How Much Debt Is The US In?
National debt of the United States, also referred to as public debt is the total amount owed by the federal government of the United States. The US government collects taxes and fees to cater for the US government’s unending needs. Washington is tasked with the responsibility of collecting national taxes and fees. But due to one reason or the other, the government may get into a deficit. This situation may force the federal government to borrow money from other sources to take care of its needs. Of interest here below is the amount of money that the United States has as its debt.
What is the Exact Debt of the United States?
The debt of the United States keeps on fluctuating from time to time due to the varied revenue collection in a fiscal year. For this reason, there is the US debt clock that tells the exact debt of the federal government at every point time. According to the US debt clock, the United States currently has $18,158,847,782,747.83. This amount is more than Canada debt which has always been greater than UK debt. Therefore, of the three countries, The United States of America has the biggest debt.
To clear the over 18 trillion United States deficit, every citizen has a burden of over $56,000. Given its impossibility, the government seeks ways to reduce the debt to a manageable figure. But despite of the efforts put by the government, the debt keeps on increasing by the day.
Who Owns the Most of United States Debt?
Social Security is the largest owner of the US debt. One may question the validity of this statement given the fact that Social Security is part of the federal government. But it happens that Social Security is the largest of all the US debt owners. It has 16% of the total debt of the government. Federal government entities and the Federal Reserve are owed 13% and 12% respectively.
Foreign countries own more than a third of the total debt. US debt to China stands at 7.2% of the total figure. This makes China the biggest foreign country owning US debt. Japan follows in second with 7.2%. There are also other countries in different regions that are owners of the National debt. The Federal Government has put up strategies to avoid having much debt from foreign countries.
But even with over 18 trillion as debt, the United States of America still remains to be world’s economic power house.
Basic Insight of US Debt to China
Just because the United States is a big country doesn’t mean they have no debt. Every country actually faces troubles when it comes to national debt. All countries have a debt-to-GDP ratio. It’s a quantity of a country’s debt linked to its economic productivity. It isn’t surprising a country may borrow money to improve its economy or fulfill its obligations. The United States isn’t an exception. Reduced tax revenue often forces the government to take loans. Whatever the reason is, they should repay it. In this article, we are going to discuss why the US is in debt, which holds their debt, why China dumps their debt and pros & cons of national debt.
Reasons Why the US is in Debt
The United States is a great country. Many people wonder about “us debt ceiling”. There are numerous reasons behind their debt. We can analyze those reasons based on their major expenses. For instance, that country spends lots of money on healthcare programs. These include Medicaid and Medicare. The approximate amount of money spent on those programs is around 945 billion USD. They also spend lots of cash on social security programs. The purpose is to provide financial security to retired citizens with age more than 65 years old. That means the government will keep them away from the poverty line.
The next biggest allocation is the defense budget expenses. This is the budget portion which is spent for military related expenses. This is the third largest allocation of us debt to gdp. What are the others? There are some allocations including veteran benefits, transportation, education, internal affairs, and more. Overall, the government should take care of these expenses in order to retain their power. There’s a common belief that internal affairs can become the biggest allocation of a nation. The fact is that national affairs cost more as compared to those expenses. The United States tend to spend their budget on Income Security benefits.
The Yuan and USD
Who holds the till debt do us part? Recently, their debt exceeds $19 trillion. News states that the United States owes China so much. The China Republic indeed is one of the biggest foreign owners. Most of the US citizens don’t even know that their retirement money is part of their national debt. There are several economic reasons why that big nation owes much to China. For instance, China is proud of their currency. That means they want the Yuan attached to the USD. It’s a common practice as many countries have applied this kind of strategy since 1944. This way, the cost of Chinese exports can be reduced. The Chinese government considers it as a correct way to make them stronger in international trades and markets.
That kind of strategy is good for their economy. It’s because the USD remains popular as one of the most formidable currencies worldwide. This is why China wants treasury really bad. The Yuan is indeed exchangeable in dollars. In fact, China became the center of attention around 2013-2014 based on national debt clock. They bought lots of gold and used bank vaults to store the gold. Even though gold is famous as a safety net, the real hero for the Yuan is definitely the USD. Due to its linkage on the USD, the Yuan has much effect on the United States.
Possible Reasons Why China Dumps the US Debt
Recently, many people use us debt calculator regarding how China is gradually dumping the US debt. What is the reason? Mostly, they really much cash. Many sources state that China wants to save their finance from a free fall. Not to mention they really want to improve their economy. Today, China is raising lots of money and cash. Beijing starts doing something to prevent further declines in the currency. They also prop up their stock market. That means the Yuan falls into an extreme selling pressure. The only thing that they are able to do is to buy their own currency.
Just because China dumps the US federal debt, doesn’t mean they try to sink the economy of such giant country. There have been many topics that China is able to sink the US economy by selling their treasuries holdings. This makes borrowing costs increase significantly. Fortunately, gradual and moderate sales of Yuan won’t make the United States currency falls. The only thing that matters is the borrowing cost. It can increase badly. Can the US survive? Many people rest assured with it. Both the Fed and China won’t cause significant effects in the short term for the US. However, there will be structural problems affecting the economy of the US in the long term.
Both Sides of National Debt
National debt is a common thing for any country. However, not all of us understand the pros of having debt. A nation can make use of the loan to enhance their infrastructure. The debt will be useful to fund lots of important programs. As long as the debt gives positive outcomes, there won’t be any problems at all. Moreover, big countries won’t borrow money if they still have sufficient budget. Once they borrow some money from the Fed or other lenders, they will store it in the central banks. For them, taking loans will only increase their wealth. It’s true that countries with the largest debts are also the richest. They really know how to use the money.
What about the cons? Most countries choose to link their currency to others. There’s a clear example of it. The EU nations have decided to adopt a Euro currency. Some other nations also tend to issue connections in foreign currency. That means they share the same debt with others who adopt the same currency. Overall, no nation wants to give up their currency in the hope of expanding their economic conditions. It won’t work well in the long run.
A nation’s economy is quite intricate to comprehend. Each country has its own problem. Most advanced countries will be more dependable on borrowing cash from the FED. The United States is one of them. How can they survive lots of economy issues and global debt crisis? This kind of country really understands how to take advantage of loans. They will only use the money for good reasons.