpluses. So where does the “debt” come into play? Whenever the government runs a deficit, it sells government bonds called U.S. Treasuries. This is usually referred to as “borrowing,” but that’s actually misleading. What’s really happening is that the government is allowing people to trade in their dollars for a bond that pays some interest. A pretty good deal if you happen to be lucky enough to hold some of that $22 trillion.