US government debt: features, history, structure and interesting facts

2024 Author: Henry Conors | [email protected]. Last modified: 2024-02-12 02:53

We like to talk about America. For a long time, the reinforced concrete Soviet argument held out: “But they lynch their Negroes.” In today's Russia, they say differently: "They have a public debt through the roof, they will soon crash." With blacks and lynching, everything is clear for a long time. But with the US government debt is not very clear. Is it all that scary? Time to deal with this.

Dotting the i

First of all, the US national debt is not an exaggeration or a campaign horror story, it is a real huge federal government loan that has not yet been paid. Terrible interest accrues on it every minute.

To say that the United States is the biggest debtor in world history would be a true statement. The amount of debt is more than 20 trillion dollars - fantastic money, it is even visually difficult to imagine.

No country even comes close to this debt, not even the EU states, if you take them all together. But there isnuance: we are talking about the amount in absolute terms. And in serious analytics, everything is considered in comparison, so it is always preferable to operate with relative values.

To say that the United States, with its debt, is at the bottom of the world ten debtor countries (9th place), would also be a true statement. This is because the most objective assessment of the debt will be its recalculation relative to GDP, which is also huge in the country and is quite comparable to the US government debt: 19.3 trillion (GDP) against $20 trillion (debt). This situation can be compared with a debt equal to a person's annual salary - it would seem that it's okay, repayment is quite real. But in the movement of global finance, nothing is simple. The mere fact that the debt growth rate is higher than the GDP growth rate does not inspire optimism.

What to do and who is to blame

If there is anything to confuse the federal government, it is the skyrocketing debt. It began to grow at breakneck speed in the 1980s during the presidency of Ronald Reagan and in connection with his famous Reaganomics. At that time, taxes were cut, budget expenditures were reduced, state intervention in the economy was minimized and … military spending was significantly raised - this was the height of the Cold War with the USSR. Reagan is considered one of the most successful American presidents, he achieved his goals and raised the country's economy. But now, truly, "you have to pay for everything" - Reaganomics cost the country very dearly. The real US national debt has grown over the eight years of itsboard from 26% to 41%. All this was explained in two simple words: budget deficit - expenses were higher than income.

Since then, the growth of debt has not stopped. Each president "applied" his own efforts for this, those who waged wars were especially successful in this matter.

The Republicans, with their fighting spirit, have the highest presidential anti-rating in terms of debt growth. If Ronald Reagan is the champion, then George W. Bush has an honorable silver.

How it all began

What should a country seek and borrow money for? Of course, going to war is a common thing. In America, too, everything began not at the best of times, at the end of the 18th century. The money was borrowed for the Anglo-American war, for the civil war, for the First World War. During the Second World War, the debt reached its maximum value - 121% of GDP due to huge military spending.

Then, during the period of economic growth, the public debt was reduced to 30%. He remained at this level until the arrival of the already mentioned Ronald Reagan. Such a swing between wars (the highest spending with a deep budget deficit) and peaceful creative stages of development (budget surplus or conscious measures to reduce public debt) are considered classics and a reliable historical pattern - “loans from war to war.”

What do the Americans themselves think about it

First, Americans are well aware of the developments and risks associated with US government debt. Growthdebt and how to repay it is often the subject of political debate, especially in campaigns of all sizes, from party primaries to presidential campaigns.

Donald Trump has always criticized Barack Obama and the Democrats for the dynamics of changes in the US public debt. Since taking office, he has reduced further borrowing of money, trying to keep debt at around $20 trillion. Setting "no more borrow!" looks very attractive to the broad masses of Americans. Another question is how long Trump will hold on to this mark: he has already spent hundreds of billions of dollars to support this promise.

One way or another, the funds to pay off the debt are annually included in the budget. They take care of the public debt. Forecasts are very different, no one undertakes to predict the development of events with an accuracy of 100%.

Who is the lucky one? To whom America owes

The structure of the US government debt is simple and straightforward. America owes a third of its debt to itself - to state organizations such as social security funds and pension funds, the main one here is the US Federal Reserve. America owes the second third to its citizens, both individuals and legal entities.

US external public debt is only 33% - exactly one third of the total. Japan has always been the old big borrower (21% share). Solid packages of treasuryobligations have Brazil, Great Britain, countries that are exporters of oil. The US government debt to Russia is almost 4% of the external debt. But America owes the most to China, whose share is 24%.

How China became the biggest US borrower

In the 1990s, the trend was to transfer production to countries with cheap labor. It was especially pronounced in the landing of American companies in China. The result was a backflow in the form of Chinese-made American finished products. The US foreign trade deficit and China's trade surplus resulted in China buying US bonds with foreign exchange surpluses. The story is telling, and it's not just about the US and China.

What is being done in the world: who has what debts and what

Almost all countries owe someone. If we consider government debt as a percentage of GDP (the most objective estimate), then Japan is the champion by a huge margin with a debt of 251% of GDP. The silver medalist, Lebanon, has 148%. Russia is far down the list with a debt of 19%, a line above Kazakhstan with 20%, next door is the United Arab Emirates with 20%. There are three countries that have no debt at all - Macau, Palau and Brunei.

Does the size of public debt, or lack of it, indicate the success of countries? Definitely not, these numbers have never been criteria for cost-effectiveness.

The ninth wave or complete calm

You can track the amount of US government debt in real time online, the flashing numbers are very impressive. Forecasts and prospects for the development of the situation with public debt are very different: from the promise of a complete collapse in the country to confidence in the absence of any danger at all.

To at least stop its growth, there are only two ways: either cut social spending, or increase taxes. The first option is fraught with serious difficulties: the fact is that people of the baby boom generation have begun to retire. There are a lot of them. They were born during a population explosion, and they will retire for about twenty years. Baby boomers are already weighing heavily on the shoulders of social systems around the world. The United States with their public debt will not stand aside. So there will be no easy solutions, all experts agree on this.

Interesting facts

The real-time US government debt scoreboard has long been the pride and landmark of New York City. But it was dismantled after September 8, 2017, when the amount of debt exceeded the historical milestone of $20 trillion. Decided not to risk it.

In December 2017, the scoreboard was launched again.

The debt of every American citizen, including old people and babies, is 65,000 US dollars. In other words, every American owes someone a pretty decent amount.

US government debt has been raised about 100 times over its history.