Who Owns the U.S. National Debt?
How do you feel about the national debt?
The U.S. national debt surpassed $22 trillion for the first time this February, which has led many Americans to ask who it is that the federal government owes so much money to.
Of the $22 trillion in gross federal debt, about $16 trillion is “debt held by the public” ― which is debt issued by the Treasury as securities (i.e. Treasury bonds) in capital markets. According to the Congressional Budget Office (CBO), at the end of 2018 about 60% of the national debt was held by domestic investors while the remaining 40% was held by foreign investors. Here’s how the debt held by the public broke down:
- U.S. individuals and households held 17% of the debt (~$2.7 trillion);
- The Federal Reserve held 15% of the debt (~$2.5 trillion);
- U.S. mutual funds held 12% of the debt (~$2 trillion);
- U.S. financial institutions, pension funds, and state & local governments combined to hold roughly 16% of the debt (~$2.7 trillion);
- China and Japan held 14% of the debt between them (~$1.3 trillion & $1 trillion, respectively);
- The next eight largest foreign debt holders collectively held about 12% of the debt (~$1.8 trillion);
- All other nations collectively held about 14% of the debt (~$2.1 trillion).
The national debt has grown rapidly in recent years because the federal government has run sizeable budget deficits that are largely driven by mandatory spending, which includes programs like Social Security, Medicare, and servicing the national debt (which is expected to cost $383 billion this year).
This chart from USAFacts shows the growth in the national debt over the last few decades broken down by groups of debt holders:
To give you a sense of recent trends in foreign investment in U.S. debt, this chart from USAFacts shows the amount of Treasury securities held by China, Japan, and other nations since 2000:
— Eric Revell
(Photo Credit: iStock.com / Jitalia17)
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