A Note on the Real Federal Deficit

Two alternative ways of extracting a measure of the real federal deficit from a measure of the nominal federal debt are discussed. One equates the real federal deficit to the real value of the change in the nominal debt. Aspects of the issues of crowding out, the use of the deficit as an indicator of fiscal policy, and the feasibility of permanent deficits are taken up to show that both measures are important and neither is merely the wrong way to calculate the other.