At Marketplace, we try to help listeners and readers gain a better understanding of the economy. But in the world of business and economics reporting, it’s easy to get lost in the words and jargon we sometimes use on a daily basis.
So, let’s get back to basics. The following is a glossary of terms commonly used in Marketplace coverage — with definitions, deeper explanations and helpful links for more context. Click on the bullet points below to jump to the definitions of each term.
What are taxes?
The only certainty besides death? Just kidding. (Kinda.) Taxes are mandatory payments made to the government by businesses and individuals — sometimes taken out of earned money or tacked on to the cost of goods.
Tell me more.
Our tax dollars pay for things like the salaries of police, firefighters and teachers, the military, prisons, health insurance programs and Social Security, as well as the building and maintenance of schools, roads, bridges and parks. Tax rates are determined at the city, state and federal level and are determined by elected officials.
So what about Tax Day? Why do we have to file our taxes? The reason we file each April is to settle up with the government based on the tax code of our state and federal government. That means, depending on the amount taken out of our paychecks, we may have to pay a bill — meaning we owe money more to the government than was taken out of our pay or because we sold investments — or get a tax return, meaning the government took out too much money and we’re owed some back.
Many other countries do your taxes for you. The U.S. is somewhat of an outlier in this regard. Some states do offer free-file options for people with simple tax returns, though these are opposed by lobbyists for the tax preparation industry.
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What does this mean?
Paid for through payroll taxes, Social Security is the foundation of retirement for many retirees in the U.S. It is the federal retirement benefits program. The Social Security Administration also provides payments for folks with disabilities and surviving family members.
Why does this matter?
Social Security makes up the largest part of the national budget. It has long been called the third rail of politics because cuts to the program feel personal — so few politicians want to touch it.
Social Security is often referred to as an entitlement program, as is Medicare and Medicaid. Half of the U.S. budget comprises these three programs, costing the U.S. about $3 trillion a year. This makes entitlement programs significant in conversations about cutting national spending.
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How entitlements like Social Security and Medicare got so big
Social Security has funding problems. How do we fix it before benefits are cut?
Here’s what the impact of layoffs and site closures at Social Security could look like
Signing up for Social Security could soon feel like a trip to the DMV
Does Social Security increase the national debt? It depends on how you define “debt.”
How families, and not just retirees, depend on Social Security
What are these?
Medicare and Medicaid are two federal health insurance programs; Medicare provides coverage for older adults, while Medicaid covers health care for lower-income individuals. CHIP, or the Children’s Health Insurance Program, is an extension of Medicaid that provides health coverage for children.
OK, so what’s the big deal about them?
Medicare and Medicaid are major sources of government spending. The programs, along with Social Security, are so-called government entitlements — benefits paid or given out to U.S. citizens and permanent residents. For those who want to cut government spending, they can be big targets. But it’s important to note that they help provide care for more vulnerable populations in a country where health care is inordinately expensive. More than 66 million older Americans get coverage through Medicare, and more than 72 million Americans are enrolled in Medicaid and CHIP.
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Both Democrats and Republicans largely support funding Medicaid and Medicare, poll finds
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Here’s how it works if you’re undocumented and need health care
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A budget deficit occurs when money going out exceeds money coming in. When the federal government’s spending exceeds its revenue (taxes, customs duties, any other money it collects), it runs a deficit.
OK, what does this really mean?
Think of it like balancing your own budget: If you spend more money than you have, you end up in debt. When the fiscal year is up, if the federal government spent more than it made, it ends the year in a deficit.
For example, in fiscal year 2024, the government spent $6.75 trillion and brought in $4.92 trillion. The resulting budget deficit was $1.83 trillion.
Any money the government spends beyond its revenue for the year is referred to as “deficit spending.” The federal government borrows money to finance deficit spending, and then it owes that amount, plus interest.
When the government ends its fiscal year with more revenue than money spent, it’s called a budget surplus. That happened most recently in 2001.
Tell me more. Where does the deficit go?
Each year, any budget deficit — or surplus — is added to the national debt. The short version? We owe that money to ourselves. But foreign governments, individuals and other investors can buy the debt, and then the government owes the money to them.
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What does this mean?
The debt ceiling, or debt limit, is simply the amount of money the government is allowed to borrow, which the government uses to meet existing obligations — think things like military salaries, Social Security benefits, tax refunds or payments on national debts.
OK, so why should I care?
If Congress fails to raise or suspend the debt ceiling, it won’t cause a government shutdown. But it could mean a failure to pay Social Security benefits and federal salaries.
The debt ceiling dates back to World War I when the government had to figure out how to pay for the war effort in Germany. So Congress passed legislation allowing the Treasury Department to borrow money by selling war bonds to investors and the American public. The Treasury was free to sell the bonds, as long as the borrowing didn’t go over a certain amount, or a debt limit.
Historically, Congress raising the debt ceiling has been pretty blassé. But over the past several decades, the debt ceiling has begun sparking political battles over federal spending. While other nations limit debt, Denmark is the only other country besides the U.S. that sets a nominal debt ceiling.
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This project is supported by the funding of the Peter G. Peterson Foundation is a nonpartisan organization dedicated to raising awareness and accelerating action on America’s fiscal challenges to build a brighter economic future for the next generation. Learn more at PGPF.org.
