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US Federal, State, and Local Government Debts

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US Federal, State, and Local Government Debts

The issue of US government debt has become rather complex and challenging to clearly understand. Although there is a right level of transparency regarding government’s budget reporting, incomes, expenses, deficit, debts, and paid interest for its debt, the public seems confused by media reports. Here, there is a need for transparency to enable you making your own assessment of financial state of US governmental bodies. The three organs of US governments are (1) federal government, (2) state governments, and (3) local governments.

State of US Federal Government Debt

On February 2, 2017, the US federal debt amounted to $19.97 trillion. It represents some 105% of the US GDP excluding the debt of the state and local governments. When included, it would represent a debt to GDP ratio of 122%.

Figure 13.1 shows the US federal government’s debt of $19,969 and budget deficit of $516,331,828 on February 1, 2017. In addition, the US federal government has $105 trillion of unfunded liabilities. They are mainly related to Medicare, Medicaid, Social Security, student loans, Fannie Mae, Freddie Mac, FHA, and so on.

Figure 13.1

The lenders (creditors) are the “Public” and the “Intergovernmental Debt Holding.”
  1. The “Public”: It owns a major part of Treasury Bonds (the US federal debt) with a total of $12,717 billion or some 71 percent of total debt in 2014. Foreign countries, institutions, and citizens own $5,976 billion of Public bonds. This represents 47 percent of the Public portion of debt or 33.4 percent of the total debt of $17,900 billion. China and Japan are the biggest bondholders of the US Treasuries with $1,270 and $1,220 billion respectively. These two countries alone own $2,490 billion of Treasury Bonds that represents 42 percent of foreign bondholders.
  2. The “Intergovernmental Debt Holding”: These are government institutions, among others the Social Security, Medicare, and Retirements funds. The law requires them to purchase the Treasury Securities with the surplus on their balance sheets. Therefore, they own the remaining part of Treasury Bonds of $4,756 billion. This represents6 percent of the US federal government debt.
The media sometimes give confusing messages regarding the US debt. They tend to report on the public part of it only and tend to omit the “Inter-government” part. Specifically, it causes confusion concerning the ratio of debt to GDP. The government reports also seem sometimes to provide confusing information as to how it counts the amount of accrued interest, associated with the “inter-governmental debt holding” in the Federal government budget. We discuss this issue in detail later on.

State of the US State Government Debt

The state governments have also accumulated debts, now amounting to some $1.2 trillion.

State of the US Local Government Debt

The local governments have also accumulated debt, now amounting to some $1.92 trillion.

Overall Government’s Debt

By adding all three governments' debts in 2017, it becomes $23.09 trillion (19.97 + 1.2 + 1.92 = 23.09).
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