The “National Debt” Is NOT the Problem

Politicians from both parties are forever issuing warnings about the “rising national debt” and “risky federal deficits” which are purportedly going to plunge the United States into a downward spiral of economic and financial collapse. Major pieces of legislation are stalled in congress over these same “alarming developments” and politician’s rally their base by stoking fear that the government might go “bankrupt.” Every so many years Congress holds the federal government hostage over the “debt ceiling” which is a totally artificial cap on the “national debt.” Well, let’s look at this monster, the “national debt.”

What is the national debt and to whom is it owed? The “national debt” is primarily held in one main way – US Treasury securities. These can take many forms, from Treasury bills, notes, and bonds. Treasury bills have maturities of a year or less. Treasury notes are issued with maturities from two to ten years. Treasury bonds are long-term investments that have maturities of 10 to 30 years from their issue date. Why does the U.S. Treasury sell securities? U.S. Treasury securities are debt instruments used to raise funds in a way other than taxing the US citizens and companies. The U.S. Department of the Treasury issues securities to raise the money needed to operate the federal government. So these securities represent our “national debt.” Another name for this is the “U.S. Bond Market.”

But who owns the U.S. Bond Market? Here’s the facts. The US Bond Market is now at about $31.45 trillion dollars. The US public, which means us, holds over $24.2 trillion of the national debt. Yes folks, Americans own 75% of the “national debt”! Sure, foreign governments hold a sizable portion of the public debt as well, but the vast majority is owned by U.S. banks and investors, the Federal Reserve, state and local governments, mutual funds, pensions funds, insurance companies, and private citizen held savings bonds. So when politicians say we have this big debt, most of the debt is owed to us. In other words, this is just more scare mongering about nothing!

And what about China? As of June 2022, the Asian nation owns $.908 trillion, or about 3.68%, of the U.S. national debt. But did you know that in late 2016, Japan overtook China as the biggest foreign holder of U.S. debt? Japan currently holds about $1.212 trillion in US securities.

As the commercials say, “Wait, there’s more!” Despite substantial debts that America owes to countries like China and Japan, they owe us money as well. Other countries also owe the US. Imagine that. In fact, foreign countries owe the US much, much more than the US owes to other nations. This whole discussion is based on not telling “we the people” the whole story and using it as a way of justifying NOT putting in place programs and policies that benefit the average American working family.

So what’s the bottom line? If we really want to get rid of the national debt (that is, the bond market), which would be silly, all we have to do is to have the Treasury pay the notes off when they come due, which they have the ability to do. Most importantly, there is no “Doomsday” when you, your children, or your grandchildren, or anyone else will be handed a bill for your part of the national debt.

By the way, none of this, the deficit, the bond market, and the national debt has little to do with inflation or the rise in the cost of any commodities. That’s just another red herring politicians drag out to scare the populace into believing that the government can’t help the average working family out. So don’t fall for it. The politician’s agenda is to help themselves get re-elected, so they don’t have to work at a real job like we do. Anyone who just looks at the current spate of enormous and unprecedented (and frankly obscene) profits being made by large corporations can see that the current inflation spike is caused primarily by corporate greed.