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.
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.
The government can easily service its debt because of its unlimited taxing authority and ability to issue more US Treasury securities to repay maturing securities.
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).
- Bonds. Using Debt to Pay Debt. ...
- Interest Rates. Maintaining interest rates at low levels can help stimulate the economy, generate tax revenue, and, ultimately, reduce the national debt. ...
- Spending Cuts. From 1921 to 1974, the President led the government budgeting process. ...
- Raising Taxes. ...
- Bailout or Default.
Who owns this 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.
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.
Singapore is one of Asia's major financial centers. It is also one of the most prosperous countries on the planet. And all this has been achieved without taking on any meaningful public debt. In fact, very much like Norway, Singapore has more assets than debt.
- Japan. Japan has the highest percentage of national debt in the world at 259.43% of its annual GDP. ...
- United States. ...
- China. ...
- Russia.
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.
How much does the US owe China?
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.
The United States has the world's highest national debt at $31.4 trillion. Global debt currently stands at $305 trillion, $45 trillion higher than before the COVID-19 pandemic, according to the Institute of International Finance (IIF) – a global association of the financial industry.
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).
Risks of a new crisis
Possible scenarios include the U.S. debt being discounted, other countries no longer buying the U.S. debt, or the stock market performing poorly due to a loss of confidence in federal fiscal policies. The crisis could also take the form of a high inflation rate or devalued dollar.
The dollar is a global reserve currency and U.S. bonds are seen as one of the most stable investments on the planet. So if the U.S. cannot pay its creditors, interest rates on U.S. debt would go up, creating a cascade of higher interest rates. So mortgage rates, credit card rates, car loan rates.
People buy government because they assume a government bond is a safe investment. However, this assumes that inflation will remain low. If governments print money to pay off the national debt, inflation could rise. This increase in inflation would reduce the value of bonds.
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.
- CANADA. 31%
- Other. 28%
- NETHERLANDS. 12%
- ITALY. 7%
- UNITED KINGDOM. 6%
- GERMANY. 6%
- PORTUGAL. 3.6%
- FRANCE. 3.2%
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.
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.
How much is America worth?
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).
The U.S. has carried debt since its inception, but the number has spiked in recent years thanks in part to costly events like the COVID-19 pandemic. Tax cuts, stimulus programs, government spending and lower tax revenue also contributed to the debt load.
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.
India takes the top spot. Its $39.7bn debt towards the WB recorded at the end of 2021 is double that of the next biggest debtor, Indonesia, with $19.6bn.
Key information about Russia Government Debt: % of GDP
Russia Government debt accounted for 14.9 % of the country's Nominal GDP in Dec 2023, compared with the ratio of 15.5 % in the previous quarter. Russia government debt to GDP ratio data is updated quarterly, available from Dec 2011 to Dec 2023.
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