Why is America 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.
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.
Foreign holdings peaked at 49 percent of DHBP in 2011, but dropped to 29 percent by the end of 2023. Investors in Japan and China hold significant shares of U.S. public debt. Together, as of December 2023, they accounted for nearly $2 trillion, or about 7 percent of DHBP.
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.
Mortgage debt is most Americans' largest debt, exceeding other types by a wide margin. Student loans are the next largest type of debt among those listed in the data, followed closely by auto loans. Note: Total household debt in the US is $17.987 trillion as of the first quarter of 2024.
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.
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.
| Country | National Debt (Million USD) | % of GDP |
|---|---|---|
| United States | $30.89 Mn | 121.31% |
| China | $13.77 Mn | 76.98% |
| Japan | $12.78 Mn | 255.07% |
| United Kingdom | $3.14 Mn | 101.86% |
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.
Inflation adjusted to the 2023 calendar year. As of April 2024, the five countries owning the most US debt are Japan ($1.1 trillion), China ($749.0 billion), the United Kingdom ($690.2 billion), Luxembourg ($373.5 billion), and Canada ($328.7 billion).
How high can US debt go?
We estimate that the U.S. debt held by the public cannot exceed about 200 percent of GDP even under today's generally favorable market conditions.
Recent MarketWatch Guides survey results indicate that 66.2% of Americans feel like they're living paycheck to paycheck. Respondents struggling to make ends meet span demographics, including genders, generations and incomes.
Women are stereotypically seen as irresponsible spenders, but the data doesn't back this up. According to a 2019 Experian study, men carry more debt than women across nearly all categories, including credit card debt — the study found that men have $125 more in credit card debt than women on average.
The Standard Route is what credit companies and lenders recommend. If this is the graduate's choice, he or she will be debt free around the age of 58. It will take a total of 36 years to complete. It's a whole lot of time but it's the standard for a lot of people.
1837: Andrew Jackson
This resulted in a huge government surplus of funds. (In 1835, the $17.9 million budget surplus was greater than the total government expenses for that year.) By January of 1835, for the first and only time, all of the government's interest-bearing debt was paid off.
And while the recent increases in debt seem quite manageable, the federal debt cannot grow faster than the economy indefinitely. Eventually, private borrowing will be crowded out if the government's debt continues to grow, and interest rates will rise.
Who owns the U.S. debt? There are two basic categories of debt owners: 1) the public, which includes foreign investors and domestic investors and, 2) federal accounts, also known as "intragovernmental holdings." Each category is explained below.
Years of elevated budget deficits, exacerbated by massive federal spending during the COVID-19 pandemic, have taken the debt to historic levels: totaling more than $26 trillion in 2023, U.S. federal government debt is now at its highest percentage of gross domestic product (GDP) since World War II.
How the Federal Government Borrows Money. 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.
High debt levels and wide deficits limit fiscal flexibility. The U.S. government's wide deficit and elevated debt levels restrict its ability to respond effectively to future economic downturns. Historically, during recessions, governments boost spending to stimulate growth.
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).
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.
No country owes the bank more than India, Indonesia and Bangladesh. There are 121 low- and middle-income countries feeding into the World Bank's (WB) debtor reporting systems, but almost half of the $407bn owed to the Washington-based multilateral lender traces back to just 10 of them. India takes the top spot.
The last payment was made on 29 December 2006 for the sum of about $83m USD (£45.5m) to the United States, and about $23.6m USD (£12m) to Canada; the 29th was chosen as it was the last working day of the year.
