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.

Who does the US owe $31 trillion dollars to? ›

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 owes the United States 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.

Who does the US Treasury 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.

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.

Does China owe US money? ›

The United States pays interest on approximately $850 billion in debt held by the People's Republic of China.

How much U.S. debt does China own? ›

China is one of the United States's largest creditors, owning about $859.4 billion in U.S. debt. 1 However, it does not own the most U.S. debt of any foreign country. Nations borrowing from each other may be as old as the concept of money.

What happens if China dumps US bonds? ›

If China (or any other nation that has a trade surplus with the U.S.) stops buying U.S. Treasuries or even starts dumping its U.S. forex reserves, its trade surplus would become a trade deficit—something which no export-oriented economy would want, as they would be worse off as a result.

Who does the US owe all its debt 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.

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 is the largest buyer of US debt? ›

Top Foreign Owners of US National Debt
  • Japan. $1,098.2. 14.52%
  • China. $769.6. 10.17%
  • United Kingdom. $693. 9.16%
  • Luxembourg. $345.4. 4.57%
  • Cayman Islands. $323.8. 4.28%

How much money has the government borrowed from the Social Security Fund? ›

The fact is that Congress, despite borrowing $2.9 trillion from Social Security, hasn't pilfered or misappropriated a red cent from the program. Regardless of whether Social Security was presented as a unified budget under Lyndon B.

Why is China selling US treasuries? ›

Selling Treasurys is a fast way to whip up U.S. dollars, and China will sometimes use extra dollars to go out on the global market and buy up their own currency. That artificially pumps up its value. It's like planting someone at an auction to drive up your prices. That's one idea.

How will America get out of debt? ›

Most include a combination of deep spending cuts and tax increases to bend the debt curve. Cutting spending. Most comprehensive proposals to rein in the debt include major cuts to spending on entitlement programs and defense.

Can America pay off its debt? ›

Under current policy, the United States has about 20 years for corrective action after which no amount of future tax increases or spending cuts could avoid the government defaulting on its debt whether explicitly or implicitly (i.e., debt monetization producing significant inflation).

Which country has the highest debt? ›

Japan consistently ranks among the countries with the highest national debt. In 2022, the nation's debt was estimated at almost 10 trillion U.S. dollars , while it's GDP is just 4.2 trillion . The Japanese government is currently spending around half of its total tax revenue on servicing its massive debt.

Who holds the $30 trillion US debt? ›

Approximately one quarter, or $7.75 trillion, is held by non-U.S. foreigners. This leaves roughly 75% held by U.S. citizens and our public and private institutions, a percentage allocation not unusual, relative to most countries' sovereign debt holdings.

Why is the US 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.

How much money does the US owe to everyone? ›

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.

Why is the US 30 trillion in debt? ›

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.

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