Will the US ever pay its debt?
Reducing the debt will require Congress to make politically difficult decisions to either curb spending, raise taxes, or both. Other experts say the United States can safely afford to continue borrowing at present levels because it pays relatively little interest due to its unique position in the global economy.
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.
Answer and Explanation: If the U.S. was to pay off their debt ultimately, there is not much that would happen. Paying off the debt implies that the government will now focus on using the revenue collected primarily from taxes to fund its activities.
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!
The current debt is $31 trillion, and the government collects $3 trillion in tax revenue each year. Allowing for a little interest, and offsetting for inflation, they could do that in a decade (again, imagining that magically the country is able to carry on normally despite zero Federal government spending).
Around 23% of Americans are debt free, according to the most recent data available from the Federal Reserve. That figure factors in every type of debt, from credit card balances and student loans to mortgages, car loans and more. The exact definition of debt free can vary, though, depending on whom you ask.
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.
At the top is Japan, whose national debt has remained above 100% of its GDP for two decades, reaching 255% in 2023.
- Japan. $1,098.2. 14.52%
- China. $769.6. 10.17%
- United Kingdom. $693. 9.16%
- Luxembourg. $345.4. 4.57%
- Cayman Islands. $323.8. 4.28%
Tax cuts, stimulus programs, increased government spending, and decreased tax revenue caused by widespread unemployment generally account for sharp rises in the national debt. Comparing a country's debt to its gross domestic product (GDP) reveals the country's ability to pay down its debt.
Who is the US most in debt to?
Country/territory | US foreign-owned debt (January 2023) |
---|---|
Japan | $1,104,400,000,000 |
China | $859,400,000,000 |
United Kingdom | $668,300,000,000 |
Belgium | $331,100,000,000 |
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.
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 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.
- 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.
- Brunei. 3.2%
- Afghanistan. 7.8%
- Kuwait. 11.5%
- Democratic Republic of Congo. 15.2%
- Eswatini. 15.5%
- Palestine. 16.4%
- Russia. 17.8%
How Many Americans Are Living Paycheck to Paycheck? A 2023 survey conducted by Payroll.org highlighted that 78% of Americans live paycheck to paycheck, a 6% increase from the previous year. In other words, more than three-quarters of Americans struggle to save or invest after paying for their monthly expenses.
On average, men have more debt than women across all categories, except for student loans. While there isn't much data yet, early studies have shown that nonbinary students undergo more financial strain than their cisgender peers, and are more likely to have student loan debt.
Of the $33T of debt, roughly 78% is owned by the public (70% US vs 30% International). The major US public owners include the FED ($6T, but they are no longer buyers), mutual funds, banks, states, pension funds and insurance companies.
If China (or any other nation having 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.
Who owns US money?
Many people believe that much of the U.S. national debt is owed to foreign countries like China and Japan, but the truth is that most of it is owed to Social Security and pension funds right here in the U.S. This means that U.S. citizens own most of the national debt.
Russia National Government Debt reached 281.6 USD bn in Feb 2024, compared with 287.8 USD bn in the previous month. Russia National Government Debt data is updated monthly, available from May 2009 to Feb 2024. The data reached an all-time high of 384.2 USD bn in Jun 2022 and a record low of 86.1 USD bn in May 2009.
The United States is the undisputed heavyweight when it comes to the economies of the world. America's gross domestic product in 2022 was more than 40% greater than that of China, the world No. 2. Even more striking, U.S. GDP was over five times that of the next two largest economies, Japan and Germany.
Composition of Debt: A significant portion of Japan's national debt is held domestically, primarily by Japanese citizens and institutions. This reduces the country's vulnerability to external economic shocks and allows the government to continue borrowing at relatively low interest rates.
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. The federal government should not allow budget imbalances to harm the economy and families across the country.
References
- https://www.pgpf.org/top-10-reasons-why-the-national-debt-matters
- https://www.ceicdata.com/en/indicator/russia/national-government-debt
- https://www.investopedia.com/articles/economics/11/successful-ways-government-reduces-debt.asp
- https://www.treasurydirect.gov/government/historical-debt-outstanding/
- https://usafacts.org/articles/which-countries-own-the-most-us-debt/
- https://www.vedantu.com/commerce/debt-free-countries
- https://fiscaldata.treasury.gov/americas-finance-guide/national-debt/
- https://www.visualcapitalist.com/government-debt-by-country-advanced-economies/
- https://www.thebalancemoney.com/who-owns-the-u-s-national-debt-3306124
- https://www.forbes.com/advisor/banking/living-paycheck-to-paycheck-statistics-2024/
- https://www.investopedia.com/articles/markets-economy/090616/5-countries-own-most-us-debt.asp
- https://www.investopedia.com/articles/investing/080615/china-owns-us-debt-how-much.asp
- https://www.quora.com/How-long-would-it-take-to-pay-off-the-national-debt-of-the-United-States-if-the-government-stopped-spending-money-and-only-used-money-from-tax-revenue-to-pay-it-off
- https://www.linkedin.com/pulse/who-going-buy-all-us-debt-rod-khleif-gdete
- https://www.investopedia.com/financial-edge/0611/june-20-5-ways-the-u.s.-can-get-out-of-debt.aspx
- https://homework.study.com/explanation/what-would-happen-if-the-u-s-actually-paid-off-the-national-debt-where-would-the-banks-big-financial-institutions-and-government-foreign-and-domestic-put-their-cash.html
- https://www.itsuptous.org/blog/who-does-us-owe-money-to
- https://www.usnews.com/news/best-countries/articles/the-top-10-economies-in-the-world
- https://www.investopedia.com/articles/investing/040115/reasons-why-china-buys-us-treasury-bonds.asp
- https://www.marketplace.org/2023/05/26/who-does-the-u-s-owe-31-4-trillion/
- https://wallethub.com/answers/cc/what-percentage-of-america-is-debt-free-2140664784/
- https://www.bankrate.com/personal-finance/debt/men-women-and-debt-does-gender-matter/
- https://www.quora.com/Why-does-Japans-national-debt-not-seem-as-bad-as-other-countries-despite-their-economy-appearing-worse
- https://en.wikipedia.org/wiki/Financial_position_of_the_United_States