Who does the U.S. owe $31.4 trillion? - Marketplace (2024)

The debt limit is the amount of money the Treasury can borrow to meet its obligations. The deadline for Congress to lift the limit, lest the U.S. default, is quickly approaching. Chip Somodevilla/Getty Images

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Listener David Friedli from Murray, Nebraska, asks:

The debt limit: Who do we owe money to? Do other countries owe us money? Has anyone ever defaulted on their debt to us? Why is it that the United States’ budget and debt limit are on different timelines … wouldn’t it make great sense to have them both tied to the same deadline, perhaps forcing Congress and the executive branch to see them as one issue, not two separate discussions?

Treasury Secretary Janet Yellen has announced June 5 as the new deadline for when the U.S. could default on its debt, which she and many other experts say could lead to catastrophic economic consequences.

So far, the White House and Congress have failed to reach a deal to raise the government’s borrowing limit due to demands for steep spending cuts from Republican officials. Earlier this year, the U.S. hit the $31.4 trillion debt ceiling, which is the amount it’s allowed to borrow to pay existing obligations, like Social Security, Medicare benefits and military salaries. A default could mean a delay in these payments, higher borrowing costs throughout the economy, greater volatility in the stock market and a range of unpredictable effects.

But late Friday, President Joe Biden said a deal to increase the debt limit was close. Since 1960, that limit has been upped or extended about 80 times, and the nation has never defaulted. “There’s a negotiation going on,” Biden said. “I’m hopeful we’ll know by tonight whether we’re going to be able to have a deal.”

Here’s a look at how the debt breaks down:

First, the debt held by the public stands at more than $24.64 trillion. This represents debt securities, like Treasury bonds and notes, bought by banks, insurance companies, state and local governments, foreign governments and private investors.

The remaining debt, which totals about $6.83 trillion, can be classified as intragovernmental holdings. This is basically debt the government owes itself. “For example, some federal trust funds invest in Treasury securities, thereby lending money to [the] Treasury,” according to the U.S. Government Accountability Office. The Social Security Administration, the Department of Defense and the United States Postal Service all have investment holdings in federal debt.

In total, other territories hold about $7.4 trillion in U.S. debt. Japan owns the most at $1.1 trillion, followed by China, with $859 billion, and the United Kingdom at $668 billion.

In isolation, this $7.4 trillion amount is a lot, said Scott Morris, a senior fellow at the Center for Global Development. “But the way an economist would look at this is to say, ‘Well, how does that compare to the size of our economy?’” he said.

And when you do that, the amount of debt we owe other countries is not “particularly problematic,” Morris said.

The United States supported China’s entrance into the World Trade Organization at the turn of the millennium, which led to an export boom of Chinese goods into the U.S. China ended up parking much of its sales in U.S. Treasurys, CNN reported, because of their perceived safety as an investment. By 2008, China had overtaken Japan as the largest foreign holder of U.S. debt.

But over the past decade, Japan reclaimed its top spot. Like China, Japan also sells lots of goods to the U.S. and then invests much of the proceeds in U.S. Treasurys, explained Insider.

Has anyone defaulted on their debts to us?

Anna Gelpern, a professor at Georgetown University Law Center, said over email that many countries have owed us money and paid it late. She pointed to Britain, which took more than 60 years to pay off a $4.3 billion U.S. loan to refinance the battered country at the end of World War II. The final payment was made six years after it was supposed to come in.

In the 1930s, the country also defaulted on debt to the U.S. that it had accrued during World War I. This had lasting consequences, according to author David James Gill, with London being frozen out of U.S. securities and money markets.

But when a country is struggling to repay the money it’s borrowed, the debt might be rescheduled or even forgiven, Morris noted.

“When it comes to one government owing money to another government, you may never see a moment that is called ‘default,’” he said.

The United States has forgiven debt owed by other countries, like it did with Iraq in 2004, shortly after President George W. Bush invaded the country. In late 2000, President Bill Clinton signed a law that would "forgive or alleviate" $435 million worth of debt for the world's poorest countries.

Why don't we address the debt limit when passing the budget?

The president is supposed to submit a budget to Congress by the first Monday in February every year. Naturally, this includes estimates of the government’s income and spending. Congress is then tasked with agreeing on a joint budget resolution by April 15. But if it fails to do so by May 15, a House committee can begin the appropriations process.

If appropriations aren’t done by the start of October, then federal agencies without an appropriation can be funded through continuing resolutions, according to the Tax Policy Center.

But even though a budget has been approved, the Treasury’s ability to borrow the money to fund government operations can bump up against the debt ceiling. In the early 20th century, Congress enabled the Treasury to issue bonds without congressional approval — up to a certain amount — to provide greater flexibility. Thus, the birth of the debt ceiling.

But what was supposed to give the Treasury flexibility has become a tool for what people call political gamesmanship. To solve this issue, the Bipartisan Policy Center has proposed an approach that would link the debt limit to the annual budgeting process.

The BPC says that if Congress adopts a budget resolution by April 15, legislation to suspend the debt limit should be sent to the president. If Congress doesn’t, then the president should be able to ask Congress for a debt limit suspension that would last till the end of the fiscal year.

A bipartisan bill known as the Responsible Budgeting Act, which ties these goals together, was introduced in Congress in 2021 and endorsed by the BPC. Under the bill, a concurrent budget resolution should meet “a certain fiscal threshold” by reducing the ratio of debt to gross domestic product by at least 5 percentage points in the 10th year.

“These recurring debt limit episodes showcase that there really is no time on the congressional calendar that lawmakers have set aside to really debate about our future fiscal path,” said Rachel Snyderman, director of economic policy at BPC.

Attempts to align the debt limit and budget-making have been difficult because it would require reform to the budget process itself, Snyderman said. She added that it’s already tough enough for Congress to pass 12 appropriation bills each year for discretionary funding.

But there are some lawmakers and groups, including the Center on Budget and Policy Priorities, who say the United States should abolish the debt limit entirely so we don’t run into this issue.

"Using the debt ceiling as a bargaining chip is always irresponsible, but it’s especially dangerous given recent turmoil in the banking industry and interest-rate increases by the [Federal Reserve] to address inflation," the CBPP wrote on its website.

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Who does the U.S. owe $31.4 trillion? - Marketplace (2024)


Who does the U.S. owe $31.4 trillion? - Marketplace? ›

This represents debt securities, like Treasury bonds and notes, bought by banks, insurance companies, state and local governments, foreign governments and private investors. The remaining debt, which totals about $6.83 trillion, can be classified as intragovernmental holdings.

Who does the US owe its $31 trillion debt? ›

The public owes 74 percent of the current federal debt. Intragovernmental debt accounts for 26 percent or $5.9 trillion. The public includes foreign investors and foreign governments. These two groups account for 30 percent of the debt.

Who owns the 34 trillion U.S. debt? ›

The $34 trillion gross federal debt includes debt held by the public as well as debt held by federal trust funds and other government accounts.

Who is the buyer of the U.S. debt? ›

The major international owners of US debt include Japan ($1.1T), China, UK, Belgium, Switzerland, Cayman Islands and smaller amounts from the rest of the world. After the recent weak treasury auction, US government officials warned that they are seeing waning demand from international buyers.

Who owes the US the most money? ›

Among other countries, Japan and China have continued to be the top owners of US debt during the last two decades. Since the dollar is a strong currency that is accepted globally, holding a substantial amount of US debt can be beneficial.

How much does China owe the United States? ›

The United States pays interest on approximately $850 billion in debt held by the People's Republic of China. China, however, is currently in default on its sovereign debt held by American bondholders.

Why does America owe China money? ›

China focuses on export-led growth to help generate jobs. To keep its export prices low, China must keep the renminbi low compared to the U.S. dollar. U.S. debt to China comes in the form of U.S. Treasuries, largely due to their safety and stability.

How much does the US government owe for social security? ›

As of December 2022 (estimated), the intragovernmental debt was $6.18 trillion of the $31.4 trillion national debt. Of this $6.18 trillion, $2.7 trillion is an obligation to the Social Security Administration.

Which country has no debt? ›

1) Switzerland

Switzerland is a country that, in practically all economic and social metrics, is an example to follow. With a population of almost 9 million people, Switzerland has no natural resources of its own, no access to the sea, and virtually no public debt.

Who has the most debt on earth? ›

United States. The United States boasts both the world's biggest national debt in terms of dollar amount and its largest economy, which resolves to a debt-to GDP ratio of approximately 128.13%.

Is China in more debt than the US? ›

Debt as a share of GDP has risen to about the same level as in the United States, while in dollar terms China's total debt ($47.5 trillion) is still markedly below that of the United States (close to $70 trillion). As for non-financial corporate debt, China's 28 percent share is the largest in the world.

Do countries still owe the US money from WWII? ›

The case of debts arising from World War II is somewhat less complicated. At this time only four countries, discussed below, owe the U.S. government debts of any size arising from World War II programs to aid our allies. Other countries have paid their debts in full.

Why is the US in so much debt? ›

One of the main culprits is consistently overspending. When the federal government spends more than its budget, it creates a deficit. In the fiscal year of 2023, it spent about $381 billion more than it collected in revenues. To pay that deficit, the government borrows money.

Why does the US owe 31 trillion dollars? ›

Two decades of tax cuts, recession responses and bipartisan spending fueled more borrowing — contributing $25 trillion to the total and setting the stage for another federal showdown.

Why is the government 31 trillion dollars in debt? ›

The federal government needs to borrow money to pay its bills when its ongoing spending activities and investments cannot be funded by federal revenues alone. Decreases in federal revenue are largely due to either a decrease in tax rates or individuals or corporations making less money.

Where does the U.S. debt come from? ›

Debt rises when the U.S. spends more than it earns from taxes and other revenue. The public debt results from tax and spending policies that commonly garner public support, but individuals often worry about how the national debt affects their lives and finances.

Why does the US owe so much money? ›

One of the main culprits is consistently overspending. When the federal government spends more than its budget, it creates a deficit. In the fiscal year of 2023, it spent about $381 billion more than it collected in revenues. To pay that deficit, the government borrows money.

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