Who does the US owe money to? 2020 update I Up to Us (2024)

The federal debt currently exceeds $23.4trillion. It's estimated that it could grow by an additional $13 trillion before 2028. The current level of spending is unsustainable, and experts agree that the current deficit will have disastrous consequences for the economy.

The US basically owes money to two groups:

  1. The public

  2. Intragovernmental holdings

How does the federal debt work?

The government finances the operation of the different federal agencies by issuing treasuries. The Treasury Department is in charge of issuing enough savings bonds, Treasury bonds, and Treasury inflation-protected securities to finance the government's current budget.

Revenues generated by taxes are used to pay the bonds that come to maturity. Investors, including banks, foreign governments and individuals, can cash in on these bonds when they reach maturity. The debt ceiling is the cap that is set on what the Treasury Department can issue.

Congress keeps raising the debt ceiling to finance government spending. A deficit occurs when spending increases faster than revenues.

Who owns this debt?

The public owes 74percent of the current federal debt. Intragovernmental debt accounts for 26percent or $5.9 trillion. The public includes foreign investors and foreign governments. These two groups account for 30 percent of the debt. Individual investors and banks represent 15 percent of the debt.

The Federal Reserve is holding 12 percent of the treasuries issued. The Federal Reserve has been purchasing these bonds to keep interest rates low after the 2008 Financial Crisis. States and local governments hold 5 percent of the debt.

Foreign governments who have purchased U.S. treasuries include China, Japan, Brazil, Ireland, the U.K. and others. China represents 29 percent of all treasuries issued to other countries, which corresponds to $1.18 trillion. Japan holds the equivalent of $1.03 trillion in treasuries.

Investing in U.S. treasuries is a deliberate strategy for foreign countries. China has been using these bonds to keep the Yuan weaker than the U.S. dollar and benefit from low import prices. Intragovernmental debt encompasses different funds and holdings.

Some agencies take in revenues and use this money to purchase treasury bonds. This makes the revenues usable by other agencies, and these bonds can be redeemed in the future when these funds and holdings need money.

Social security and disability insurance accounts for half of the intragovernmental debt. Medicare accounts for 3 percent, and retirement funds for the military and civil servants represent 36 percent of this debt.

What are the consequences of the current deficit level?

Borrowing at this rate is causing the cost of debt to increase. Securing additional funds is becoming increasingly difficult, and the government is faced with higher interest rates. It is estimated that the interest alone on the current federal debt will reach $7 trillion over the next 10 years.

Who does the US owe money to? 2020 update I Up to Us (3)

By 2026, interest would represent the third largest category in terms of government spending. Higher interest rates are creating a snowball effect that results in the debt growing at an increasingly faster pace. High interest rates are also affecting consumers who end up spending more on mortgages and other loans.

The federal deficit will also impact economic growth and the private sector. A deficit means there are less funds available for projects that would dynamize the economy, such as financing construction projects to improve the country's infrastructure.

The government is also flooding financial markets with treasuries, which means the private sector will have an increasingly hard time with securing funds from investors.

Want to know more about the consequences of the current deficit level? Check our charts about the national debt and its effects.

What can you do about this issue? Take action!

There are currently no plans to reduce federal spending or increase revenues. This is an issue that will affect future generations and greatly reduce economic growth for the years to come. Net Impact has been raising awareness on this issue and advocating for responsible fiscal policies with our Up to Us program. You can make a difference by hosting an event in your campus and raising awareness of our fiscal future.With the 2020 election coming up, it is important that we are informed on how our votes can shape our future. Check out the 2020 Election page to learn more about fiscal issues, voter registration, and how to get involved with this year's election.

Who does the US owe money to? 2020 update I Up to Us (2024)

FAQs

Who does the US owe money to? 2020 update I Up to Us? ›

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 exactly is the US indebted to? ›

Many people believe that much of the U.S. national debt is owed to foreign countries like China and Japan, but the truth is that most of it is owed to Social Security and pension funds right here in the U.S. This means that U.S. citizens own most of the national debt.

Who does the US government borrow money from? ›

The federal government borrows money from the public by issuing securities—bills, notes, and bonds—through the Treasury. Treasury securities are attractive to investors because they are: Backed by the full faith and credit of the United States government. Offered in a wide range of maturities.

Where does the U.S. debt come from? ›

The National Debt Explained

money from federal income tax), a budget deficit results. To pay for this deficit, the federal government borrows money by selling marketable securities such as Treasury bonds , bills , notes , floating rate notes , and Treasury inflation-protected securities (TIPS) .

Does the US owe its citizens money? ›

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. In very basic terms, this can be thought of as debt that the government owes to others plus debt that it owes to itself.

Who is America in debt to and why? ›

Japan and China have been the largest foreign holders of US debt for the last two decades. Japan and China held almost 50% of all foreign-owned US debt between 2004 and 2006. However, this has declined over time, and as of 2022 they controlled approximately 25% of foreign-owned debt.

How much does China owe US? ›

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 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.

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

As of 2021, the Trust Fund contained (or alternatively, was owed) $2.908 trillion. The Trust Fund is required by law to be invested in non-marketable securities issued and guaranteed by the "full faith and credit" of the federal government. These securities earn a market rate of interest.

How can the US pay off its debt? ›

Tax hikes alone are rarely enough to stimulate the economy and pay down debt. Governments often issue debt in the form of bonds to raise money. Spending cuts and tax hikes combined have helped lower the deficit. Bailouts and debt defaults have disadvantages but can help a government solve a debt problem.

What country has the highest debt? ›

At the top is Japan, whose national debt has remained above 100% of its GDP for two decades, reaching 255% in 2023.

When was the last time the US did not have a deficit? ›

The terms “national deficit”, “federal deficit” and “U.S. deficit” have the same meaning and are used interchangeably by the U.S. Treasury. A surplus occurs when the government collects more money than it spends. The last surplus for the federal government was in 2001.

Does Britain still owe America money? ›

How much does the UK owe the US? Financially, nothing. All financial debts including interest from WW2 have been repaid. If it was not for Britain the USA would have found themselves at war with Europe, Japan, Italy, most Arab States and every powerful nation in the world.

What countries still owe the US money? ›

China owes the United States $1.3 trillion, which is the most debt out of all the countries that are its debtors. Japan was the primary debt holder until 2008, but now comes in second place, with $1.2 trillion. Other countries with outstanding U.S. debt include Russia, India and South Korea.

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 does the US owe the most debt to? ›

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.

Who is the most indebted country in the world? ›

Japan has the highest percentage of national debt in the world at 259.43% of its annual GDP.

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