Janet Nguyen May 26, 2023 – for marketplace.org

Here’s a look at how the debt breaks down:

First, the debt held by the public stands at more than $24.64 trillion. This represents debt securities, like Treasury bonds and notes, bought by banks, insurance companies, state and local governments, foreign governments and private investors.

The remaining debt, which totals about $6.83 trillion, can be classified as intragovernmental holdings. This is basically debt the government owes itself. “For example, some federal trust funds invest in Treasury securities, thereby lending money to [the] Treasury,” according to the U.S. Government Accountability Office. The Social Security Administration, the Department of Defense and the United States Postal Service all have investment holdings in federal debt.  

In total, other territories hold about $7.4 trillion in U.S. debt. Japan owns the most at $1.1 trillion, followed by China, with $859 billion, and the United Kingdom at $668 billion.

In isolation, this $7.4 trillion amount is a lot, said Scott Morris, a senior fellow at the Center for Global Development. “But the way an economist would look at this is to say, ‘Well, how does that compare to the size of our economy?’” he said.  

And when you do that, the amount of debt we owe other countries is not “particularly problematic,” Morris said. 

The United States supported China’s entrance into the World Trade Organization at the turn of the millennium, which led to an export boom of Chinese goods into the U.S. China ended up parking much of its sales in U.S. Treasurys, CNN reported, because of their perceived safety as an investment. By 2008, China had overtaken Japan as the largest foreign holder of U.S. debt. 

But over the past decade, Japan reclaimed its top spot. Like China, Japan also sells lots of goods to the U.S. and then invests much of the proceeds in U.S. Treasurys, explained Insider. 

Has anyone defaulted on their debts to us? 

Anna Gelpern, a professor at Georgetown University Law Center, said over email that many countries have owed us money and paid it late. She pointed to Britain, which took more than 60 years to pay off a $4.3 billion U.S. loan to refinance the battered country at the end of World War II. The final payment was made six years after it was supposed to come in. 

In the 1930s, the country also defaulted on debt to the U.S. that it had accrued during World War I. This had lasting consequences, according to author David James Gill, with London being frozen out of U.S. securities and money markets. 

But when a country is struggling to repay the money it’s borrowed, the debt might be rescheduled or even forgiven, Morris noted.   

“When it comes to one government owing money to another government, you may never see a moment that is called ‘default,’” he said. 

The United States has forgiven debt owed by other countries, like it did with Iraq in 2004, shortly after President George W. Bush invaded the country. In late 2000, President Bill Clinton signed a law that would “forgive or alleviate” $435 million worth of debt for the world’s poorest countries.