…that’s the question we should be asking. The republicans are screaming China has the country by the balls but China holds less than 8% of the U.S.’s $16 trillion debt. Actually $16,015,769,788,215.80 as described by the the Government Accountability Office “the federal government’s outstanding debt issued by the Treasury and other federal government agencies.” What does a trillion dollars look like anyway? That ain’t no give it to me in tens and twenties money.
China is the largest foreign owner of the United States’ debt but the majority of the country’s debt is owed to itself. Two-thirds of the national debt, a little less than $5 trillion is owed to the U.S. government, American investors and future retirees, through the Social Security Trust Fund and pension plans for civil service workers and military personnel.
A little more than $11 trillion is owed to foreign and domestic investors and the Federal Reserve. Yeah that’s right the U.S. “owes” the Federal Reserve not “owns” the Federal Reserve. The country’s debt to China has actually decreased from $1.31 trillion to a little under $1.16 trillion. Japan holds nearly as much, at $1.12 trillion. Those countries are by far the biggest foreign holders, but dozens of other nations, including Brazil, Russia, Taiwan, Switzerland and the United Kingdom hold the remainder.
The rest of the debt, (gross debt) – (debt held by the public) = “intragovernmental debt” – or basically debt that taxpayers owe to future taxpayers. In other words the U.S. government is borrowing against the country’s economic stability.
This is how it works: Some government programs, like Social Security and portions of Medicare, have a designated funding stream out of total taxes paid – like payroll taxes. But every year, there is a difference between the amount of money taken through those specific taxes and the amount of money legally obligated to be paid out in the program. When Social Security takes in more in taxes than it has out in benefits – as it has done over the last few decades — it doesn’t hold onto the money or put it in a lock box. Rather, it uses the funds to purchase special Treasury securities, thus incurring an I.O.U. from the whole of government revenue in order to finance the program down the road, in years when benefits fall below tax receipts.
Bottom line: The U.S. Government is fighting over returning the rainy day money to the piggy bank.
*Each picture is a trillion dollars. That is what $16 trillion looks like.