eli5: Who does the US owe almost 32 trillion dollars of debt too? If it’s the most powerful nation in the world, can’t it just get rid of it?
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Most of it is owed to us – the American taxpayers.
Between the 2008 Great Recession and the Covid stimulus, more than $15Trillion was added to the US debt. Throw in a few wars and underfunded federal budgets, and you quickly get to $32T.
We basically just print all that money to maintain a comfortable standard of living. Eventually it will come due… whether it’s your kids, or your kids’ kids… somebody will eventually have to pay it.
Most of the debt is owed to the US government.
Medicare and Social Security collect payroll taxes from workers, which it will later pay back for medical care and pension payments. The money during the period between when it’s collected and paid out is held in US securities. Basically our Social Security and Medicare programs buy most of the federal debt. After that, other retirement funds and corporations buy a lot of that debt. Most of of the assets that Silicon Valley Bank held were government securities. Most of the cash that Apple holds is in US Treasuries.
Some is owned by individuals, and some is owned by other nations. US treasuries had been considered the safest investment in the world. After we had our debt rating downgraded the last time Republicans pulled this default stunt, that changed a bit.
One big question regarding a US default is who would and wouldn’t get paid. The concern being that the federal government would preferentially keep paying Medicare and Social Security, being part of the federal government, and not pay individuals, foreign countries, and corporations that hold that debt.
So could we get rid of it? Sure. The US would also alienate every ally it has on the planet in doing so. The economy would be destroyed. Better to carry the debt. It’s not really *that* much debt. The top 10% of the US population have total assets of about $100T. A small annual wealth tax would pay off the debt pretty damn fast.
Most of the debt is owed to US citizens. If you’ve ever owned a US savings bond or similar, you’ve owned a portion of the US national debt.
>If it’s the most powerful nation in the world, can’t it just get rid of it?
The US borrowed money from people with the understanding that the money would be repaid in the future, plus interest. Announcing that they’re not going to repay those debts would screw over everyone who was planning on being repaid, and would destroy the US’ ability to borrow any more money in the future—because who would be dumb enough to loan their hard-earned cash to a government that can’t be trusted to repay its debts?
On top of all that, there’s a provision in the US Constitution that states that “the validity of the public debt […] shall not be questioned,” so the US couldn’t legally default on its debt even if it wanted to.
United States debt is one of the most sure bets in the world. If you buy US bonds, you’re sure to get whatever you were promised when you loaned the money, without currency manipulation designed to make you lose. The certainess of being paid back is part of what makes the US the most powerful nation. Of course if you want to start a world war and a civil war at the same time, you can say we’re not paying anybody back.
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United States debt is one of the most sure bets in the world. If you buy US bonds, you’re sure to get whatever you were promised when you loaned the money, without currency manipulation designed to make you lose. The certainess of being paid back is part of what makes the US the most powerful nation. Of course if you want to start a world war and a civil war at the same time, you can say we’re not paying anybody back.
It owes most of it to its own citizens.
At some point in the past, the government needed to borrow money. Your grandma (for example) loaned it money with the promise it would pay her back in 10, 20, or however many years plus interest.
Loans to the government are very safe for the same reason you mentioned: it’s the most powerful country in the world and the chance it is still here to pay you back in 20 years is pretty damn high.
As such, loans to their own government are a huge part of citizens’ retirement plans, college funds, pension programs, insurance programs, you name it. It doesn’t pay very well, but it’s an extremely “safe” investment.
US citizens hold about 70% of all the federal debt in all these various forms. Theoretically, they could vote to forgive the debt and just never pay it back to themselves. Poof. Gone.
But good luck convincing grandma to agree to never get that money back. Especially when grandma votes. A lot.
Because people who lent the government money want to get paid and the government has an interest in not being known as a deadbeat that doesn’t pay back their loans. If the government doesn’t pay back it’s loans then all future debts will be at a much higher interest rate making it harder for it to borrow money in the future since people who lend the government money will be less inclined to do so in the future without the government offering a large interest rate.
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