What is Public Debt?
The United States Public Debt is a measure of the total obligations or amount owed by the United States Federal Government versus the amount of securities held. The Public Debt is tabulated by the United States Treasury in two distinct components:
Public Debt by the Public: This figure represents all federal securities held by institutions or individuals outside of the United States Federal Government.
Intragovernmental Holdings: This figure represents all United States Treasury Securities held in accounts which are formally administered by the Untied States Government, such as the OASI Trust fund, which is administered by the Social Security Administration.
Components of the Public Debt
These above subcomponents, when combined, yield the Public Debt figure. As of May, 2011, the Total Public Debt owed by the United States Federal Government was approximately $14.3 trillion dollars. The debt has risen as a result of the increasing costs attached to various federal programs, such as social security and Medicaid as well income security and the net interest on debt–This money is predominantly owed to corporations and countries like China who have invested and lent to the United States to help fund the nation’s federal programs and war efforts.
How does the Public Debt affect us?
In the simplest of terms, the Public Debt is simply the ratio between the monies owed by the United States Government compared to the revenue obtained from investments, the nation’s gross domestic product and revenue generated from taxes.
When the United States borrows money from other nations or countries they initiate a loan offering with a high interest rate attached. For example, if the United States borrows $1 billion from China the Chinese Government will attach a repayment schedule or be given a treasury bond as a form of repayment. When the bond matures the money is owed or the federal Government will restructure the loan with a higher rate of interest.
When the nation is operating with a significant public debt it does not adequately possess the revenue to finance public services or programs that are needed to support the impoverished or struggling aspects of the public sector. When such a shortfall is realized, the nation is required to cutback and decrease funding in an assortment of areas.
The Public Debt is not to be confused with the trade deficit, which is the difference between the country’s net imports and net exports. Furthermore, all state and local government securities, issued by local governments, are not part of the Public Debt. The annual Public Debt refers to the cash difference between all government receipts and spending of the United States Federal Government.
The Public Debt therefore increases or decreases as a result of the unified budget deficit or surplus. That being said, there is certain spending efforts that add to the gross debt but are excluded from the deficit.