Who Owns the U.S. Debt?
The national debt is the sum total of historical budget deficits. When more money is spent in a fiscal year than is earned by the government, the excess for the year is an annual deficit. The deficit each year is added to the existing debt; the United States Treasury borrows money to cover the deficit by selling bonds.
Other People Are Reading
-
The Facts
-
The owners of U.S. Treasury bonds are the owners of the debt. They are summarized by the Financial Management Service of the Department of the Treasury, in a quarterly Treasury Bulletin. As of September 2009, the latest complete figures available were from the previous March:
Total outstanding debt: $11,126.9 billion. (This is equal to $11.1 trillion.) Owned by other federal government agencies: $4,785.2 billion; privately owned: $6,341.7 billion.
The private debt is owned as follows: banks, $127.5 billion; owners of U.S. savings bonds, $194 billion; private pension funds, $302.5 billion; state and local government pensions, $177.3 billion; insurance companies, $149.5 billion; mutual funds, $717.1 billion; state and local governments, $526.3 billion; foreign government and private owned, $3,267 billion; other, $880.5 billion.
History
-
At the beginning of 1790, the federal debt stood at just under $53 million, which the government borrowed to pay its first payroll; it increased when the new government assumed the debts incurred by the Revolutionary War. These debts were paid off by 1835. Large additional deficits were incurred during subsequent wars: the Civil War, World War I, and World War II; the current national debt dates back as far as the Civil War.
-
Size
-
The national debt has been growing since World War II when measured in dollars, but the changing value of a dollar due to inflation makes this an unclear measure. The federal debt, therefore, is usually not evaluated in dollar terms, but as a percentage of the nation's gross domestic product: the sum total of what the American economy produces in that year. The national debt peaked at 120 percent of GDP after World War II, reached a low of 30 percent during the 1970s, and rose to 80 percent of GDP after the bailout and stimulus expenditures of 2009.
Misconceptions
-
Unlike the debt of a private entity or individual, it is not the goal of the federal government to get out of debt entirely. United States bonds are the safest investment instrument in the world, and they act as a stabilizer for the world's financial markets; paying off our debt, even if it were possible, would mean that this secure investment was no longer available. This is why $4.8 trillion in federal debt is owned by the federal government itself.
Significance
-
Outstanding bonds require the payment of interest, so there is an ongoing cost to the United States for past debt. It remains a matter of contentious debate as to what amount of debt relative to GDP the United States should carry as a target in years to come.
-
