The official federal deficit numbers won't be out until next week, but based on this AP story [1] we can already anticipate one point of confusion that makes it harder for the public to deal with this issue.

The AP story reports that the deficit will probably be less than anticipated, because the White House doesn't feel the need to spend another $250 billion on bank bailouts. In a broad economic sense, there is a nugget of good news there; this means the financial system is stabilizing and doesn't need to be propped up with federal money.

But we're still talking about a $1.58 trillion deficit, triple what it was last year. Almost all fiscal experts say steep deficits are inevitable in the short term [2], because of the "great recession" and the need to pump federal money into the economy.

But this does go to one of the most confusing points for the public, which is a falling deficit may be progress but is still essentially bad news. A deficit occurs whenever the government spends more than it takes in – which is almost all the time, in good years and in bad [3]. Whenever that happens, the government borrows money to cover its bills, which adds to the national debt [4]. The only time we're not adding to the national debt is during those rare years when the budget is balanced – and there's no way the budget is going to be balanced this year, or in the near future.

Over the long term, the national debt is the real problem [5], because if nothing is done it's going to get too big to handle. We're already at more than $11 trillion and counting, plus we have enormous expenses coming up to cover Medicare and Social Security as the baby boomers retire. Warren Buffet [6], among others, has been raising the alarm on this problem, and our Students Face Up to the Nation's Finances [7] initiative is all about dealing with it.

In the end, it's not this year's deficit that's the core problem. It's the question of how we're going to turn this around in the long run, and whether we as a nation have the nerve to do what needs to be done [8].