Raising the Debt Ceiling

Breaking down the $31.4 trillion national debt

Kai Ryssdal and Maria Hollenhorst Jan 27, 2023
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The national debt is made up of two big pieces — intragovernmental holdings and IOUs held by the public. Above, the U.S. Capitol dome seen through a glass ceiling. Drew Angerer/Getty Images
Raising the Debt Ceiling

Breaking down the $31.4 trillion national debt

Kai Ryssdal and Maria Hollenhorst Jan 27, 2023
Heard on:
The national debt is made up of two big pieces — intragovernmental holdings and IOUs held by the public. Above, the U.S. Capitol dome seen through a glass ceiling. Drew Angerer/Getty Images
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On Jan. 19, the U.S. government hit its congressionally imposed $31.4 trillion borrowing limit, forcing the Treasury Department to implement “extraordinary measures” to keep paying its debts on time. 

The debt payments are for expenditures that Congress has already authorized and are crucial to maintaining the “full faith and credit of the U.S. government.” If the U.S. failed to meet those obligations, experts believe trillions of dollars of global wealth could be erased and economies could skid into recession. 

Not all government debt is created equal, though. “There are two pieces of that debt puzzle,” said Cailin Birch of the Economist Intelligence Unit. “The biggest and most important is federal debt that’s held by the public.”

Debt held by the public is essentially U.S. Treasury securities — government-issued IOUs — held by the sovereign wealth funds, banks, insurance companies and other private investors, including individuals. 

“Treasuries are viewed as one of if not the most liquid security, so they’re very attractive,” said Libby Cantrill, head of public policy for Pimco, a major investment management firm. 

That piece of the U.S. national debt — debt held by the public — accounts for nearly 80% of the $31.4 trillion. As of the most recent Treasury statement, it was $24.6 trillion

“The second part of the debt puzzle is debt that is owed within the government to other agencies,” Birch said. That piece — intragovernmental holdings — currently makes up about 20% of the national debt, about $6.9 trillion. 

“It’s like the right hand lending to the left,” Birch explained. “Usually it’s things like Social Security or Medicare or other public services [that] collect more in revenue than they necessarily need in a year [and] that surplus revenue is invested in Treasuries.”

Just as a private pension fund might want to park money in U.S. Treasury securities to earn some return with little risk, government agencies like the Social Security Administration like to put their surplus cash in Treasury securities too. 

“As a result, the U.S. Treasury effectively owes them money,” Cantrill said. “But it’s as if I lend some money to my husband. Now he has more money and I have less, but as a household, the same value is in place,” Birch added. 

The U.S. government has a centurieslong track record of paying its debts on time — both the money it owes to private investors and obligations to other government agencies like Social Security. That’s why U.S. Treasuries are considered such an attractive asset around the world. 

It’s that track record — that “faith and credit” of the U.S. government — that congressional Republicans are leveraging for political advantage in the current standoff over the debt ceiling. 

“Because the debt ceiling number looks at gross debt, which does include that internal lending from one hand of the government to the other … that total number is important,” Birch said. “That’s the debt ceiling figure that’s got to be raised.” 

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