Why America Can't Pay It's Bills

The Clock is Ticking

How do you tell your children or grandchildren they live in the greatest country in the world? However, the governing bodies can’t balance a checkbook without being overdrawn. The United States is in debt because the federal government spends more than it receives in revenue from taxes and other sources. Then it borrows money to cover this annual deficit, known as the national debt. Here’s our national debt clock in real-time.

Understanding the National Debt.

The national debt refers to the total amount of money that the federal government has borrowed to cover its expenses over time. Each fiscal year (FY), when government spending (such as funds for road construction) outpaces revenue (like income from federal taxes), a budget deficit occurs. To bridge this gap, the federal government borrows money by issuing marketable securities, including Treasury bonds, bills, notes, floating rate notes, and Treasury inflation-protected securities (TIPS). The national debt is essentially the sum of these borrowings, plus any interest owed to investors who buy these securities. As the government frequently runs into budget deficits— a common occurrence— the national debt continues to rise.

In simpler terms, you can think of the national debt as using a credit card. If you make purchases but don’t pay the full balance each month, the amount you owe grows. The difference between what you spend and what you pay off signifies a deficit, while all those deficits accumulated over time represent your total debt.

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Here’s a quick and fascinating breakdown by total amount held and percentage of total U.S. debt, according to Business Insider: Vincent Trivett is a contributor to Business Insider and a multimedia student in CUNY’s Graduate School of Journalism. His work has also appeared in Koe Magazine (Japan), Yokohama Seasider Magazine (Japan), WNYC’s News Blog, DNAinfo.com, The Atlantic Business, City Limits Magazine, and The L Magazine. Article dated: July 20, 2011.

What and Who America Owed in 2011

Hong Kong: $121.9 billion (0.9 percent)
Caribbean banking centers: $148.3 (1 percent)
Taiwan: $153.4 billion (1.1 percent)
Brazil: $211.4 billion (1.5 percent)
Oil exporting countries: $229.8 billion (1.6 percent)
Mutual funds: $300.5 billion (2 percent)
Commercial banks: $301.8 billion (2.1 percent)
State, local and federal retirement funds: $320.9 billion (2.2 percent)
Money market mutual funds: $337.7 billion (2.4 percent)
United Kingdom: $346.5 billion (2.4 percent)
Private pension funds: $504.7 billion (3.5 percent)
State and local governments: $506.1 billion (3.5 percent)
Japan: $912.4 billion (6.4 percent)
U.S. households: $959.4 billion (6.6 percent)
China: $1.16 trillion (8 percent)
The U.S. Treasury: $1.63 trillion (11.3 percent)
Social Security trust fund: $2.67 trillion (19 percent)

So America owes foreigners about $4.5 trillion in debt. But America owes Americans $9.8 trillion. You simply can’t live in this world without owing something to someone. Wealth is transitory but it can be created through your creativity, courage, discipline, and knowledge. George Gilder explains it best in the title: Wealth and Poverty, “Without entrepreneurs, there is no wealth to distribute”. If you found this article helpful, please share it with a friend. Leave your comments below.