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)

FAQs

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. The remaining debt, which totals about $6.83 trillion, can be classified as intragovernmental holdings.

Who does the US owe its $31 trillion debt? ›

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 does the US owe money to? ›

What countries does the U.S. owe money to? The United States owes money to many countries, including Japan, mainland China, the U.K., Ireland, Luxembourg, Brazil, Switzerland and Belgium, among others.

Who is buying all the U.S. debt? ›

The international buying appetite has been falling over the past 10 years (dropping from 40% to the current 30%). The major international owners of US debt include Japan ($1.1T), China, UK, Belgium, Switzerland, Cayman Islands and smaller amounts from the rest of the world.

Who are the top owners of the US Treasuries? ›

The three largest holders of Treasuries -- Japan, China and the UK -- led the purchase U.S. government debt. Japanese investors raised their stash of Treasuries to $1.138 trillion in December, from $1.127 trillion in November, data showed. Their holdings were the largest since August 2022.

How much does China owe the US? ›

China is in default on a trillion dollars in debt to US bondholders. Will the US force repayment?

Who are the three biggest holders of U.S. debt? ›

Nearly half of all US foreign-owned debt comes from five countries. All values are adjusted to 2023 dollars. As of January 2023, the five countries owning the most US debt are Japan ($1.1 trillion), China ($859 billion), the United Kingdom ($668 billion), Belgium ($331 billion), and Luxembourg ($318 billion).

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.

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.

What country owns most of the United States? ›

Which countries own the most land in the U.S.?
  • CANADA. 31%
  • Other. 28%
  • NETHERLANDS. 12%
  • ITALY. 7%
  • UNITED KINGDOM. 6%
  • GERMANY. 6%
  • PORTUGAL. 3.6%
  • FRANCE. 3.2%
Mar 29, 2024

Who owns over 70% of the US debt? ›

Who owns the most U.S. debt? Around 70 percent of U.S. debt is held by domestic financial actors and institutions in the United States. U.S. Treasuries represent a convenient, liquid, low-risk store of value.

Who owns most of Americans debt? ›

Public debt is held by the public: individual investors, institutions, foreign governments. After intragovernmental holdings, the next largest category is national debt held by foreign governments. Of those, Japan has the most, followed by China.

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.

Does China own the US? ›

It's politically popular to say that the Chinese "own the United States" because they are such a huge creditor. The reality is very different than the rhetoric. If China called in all of its U.S. holdings, the U.S. dollar would depreciate, whereas the yuan would appreciate, making Chinese goods more expensive.

Who is buying US debt in 2024? ›

CharacteristicSecurities in billion U.S. dollars
Japan1,153.1
China, Mainland797.7
United Kingdom753.5
Luxembourg376.5
9 more rows
May 24, 2024

Why is everyone buying T bills? ›

A Treasury bill, or T-bill, is a short-term debt obligation backed by the U.S. Treasury Department. It's one of the safest places you can save your cash, as it's backed by the full faith and credit of the government. T-bills are auctioned off at a discount and then redeemed at maturity for the full amount.

How did the US get 30 trillion in debt? ›

Tax cuts, stimulus programs, increased government spending, and decreased tax revenue caused by widespread unemployment generally account for sharp rises in the national debt. Visit the Historical Debt Outstanding dataset to explore and download this data.

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.

How much U.S. debt does Russia own? ›

According to the US Treasury, Russian ownership of US Treasuries was $2.1 Billion in Nov 2022.

How long will it take the US to pay off its debt? ›

Eliminating the U.S. government's debt is a Herculean task that could take decades. In addition to obvious steps, such as hiking taxes and slashing spending, the government could take a number of other approaches, some of them unorthodox and even controversial.

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