As usually defined, this denotes the total sum of the outstanding debt obligations of a country's central government. (But occasionally writers may use the term somewhat more broadly to refer to the total indebtedness of all levels of government, including regional and local governments, and sometimes also the indebtedness of government owned business entities such as local transit and communications systems or nationalized industries as well.) The national debt represents the accumulated total of all the government budget deficits of past years, less the accumulated total of all the government budget surpluses of past years. For most developed countries, such as the United States, the national debt consists almost entirely of interest-bearing ";IOU"; instruments that are usually re-sellable on organized financial markets (such as, for example, U.S. bonds, U.S. treasury notes, and U.S. treasury bills). These IOUs are originally purchased from the Treasury by private individuals, private corporations, insurance companies, pension funds and banks (both inside the United States and outside its borders), and the Treasury then uses the money thus raised to bridge its spending gap when its budget is in deficit. (The Treasury also sells IOUs to other Federal agencies that operate so-called trust funds -- primarily the Social Security Administration and other Federal retirement programs -- but since this is money that the government ";owes to itself,"; it is not counted as part of the national debt in any realistic system of accounting.) Money to pay the annual interest owed to the owners of the government's debt instruments has to be provided through appropriations in every year's Federal budget and, indeed, these interest payments on the national debt nowadays always constitute one of the two or three largest spending categories in the budget.

[See also: budget deficit, budget surplus, monetary policy, open market operations, Federal Reserve System]