How America’s Debt Problem Compares to Other Countries—and Why It Matters (2024)

FAQs

How does US national debt compare to other countries? ›

As of 2021 (the latest available data), federal debt reached 115 percent of gross domestic product (GDP), ranking 16^th highest out of 164 countries for which the IMF has data. Japan tops the ranking with central government debt of 221 percent of GDP, followed by Greece, Sudan, Eritrea, and Singapore.

The United States has the world's highest national debt at $31.4 trillion. Global debt currently stands at $305 trillion, $45 trillion higher than before the COVID-19 pandemic, according to the Institute of International Finance (IIF) – a global association of the financial industry.

The U.S. debt is the total federal financial obligation owed to the public and intragovernmental departments. The U.S. national debt is so big because Congress continues both deficit spending and tax cuts.

Among the most populated countries, the United States ranks second behind Japan in terms of debt as a percentage of GDP.

According to usafacts.org, as of January 2023, Japan owned $1.1 trillion in US Treasuries, making it the largest foreign holder of the national debt. The second-largest holder is China, which owned $859 billion of US debt.

It's high because the U.S. continues to spend more than it receives in revenue. Therefore, it must issue more debt to cover the difference. The national debt is an accumulation of federal budget deficits. Every spending program and tax cut adds to the debt unless paid for by new appropriations.

Flashpoints that greatly contributed to the debt over the past 50 years include the wars in Iraq and Afghanistan, the 2008 financial crisis and the 2020 COVID-19 pandemic -- the latter two prompting sweeping stimulus measures from Congress that cost trillions of dollars.

United States. The United States boasts both the world's biggest national debt in terms of dollar amount and its largest economy, which resolves to a debt-to GDP ratio of approximately 128.13%. The United States' government's spending exceeds its income most years, and the US has not had a budget surplus since 2001.

Many people believe that much of the U.S. national debt is owed to foreign countries like China and Japan, but the truth is that most of it is owed to Social Security and pension funds right here in the U.S. This means that U.S. citizens own most of the national debt.

There are a number of methods to reduce the U.S. national debt that go beyond raising taxes and cutting discretionary spending. One of the most controversial is to open the nation's borders to more immigration, kick-starting entrepreneurship and consumption.

Who owns America's debt? ›

Investors in Japan and China hold significant shares of U.S. public debt. Together, as of September 2022, they accounted for nearly $2 trillion, or about 8 percent of DHBP. While China's holdings of U.S. debt have declined over the past decade, Japan has slightly increased their purchases of U.S. Treasury securities.

Rising debt reduces business investment and slows economic growth. It also increases expectations of higher rates of inflation and erosion of confidence in the U.S. dollar.

The Fed tries to influence the supply of money in the economy to promote noninflationary growth. Unless there is an increase in economic activity commensurate with the amount of money that is created, printing money to pay off the debt would make inflation worse.

To pay back one million dollars, at a rate of one dollar per second, would take you 11.5 days. To pay back one billion dollars, at a rate of one dollar per second, would take you 32 years. To pay back one trillion dollars, at a rate of one dollar per second, would take you 31,688 years.

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.

For several years, the nation's debt has been bigger than its gross domestic product, which was $26.13 trillion in the fourth quarter of 2022. Debt-to-GDP is a useful metric for analyzing the debt over long time spans, as it puts the debt into relative terms by comparing it against the size of the national economy.

Continuing a trend that began early in 2021, China's portfolio of U.S. government debt in May dropped to $980.8 billion, according to Treasury Department data released Monday. That's a decline of nearly $23 billion from April and down nearly $100 billion, or 9%, from the year-earlier month.

The US doesn't actually have to pay off its $31 trillion mountain of debt, according to top economist Paul Krugman, hitting back at the idea that government finances can be compared to household balance sheets in an op-ed weeks before the US possibly defaults on some obligations.

How much does Russia owe? About $40 billion US in foreign bonds, about half of that to foreigners. Before the start of the war, Russia had around $640 billion US in foreign currency and gold reserves, much of which was held overseas and is now frozen.

Who is the US borrowing money from? ›

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.

So if the U.S. cannot pay its creditors, interest rates on U.S. debt would go up, creating a cascade of higher interest rates. So mortgage rates, credit card rates, car loan rates. All would become more expensive. Finally, there is a real concern about the economy — that a default could spark a recession.

China's $23 Trillion Local Debt Crisis Threatens Xi's Economy - Bloomberg.

Impact on China's economy

The growing debt has cast a shadow over the country's economic potential for the foreseeable future. Moreover, the transition toward a consumption-driven growth model has yet to yield significant results.

Except for about a year during 1835–1836, the United States has continuously had a fluctuating public debt. The national debt has increased under every presidential administration since Herbert Hoover. The United States has raised its debt ceiling at least 90 times in the 20th century.

Because Japan exports so many goods to the U.S. and other nations, the country frequently develops an account surplus in dollars - the currency the U.S. and other countries give Japan in exchange for their products.

China's demand for Treasurys helps keep U.S. interest rates low. It allows the U.S. Treasury to borrow more at low rates. Congress can then increase the federal spending that spurs U.S. economic growth.

A default on U.S. debt could trigger a worldwide recession and upend stock markets in addition to wreaking havoc in Americans' financial lives.

Potential repercussions of reaching the ceiling include a downgrade by credit rating agencies, increased borrowing costs for businesses and homeowners alike, and a dropoff in consumer confidence that could shock the United States' financial market and tip its economy—and the world's—into immediate recession.

In total, other territories hold about $7.4 trillion in U.S. debt. Japan owns the most at $1.1 trillion, followed by China, with $859 billion, and the United Kingdom at $668 billion.

How much does the US owe China? ›

For the fourth quarter of 2019, total wealth in the U.S. was $111.04 trillion.

The debt limit caps the total amount of allowable outstanding U.S. federal debt. The U.S. hit that limit—$31.4 trillion—on January 19, 2023, but the Department of the Treasury has been undertaking a set of “extraordinary measures” so that the debt limit does not yet bind.

There's just a 2% possibility the U.S. government will default on its loans, according to analysts at Deutsche Bank, despite days of stalled-out negotiations.

Investors in Japan and China hold significant shares of U.S. public debt. Together, as of September 2022, they accounted for nearly $2 trillion, or about 8 percent of DHBP. While China's holdings of U.S. debt have declined over the past decade, Japan has slightly increased their purchases of U.S. Treasury securities.

As of January 2023, the five countries owning the most US debt are Japan ($1.1 trillion), China ($859 billion), the United Kingdom ($668 billion), Belgium ($331 billion), and Luxembourg ($318 billion).

In dollar terms, debt held by the public at the end of 2022 was $24.26 trillion. Such debt is issued in a range of maturities from 1-month bills to 30-year bonds. It also includes securities that are not traded in secondary markets, such as savings bonds and state and local government securities.

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. Below are some of these options.

Does China have more debt than the US? ›

Therefore, China's national debt has surged almost three times that of the United States in the past 12 months. In the third spot, Japan has a national debt of $13.36 trillion, indicating a drop of $1.49 trillion YoY.

Many people believe that much of the U.S. national debt is owed to foreign countries like China and Japan, but the truth is that most of it is owed to Social Security and pension funds right here in the U.S. This means that U.S. citizens own most of the national debt.

Since the government almost always spends more than it takes in via taxes and other revenue, the national debt continues to rise. To finance federal budget deficits, the U.S. government issues government bonds, known as Treasuries.

About a third of the debt held by the public is held by foreign holders. Foreign countries hold a total of roughly $7.4 trillion of U.S. debt as of the end of June, the most recent month with available data. Japan is the largest holder with about $1.2 trillion in Treasury securities.

Rising debt means fewer economic opportunities for Americans. Rising debt reduces business investment and slows economic growth. It also increases expectations of higher rates of inflation and erosion of confidence in the U.S. dollar.

U.S. debt to China comes in the form of U.S. Treasuries, largely due to their safety and stability. Although there are worries about China selling off U.S. debt, which would hamper economic growth, doing so in large amounts poses risks for China as well, making it unlikely to happen.

Raising taxes can generate revenue that the government can use to pay down debt as well as invest in programs that support the economy. But it can cut into tax revenue and hurt the economy if the government raises taxes too high. Finding the correct balance is expressed by a concept known as the "Laffer Curve."

High levels of debt can diminish economic growth. Rising debt service costs will consume the discretionary budget, crowding out all other priorities; cause higher interest rates and borrowing costs for public and private sectors; weaken investment; and erode the standard of living.