Who Owns the National Debt?

Currently, the national debt (sometimes called the public debt) of the United States stands at nearly $7.8 trillion ($7,782,155,135,998.03 (06/20/2005)). The debt has grown at a staggering rate. In 1995, just ten years ago, the debt was $5.0 trillion, almost three-fourth its current size. The debt has grown because the national government has consistently spent more each year than it has raised through taxes. To spend more than it has, the government must borrow money. But who does it borrow it from? Who owns the national debt?

Approximately 58% of the national debt ($4.5 trillion) is owned by private investors--individuals, corporations and pension fund managers--who purchase U.S. Treasury Bonds, Savings Bonds and other certificates. The government must repay the purchasers of these bonds their face value plus interest. About one third of the privately held debt (approximately 22% of the total debt) is held by foreign investors.

The remaining $3.3 trillion is held the Federal Reserve and other "federal government accounts." The most notable of these "other accounts" is the Social Security Trust fund, from which the government has borrowed money to pay for other programs and expenditures. By definition a trust fund is maintained to pay for spending for a given purpose at a later date. The Social Security Trust fund was intended to be a "savings account" where excess payroll taxes would be kept to pay Social Security benefits in the future when payroll taxes were no longer sufficient to pay all benefits. Over the last several years, billions of dollars have been borrowed from the Social Security Trust fund--the money that should be available to cover shortfalls in the Social Security program is not there. If the program to remain solvent, this money must eventually be repaid.