top of page
National Debt Logo


The national debt of the United States is the accumulated amount of money America owes to all of its creditors.  These creditors are bondholders: ranging from individual American citizens to large banks, investment funds, foreign individuals, corporations, and governments. The United States even owes itself. The U.S. Government has on its balance sheet a line item for intragovernmental holdings: debt issued against money borrowed from various federal trust funds used to fund current government expenditures. The U.S. national debt stands currently at over $22 trillion dollars, with about $6 trillion of that being intragovernmental holdings.

What is the Budget Deficit?

The deficit is the annual difference between what the Federal Government takes in, (revenues from taxes, fees, etc.), and what the government must spend (outlays). As the U.S. has not had a history of balancing its receipts and expenditures, deficits have continued to grow the U.S. national debt. As a fiscal year ends, the total amount of debt grows by the deficit or shortfall in the nation's budget. The national debt could be reduced were the U.S. to have a surplus in revenues in any particular year.  In 1835, under President Andrew Jackson, the United States paid off entirely the national debt, which at the time was about $58 million. This is the only time in history the Unites States retired its entire national debt, and it lasted all of one year.

What is the National Debt?

How is the debt issued today?

The U.S. Treasury Department is authorized by Congress to borrow money for operating the federal government. Marketable treasury securities are issued and sold through regular auctions.  Participants submit competitive and noncompetitive bids on various debt securities.  These bonds are then traded via secondary markets with buyers and sellers all over the world. One of the biggest markets involving Treasury securities is the Treasury Futures and Options markets at the Chicago Mercantile Exchange (CME). Other types of debt, such as U.S. Savings Bonds, can be purchased directly from The Treasury Department. Savings bonds are not considered a marketable Treasury security; they are not transferable (with escheat exceptions), nor are they traded in any secondary markets.  

Why are U.S. Treasury securities so important?

U.S. Treasury Bonds are the most important financial instrument in the world, save the U.S. dollar itself.  There are many reasons for this fact.  On a yearly basis, trillions of dollars in Treasuries are auctioned off and traded throughout the global financial marketplace.  Whether it is a short-term need to park money or a long term investment of reserve funds, individuals, small companies, large multinational corporations, and foreign governments rely on the availability and liquidity of U.S. Treasury securities.  Treasuries represent the most reliable investment throughout the world, and thus a bedrock foundation for the global financial system. The promise of the United States to fulfill its financial commitments is considered sacrosanct within the markets, despite whatever political theater may play out in Washington D.C. at any particular time. Many nations in the past have of course defaulted on their sovereign obligations, causing financial turmoil both within their borders and in the global financial system.  But it is the stability of the major sovereign debt markets, (countries such as Germany, France, the U.K., Japan, Switzerland), lead by the United States that allows the global banking system to function.

Has the U.S. Government ever defaulted on its bonds?

If one were to ask most financial advisors, bond traders, or government officials, the likely answer would be no- U.S. Treasuries have always paid.  And while this is technically true, there was an occurrence in American history whereby the Treasury defaulted on the stated original terms of a bond issue. The Fourth Liberty Loan, issued in 1918, was to be payable, "in United States gold coin of the present standard of value." However, because of House Joint Resolution 192, the federal government had suspended payment in gold in 1933, a year before the Fourth Liberty Loan was called.  Despite a legal challenge to this default on the gold exchange provision, (wherein the Supreme Court acknowledged that the 14th Amendment had been violated), the Fourth Liberty Loan was not redeemed at the terms of its original issuance.  The high court felt that to pay bondholders at the 1918 gold value would be an unjust enrichment, so the ruling had only a symbolic meaning for the bondholders.

Copyright The Joe I. Herbstman Memorial Collection of American Finance ™   All rights reserved.

bottom of page