I recently saw that the US has $12.1 trillion in intragovernmental debt – more than 1/3 of the total debt. I’m struggling to understand why this debt even exists? If it all comes out of the same national budget then why isn’t just considered a reallocation of funds?
In: Economics
>If it all comes out of the same national budget then why isn’t just considered a reallocation of funds?
Um. yes. but also no. It’s easier to think of a government budget as just this big bowl of money but it’s really not. It’s more like a pie. Every branch, office, agency, fund, etc etc has its own slice of that pie and sometimes they can borrow pieces off of other slices if they promise to give it back later.
Sometimes agencies will have an overage of funds and will lend those funds back to the Treasury; this way, they don’t lose the money, are able to gain a bit of interest, and the government has a ready lender.
Social Security is the best example of this. When they had a surplus, that money would otherwise just sit around doing nothing. They lent it back to the government (one of the safest investments there is) and increased the funding a touch thanks to interest payments on that debt.
Remember that Social Security **isn’t** funded from the normal national budget. It is a separate, special tax that goes exclusively to that agency.
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