How can America pay off its debt?
It ultimately comes down to the U.S. taxpayers. That means in order to pay it off, or at least make a larger dent in the debt, the federal government would have to raise taxes and cut spending.
It ultimately comes down to the U.S. taxpayers. That means in order to pay it off, or at least make a larger dent in the debt, the federal government would have to raise taxes and cut spending.
An important way to tackle America's debt problem is to devolve a large part of federal spending to the states, allowing them to fund it themselves. The federal government spends more than $1 trillion a year on state and local activities such as education, housing, and transportation.
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.
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.
| Characteristic | National debt in relation to GDP |
|---|---|
| Macao SAR | 0% |
| Brunei Darussalam | 2.06% |
| Kuwait | 3.08% |
| Hong Kong SAR | 4.27% |
At the top is Japan, whose national debt has remained above 100% of its GDP for two decades, reaching 255% in 2023.
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.
Nearly every year, the government spends more than it collects in taxes and other revenue, resulting in a deficit. (The debt ceiling, set by Congress, caps how much the U.S. can borrow to pay for its remaining bills.) The national debt, now at a historic high, is the buildup of its deficits over time.
States and local governments hold 5 percent of the debt. Foreign governments who have purchased U.S. treasuries include China, Japan, Brazil, Ireland, the U.K. and others. China represents 29 percent of all treasuries issued to other countries, which corresponds to $1.18 trillion.
Is the US debt a problem?
The US Department of Treasury building seen in March 2023. US government debt is nearing $35 trillion. The high and rising level of US government debt risks driving up borrowing costs around the world and undermining global financial stability, the International Monetary Fund has warned.
China is one of the United States's largest creditors, owning about $859.4 billion in U.S. debt.
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. After the recent weak treasury auction, US government officials warned that they are seeing waning demand from international buyers.
By January of 1835, for the first and only time, all of the government's interest-bearing debt was paid off. Congress distributed the surplus to the states (many of which were heavily in debt). The Jackson administration ended with the country almost completely out of debt!
A nation saddled with debt will have less to invest in its own future. Rising debt means fewer economic opportunities for Americans. Rising debt reduces business investment and slows economic growth. It also increases expectations of higher rates of inflation and erosion of confidence in the U.S. dollar.
- Somalia.
- South Sudan.
- Sudan.
- Tanzania.
- The Gambia.
- Togo.
- Uganda.
- Zambia.
Former financial arbitrage trader Jerome Kerviel is the most indebted man on the planet, owing his former employer $6.3 billion. The amount Kerviel owes to French bank Societe Generale for fraudulent trades made in 2007 and 2008 would make Kerviel one of the 50 richest people in America if those debts were assets.
The organizations that make up the World Bank Group are owned by the governments of member nations, which have the ultimate decision-making power within the organizations on all matters, including policy, financial or membership issues.
In the latest reports, Russia National Government Debt reached 285.4 USD bn in Dec 2023. The country's Nominal GDP reached 494.7 USD bn in Mar 2023.
Around 70% of Japanese government bonds are purchased by the Bank of Japan, and much of the remainder is purchased by Japanese banks and trust funds, which largely insulates the prices and yields of such bonds from the effects of the global bond market and reduces their sensitivity to credit rating changes.
Who does China owe debt to?
[2] A report by the credit rating agency S&P Global in 2022 estimated that 79 per cent of corporate debt in China was owed by SOEs (the IMF does not break down the proportion of debt owed by SOEs).
The financial position of the United States includes assets of at least $269 trillion (1576% of GDP) and debts of $145.8 trillion (852% of GDP) to produce a net worth of at least $123.8 trillion (723% of GDP).
Nearly half of mandatory spending in 2022 was for Social Security and other income support programs such as the Child Tax Credit, food and nutrition assistance, and federal employee benefits (figure 3). Most of the remainder paid for the two major government health programs, Medicare and Medicaid.
Federal Borrowing
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.
As a result, totals from January 2023 are lower than reported. 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).
