How Much Debt Does the US Owe?

On December 31, 2017, the debt incurred by the United States was $20.5 trillion. Several headlines focus on the amount the US owes China. Most people don’t know about Social Security Funds (retirement money). These make up the largest elements of the US national debt. The treasury of the United States manages the debt through the Bureau of Public Debt. may help you to view a clearer picture of our national debt. The national debt is divided into two categories: debt taken on by the general public and intragovernmental holdings.

Intragovernmental Debt

This is a specific portion of the national debt owed to 230 federal agencies. A total $5.7 trillion intragovernmental holdings make up 28% of the national debt. The government is in debt to some agencies such as trust funds for social security. These agencies take more revenue from taxes than they need. Instead of sticking this cash under giant mattresses, these special agencies purchase US Treasury Bonds with this revenue.

They own treasury bonds and transfer their extra cash to general funds. They can redeem these treasury notes for currency. The government has to issue more debt or increase taxes to satisfy the needs of the agencies. The Social Security Administration owns the most treasury bonds.

Public Debt

The public is responsible for the rest of the $14.8 trillion debt. Foreign investors and governments hold half of this amount. Other government entities have almost 1/4th of this amount. These may include the Federal Reserve and local and state governments. Mutual funds, savings bondholders and private pension funds have a contribution of 16% in this debt. The remaining 7% belongs to insurance companies, banks, investors, and trusts.

Along with bonds, notes, and treasury bills, there are some treasury securities (inflation protected), and local and state government securities. Treasury debt becomes essential for retirement. Almost half of the Treasury debt of the United States is based on social security pensions and retirement funds. If the USA defaults on debts, foreign investors become angry. This situation would hurt present and future retirees. As per the central bank of the nation, the Federal Reserves are essential for the credit of the country.

Current Ownership of the USA Debt

China owned almost $1.14 trillion of US debt in October 2018. China is the largest holder of Treasury securities of the United States.  Japan also holds $1.023 trillion. Both China and Japan want to manage the higher value of the dollar than their currencies. They do this to increase the affordability of their exports for the USA. Despite the occasional threats of China to sell its possessions, both countries are satisfied to become the significant foreign bankers of America. China replaced the UK, the second primary foreign holder on 31 May 2007.

Government spending can increase its debt, and taxes play an important role in decreasing these debts. Treasury securities can’t be redeemed or issued on a regular basis. These are redeemed and released as a part of macroeconomic management operations of the federal government.