The fact of the matter is that the budget deficit is really a non-issue that both parties use to beat each other over the head as an exercise to inflame the voters one way or the other. We owe that money, but overwhelmingly, we owe it to ourselves.
It's a bit like taking money out of your Christmas fund to boost your checking account. Is there a deficit? Yes, but what if you never pay it back? Nothing really happens in the long run, and so it is with the Federal deficit. Since we control the value of the dollar now (as opposed to several years ago, when we were still ont he gold standard), there is no real need to worry about many of them we owe ourselves. It simply doesn't matter any more.
Of course, through the sense of stability, the rise and fall of the deficit has short term effects on things such as interest rates and market demand, but those issues are going to seek their own natural levels of competition in an open market setting. Some people would lose money in a big, temporary fluctuation, but a lot of others would make money in the long run.
There is a small percentage of debt that we owe to foreign nations in the form that they have purchased T-bonds, T-bills, and T-notes. There are those of the American population who have bought those over the years as well. However, this amounts to a tiny portion of the national debt, and could be completely paid off with just a minimal effort, once the interest on the current national debt was disavowed.
As to why we run a deficit in the first place, it really goes beyond the simple overspending ideas that are perpetuated on the news broadcasts. In a reccession period, the very best thing the government can do is to overspend. Why? Because to do so is to pump money into the economy as quickly as possible so as to jump start it. If we were to run a positive balance during slow economic times, that takes money out of the system, thereby slowing the chances for recovery.
Also, the government overspends on the case by case scenarios on purpose so as to help economic considerations. Remember the $400.00 toilet lids of the '80s? No one is so dense as to actually spend that much accidentally. Those prices kept assemply lines up and running while we were trying to extricate ourselves from one of the worst reccession periods since the '30s. In 1979-80, we were at double-digit inflation, double-digit interest rates, and double-digit unemployment. It was a very bad economic outlook, to say the very least! So, we spent and spent until the spending caused the spark of the economic recovery we saw. Did we rake up a huge debt? Absolutely, but it was the longest period of non-wartime economic growth the country had EVER seen!
Deficits (or surpluses) simply do not matter in the long run.
