America’s Not-So-Troubling Debts and Deficits (2024)

FAQs

Why is the US debt not a problem? ›

The US is a very wealthy country. For example, the total US household net worth is over $150 trillion, which is close to five times the size of the nation's debt. From that lens, the debt level may not seem as troubling. It may be one reason to explain why the nation is generally viewed by markets as a good creditor.

The film follows Bixby and Walker who describe systematically four serious deficits shaping the U.S. economy: budget, savings, the balance of payments, and leadership.

One of the main culprits is consistently overspending. When the federal government spends more than its budget, it creates a deficit. In the fiscal year of 2023, it spent about $381 billion more than it collected in revenues. To pay that deficit, the government borrows money.

Notable recent events triggering large spikes in the debt include the Afghanistan and Iraq Wars, the 2008 Great Recession, and the COVID-19 pandemic. From FY 2019 to FY 2021, spending increased by about 50%, largely due to the COVID-19 pandemic.

One of the largest drivers of that rising debt is federal spending on major healthcare programs, such as Medicare and Medicaid. Such spending is projected to rise by 73 percent over the next decade and will exceed all other categories of federal spending in 2028.

Key Takeaways. A budget deficit occurs when the money going out exceeds the money coming in for a given period. On this page, we calculate the deficit by the government's fiscal year. In the last 50 years, the federal government budget has run a surplus five times, most recently in 2001.

Federal spending — driven by rising healthcare costs, demographics, and interest payments on the national debt — is paired with revenues that are insufficient to meet the commitments that have been made.

Debt is the amount of money owed to someone else. A deficit refers to spending more money than is received over some time. Both the national debt and budget deficit are watched by investors and economists. Debt is not necessarily an indicator of a weak economy.

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.

Can the US ever get out of debt? ›

Under current policy, the United States has about 20 years for corrective action after which no amount of future tax increases or spending cuts could avoid the government defaulting on its debt whether explicitly or implicitly (i.e., debt monetization producing significant inflation).

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.

The Beginning of U.S. Debt

Paying for the American Revolutionary War (1775 - 1783) was the start of the country's debt. Some of the founding fathers formed a group and borrowed money from France and the Netherlands to pay for the war. To manage the new country's money, the Department of Finance was created in 1781.

The nation's debt, currently over $34 trillion, is rampantly growing as U.S. lawmakers have been unable to agree to long-term budget reforms that could tame it. Officials from several institutions warn a tipping point is near and it will only get worse if it snowballs into a crisis.

Debt in the hands of the public is currently 100% of GDP – an elevated level by advanced-economy standards, but by no means catastrophic. CBO sees this rising, assuming no changes in prevailing law, to 116% of GDP in 2034, 139% in 2044, and 166% in 2054.

Thus, debt is continually paid down and new debt incurred, to be paid down by creation of new debt, ad infinitum. If total indebtedness as a percentage of the national economy does not grow, this can continue forever.

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.