When the U.S. Government spends more money than it collects from taxes, it borrows money from other branches of government, individuals, corporations and foreign countries. Anyone can buy debt from the U.S. in the form of bonds. If an investor buys a bond for a certain amount, the Government promises to pay back that amount plus interest.
The U.S. Government borrows money from private citizens by selling debt in the form of savings bonds, and it borrows from large privately owned banks and pension funds. Public holders of Government debt include state and local governments. The Federal Reserve also owns some of the debt.
The U.S. borrows the greatest amount of money from other countries, or international investors. This includes private investors from outside the U.S. and institutions run by foreign governments, such as national banks and investment funds.
- TongRo Images/TongRo Images/Getty Images