In U.S. why is more than 1/2 of federal govt. debt actually owned by the fed. govt.?

Question

This is a hw question on my Macroeconomics assignment. If someone could help me out I would really appreciate it.

I always give best answer!

Answer 1

Because the federal government sells bonds to raise cash.  They spend the cash but now have bonds that are due in future periods.  Because they hold the debt, they are the owner of that debt.

Answer 2

they spend billions more than they take in as no one on  capital hill can say no. The military has been the biggest spenders in the last few years when you think about it bombs cost 10,000 each or more plus all the people to support over there as well as fuel and food etc. that is why the dollar is worth nothing compared to the Euro as they do not just throw money at all problems world wide as The U.S government does . I could go on and on and rant and rave but it would do no good

Answer 3

Though I am not a hundred percent sure here, it could be because the federal gov sells bonds etc to the public when it needs money. So if they are selling these bonds, or basically IOU's out to the public, they both own those bonds and are indebted to them.  Like if they sold a 5 dollar bond to Joe Smith,  so they could have 5 dollars to spend on war funding, then they owe that 5 dollars (or more when the bond matures) to Joe Smith, but they also issued the bond, so they own that debt.  If that makes sense.

-Paige

Answer 4

Some government programs have surpluses which they loan to the rest of the government.  - - For example, the Social Security Trust Fund, which is funded by FICA taxes on worker's earnings, is earmarked solely for Social Security and Medicare Benefits. -  However, the trust fund has been running at a surplus, because Social Security  taxes were raised in the early 1980's in order to build up a surplus to help pay for the retirement of the baby boom generation. - The surplus is then borrowed by the general government and spent, and the trust fund holds  government bonds representing the debt.  Similarly, government employees have their own retirement funds which is invested in government securities, and there are also special trust funds with money that is earmarked for highway projects- Until it is needed for such projects, it is loaned to the rest of the government. You can see a chart showing the various components of the National Debt here: http://zfacts.com/p/461.html

The problem is that the government has no plan in place to pay this money back, when it is needed for the purposes for which it is earmarked.  The availability of  surpluses in the trust funds has made it easier to cut taxes for the wealthiest tax payers.  - The biggest problem is with the social security trust fund - Currently, the government is borrowing over 150 billion dollars per year from the trust fund as the baby boomers reach their peak earning years in preparation for their retirement.

Some people complain about taxes being earmarked for specific purposes -  but remember that the justification for  high FICA taxes on workers, is that the money can only be used for the workers' retirement and Medicare benefits.

When President Bush gives out his budget deficit figures, he ignores this borrowing, as if it were free money that could be borrowed and not paid back  and - and he states a deficit  figure which is known as the  deficit in the "unified budget"  (As statement of what is coming and what is going out, which ignores future liabilities.) -  Even this budget ignores off budget items such as the cost of the war.