Showing posts with label Our National Debt. Show all posts
Showing posts with label Our National Debt. Show all posts

Thursday, October 15

OUR National Debt

                                                  

Understanding the Debt

When the federal government runs a deficit, Treasury borrows money to make up the difference between spending and revenue. Then, if special funds like the Medicare trust fund have surpluses, the “extra” revenue is lent to the rest of the federal government.

The federal debt is the total amount of money that the federal government owes, either to its investors or to itself. At the end of fiscal year 2019, the total federal debt was $22.8 trillion dollars.


How the Federal Government Borrows Money

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:
  1. Backed by the full faith and credit of the United States government
  2. Offered in a wide range of maturities
  3. Exempt from state and local taxes
  4. Mostly marketable, meaning they can be resold in the financial market (a small portion are nonmarketable and can’t be resold, like U.S. Savings Bonds).
Investors can easily trade Treasury securities because there are many people interested in buying and selling them at any given time. Investors are willing to pay more for this safety and liquidity—leading to lower borrowing costs (interest on the debt) for the government.

More than 75 percent of foreign holdings of Treasury securities can be attributed to 14 countries. China (excluding Hong Kong and Macau) and Japan have the largest holdings. However, this does not mean that residents of these countries are the ultimate owners. The data only identify where the securities are held. Obtaining accurate information on the actual foreign owners is often not possible, because chains of foreign financial intermediaries are often involved in the custody or management of these securities.