Deficits, debt and 22 trillion reasons U.S. citizens worry
Biggest holder of IOUs is not a foreign country — it’s us.
The government WASHINGTON — surpassed a dubious milestone this week: Its debt topped $22 trillion
— that’s trillion, with a “t”
— for the first time.
Piles of federal debt have been growing ever higher for years, fueled by accumulating annual deficits, which themselves have been driven by tax cuts, government spending increases and the mounting costs of Medicare and Social Security and interest on the debt itself.
Under President Donald Trump, the national debt has topped $20 trillion (September 2017) $21 trillion (March 2018) and now $22 trillion. As a presidential candidate, Trump had assailed the $1 trillion annual deficits under President Barack Obama and had said that as president he could wipe out all the debt.
Should we be about the debt? Here are some questions and answers:
Q: What makes up the national debt?
A: It’s the total the government has borrowed to finance its operations beyond what it’s collected over the years in taxes and other revenue. The debt has become a perennial source of hand-wringing because of, among other things, concern that it will hamstring generations to come. Q: How does the debt differ from the deficit? A: The deficit is the gap between what the government collects and what it spends in any particular year. The accumulation of these annual deficits, combined into one, is the debt. Because the government typically spends more than it collects, it must borrow to make up the difference. For the 2018 budget year, which ended Sept. 30, the deficit totaled $779 billion. That was the largest gap since 2012, when the deficit was $1.1 trillion.
Q: Who holds the government’s debt?
A: One misperception is that most of the U.S. debt is held by foreigners. But in fact America’s biggest creditor is ... America. Sixty-two percent of the federal debt is held in the United States — by the Federal Reserve, the Social Security system, banks, pension plans, mutual funds, insurance companies and individual investors.
In fact, the largest single chunk — $5.9 trillion, about one-fourth of the total — is money the government owes itself in the form of trust funds. The biggest is the Social Security trust fund. The government has drawn on this money to finance other expenses, but once it is needed to pay Social Security benefits, the government must replenish it — with interest.
Q: With interest rates low, is the size of the U.S. debt a big concern?
A: That depends on whom you ask. Many economists fear the rising debt is a time bomb that will eventually derail the economy. Others counter that with rates so low, the government shouldn’t be worried about deficits — at least not now.