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Ryan Abramson

AvGeek

The Truth About America's Debt

  • Writer: Ryan Abramson
    Ryan Abramson
  • Jul 12
  • 5 min read

Whether you're a Catholic school teacher in Bucks County or a Banker from Kansas, the US Debt Impacts Everyone



The United States government owes more than $36 trillion in debt. That’s an amount so large it’s hard to even imagine. But where does all that debt go? Who actually owns it? And how does it affect you? The answers may surprise you. In fact, you will be shocked by the truth. While politicians and talking heads often speak about "China owning our debt" or “borrowing from the future,” what you’ve always been told is not quite the truth. Understanding this isn’t just about economics—it’s about knowing how your country really works.


Let’s start with the basics. The U.S. national debt is the total amount of money the federal government has borrowed to cover years of budget deficits—when it spends more than it brings in through taxes and revenue. This borrowing happens by issuing U.S. Treasury securities—things like Treasury bonds, notes, and bills. Investors, both in the U.S. and around the world, buy these securities because they are considered one of the safest investments in the world.


The U.S. has had debt from the very beginning. Alexander Hamilton, the first Secretary of the Treasury, believed a “national debt, if it is not excessive, will be to us a national blessing.” And for much of American history, moderate debt was used to fund wars, build infrastructure, and handle economic downturns. But the size and scope of debt has changed dramatically in the past few decades. In 1980, the national debt was under $1 trillion. Today, it’s more than $36 trillion—and growing fast.


This is critical information because debt has become a central part of the U.S. economy. When people talk about “raising the debt ceiling,” they’re referring to the legal limit on how much the government can borrow. And when that ceiling isn’t raised in time, it risks the U.S. defaulting on its obligations—something that could crash financial markets and shake global trust.


Now let’s get to the real question: who actually owns this $36 trillion? The answer might surprise you. According to a detailed analysis by the Peter G. Peterson Foundation, the biggest holder of U.S. debt is not China or Japan—it’s the American people and the U.S. government itself. That’s right—about two-thirds of all U.S. debt is held domestically.

One of the largest single holders is the Social Security Trust Fund, which owns trillions in Treasury securities. These are the savings built up by working Americans, set aside to fund future Social Security payments. Other government agencies, like the Military Retirement Fund and Civil Service Retirement Fund, also hold significant portions of the debt.


Next, you have individual investors, banks, mutual funds, pension funds, and insurance companies—all right here in the United States. That includes retirement accounts like 401(k)s and IRAs. So if you have money invested in mutual funds or U.S. bonds, you may already be one of the people holding U.S. debt.


Foreign countries, while important, only hold about 25% of the total debt. As of 2025, Japan is the largest foreign holder, owning over $1 trillion in U.S. Treasuries. China used to be the top foreign holder but has reduced its holdings in recent years. According to USAFacts.org, China's current stake is closer to $775 billion. Other significant holders include the United Kingdom, Ireland, Luxembourg, and Switzerland, as well as oil-exporting nations like Saudi Arabia.


So why do these countries buy U.S. debt? It’s simple: the U.S. dollar is the world’s reserve currency, and U.S. Treasury bonds are one of the safest places to park money. When a country runs a trade surplus with the U.S., it often uses the extra dollars to buy Treasuries. That creates a cycle where foreign economies remain invested in the stability of the U.S. government.


However, recent data shows foreign ownership of U.S. debt is shrinking. A detailed report from Wolf Street in March 2025 showed that foreign central banks have been reducing their U.S. Treasury holdings. Some experts believe this reflects shifting geopolitical strategies, others point to changes in monetary policy and rising interest rates in those countries.


Even more interesting, the Federal Reserve—America’s central bank—was once a major buyer of debt, especially during the pandemic. Through a process called quantitative easing, the Fed bought trillions in government securities to help stimulate the economy. But that changed in 2022 and beyond. Now, the Fed is letting those assets mature without replacing them, meaning it’s shrinking its balance sheet. That leaves more of the debt to be absorbed by the market—and yes, even by you and me through retirement accounts and investment portfolios.


There’s a common myth that “China owns the U.S.” because of our debt. But this is not quite the truth. China owns less than 3% of total U.S. debt. And importantly, owning debt does not mean owning the country. Treasury bonds are simply loans—with a clear interest rate and repayment date. If China or any other country were to suddenly “call in the debt,” it wouldn’t change anything—the U.S. doesn’t operate on those terms. Treasuries are sold on fixed terms, and the government repays them at maturity.



Still, the sheer size of the debt makes people nervous. And understandably so. A recent Marketplace.org article explored whether national debt is “good or bad.” The answer, like most things in economics, is: it depends. Borrowing to invest in infrastructure, education, or economic stimulus can boost growth. But borrowing too much for too long, especially without raising revenue, can lead to higher interest costs and make it harder for future generations to manage finances.


Right now, interest payments on the debt are the fastest-growing part of the federal budget. In 2024, the U.S. spent more on interest than on national defense. That’s billions of dollars that aren’t going to roads, healthcare, or education. And as interest rates rise, so do those costs.


So what’s the takeaway? What you need to know is that the U.S. debt is a complex, global financial instrument—but most of it is owned by Americans. That means we’re not at the mercy of foreign governments the way some people fear. But it also means we have to be responsible stewards of our own economy. We must understand that debt isn't just a political talking point—it's a reality that touches everything from your retirement account to your kids' future taxes.



Economist Douglas Holtz-Eakin once said, “If we don't pay attention to who owns our debt, we miss how our economy actually functions.” And Federal Reserve Chair Jerome Powell has warned, “The U.S. federal government is on an unsustainable fiscal path.”

Yet, not all hope is lost. The dollar remains strong, the U.S. economy is resilient, and demand for Treasury securities remains high. But we should all take the time to understand the system, question the myths, and ask our leaders the right questions. This is critical information for every American—regardless of politics.


So the next time someone says China owns America, you’ll know better. You’ll know that the largest stakeholder in U.S. debt is you—your neighbor, your teacher, your retiree father, and the federal agencies holding your future benefits. That’s the real story behind the numbers.


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