Debt of the Federal Government
Federal debt is the accumulated amount the Federal Government has borrowed, and not paid back yet. The total federal debt consists of debt held by the public and intragovernmental debt. Debt owed to the public is the amount borrowed from entities outside the federal government. It includes borrowing from state and local governments, foreign governments, foreign investors, foreign central banks, and private investors in the United States. It also includes the Federal Reserve System, which though is a part of the Federal Government, is treated as “nonbudget”, that is as if it were a non-Federal entity, in order to maintain its independence both in practice and appearance.
Intragovernmental debt consists of debt liabilities owed by one part of the federal government to another, which are mostly held in trust funds. The Social Security Old Age and Survivors’ Insurance (OASI) account is the federal trust fund with the largest holdings of Treasury securities. The largest 20 trust funds account for about 98% of intragovernmental debt. The Social Security trust funds were designed to provide financial resources to pay future benefits. The federal government, however, must raise revenues, cut spending, or borrow in order to obtain funds that will allow the U.S. Treasury to redeem the trust fund securities in the future.
[Derived from the Congressional Research Service, Overview of the Federal Debt (R41815), May 11, 2011.
Generally, the amount borrowed by the government from the public or from government accounts. Four ways that federal debt may be categorized for reporting purposes are (1) gross federal debt, (2) debt held by the public, (3) debt held by government accounts, and (4) debt subject to statutory debt limit. For a fuller discussion of federal debt, see Federal Debt: Answers to Frequently Asked Questions. An Update (GAO-04-485SP). (See also Borrowing Authority under Forms of Budget Authority under Budget Authority; Federal Financing Bank; Means of Financing.)
In the context of federal debt, the Department of the Treasury’s purchases of marketable Treasury securities from the public prior to their maturity through competitive redemption processes (as opposed to redemptions prior to maturity under call provisions) are often referred to as “debt buybacks.” The budget records buyback premiums and discounts as means of financing a surplus or deficit, rather than as outlays or offsetting collections or receipts. The buyback premium or discount is the difference between the reacquisition price of a security and its book value. (See also Means of Financing.)
DEBT HELD BY GOVERNMENT ACCOUNTS (INTRAGOVERNMENTAL DEBT)
Federal debt owed by the federal government to itself. Most of this debt is held by trust funds, such as Social Security and Medicare. The Office of Management and Budget (OMB) contrasts it to debt held by the public by noting that it is not a current transaction of the government with the public; it is not financed by private saving and thus does not compete with the private sector for available funds in the credit market; and it does not represent an obligation to make payments to the public.
DEBT HELD BY THE PUBLIC
That portion of the gross federal debt held outside of the federal government. This includes any federal debt held by individuals, corporations, state or local governments, the Federal Reserve System, and foreign governments and central banks. Debt held by government accounts (intragovernmental debt) is excluded from debt held by the public. Debt held by the public is not the same as public debt or Treasury debt.
DEBT SUBJECT TO STATUTORY DEBT LIMIT
Debt guaranteed as to principal and interest by the United States.
As defined by section 3101 of title 31 of the United States Code, the debt subject to the statutory debt limit includes debt issued under chapter 31 of that title. This includes Treasury debt except the securities issued by the Federal Financing Bank (FFB) under authority of section 9(a) of the Federal Financing Bank Act of 1973 (12 U.S.C. § 2888(a)) upon which there is a separate limit of $15 billion, and a small amount of agency debt. Agency debt that by law is not guaranteed as to principal and interest by the United States—for example, the Tennessee Valley Authority (TVA) (under authority of section 15d of the TVA Act of 1933, 16 U.S.C. § 831n-4) and the United States Postal Service (under authority of 39 U.S.C. § 2005(a))—is not subject to the ceiling imposed by section 3101, but is usually subject to its own ceiling.
GROSS FEDERAL DEBT
The total amount of federal government debt comprising debt securities issued by the Department of the Treasury (including securities issued by the Federal Financing Bank (FFB) under section 9(a) of the Federal Financing Bank Act of 1973 (12 U.S.C. § 2888(a)) and other government agencies. Gross federal debt is the sum of debt held by the public and debt held by government accounts (intragovernmental debt).
Treasury Debt/Public Debt. That portion of the gross federal debt issued by the Department of the Treasury to the public or to government accounts (including securities issued by the Federal Financing Bank (FFB) under section 9(a) of the Federal Financing Bank Act of 1973 (12 U.S.C. § 2888(a)). (See also Debt Held by Government Accounts under Debt, Federal.)
Agency Debt. That portion of the gross federal debt incurred when a federal agency other than the Department of the Treasury (Treasury) is authorized by law to issue debt securities directly to the public or to another government account. While an agency may have authority to borrow directly from the public, agencies usually borrow from Treasury’s Federal Financing Bank (FFB). Since Treasury borrowing required to obtain the money to lend to the agency through FFB is already part of the gross federal debt, to avoid double counting, agency borrowing from FFB is not included in the gross federal debt. In addition, federal fund advances from Treasury to trust funds are not included in the gross federal debt to avoid double counting.
Debt of government-sponsored, privately owned enterprises, such as the Federal National Mortgage Association, is not included in the federal debt.
STATUTORY DEBT LIMIT
The ceiling on the amount of most Treasury and agency debt established by section 3101 of title 31 of the United States Code, sometimes referred to as the public debt ceiling or the public debt limit.
Definition of Federal Debt
Federal Debt: Consists of all Treasury and agency debt issues outstanding. Current law places a limit or ceiling on the amount of debt. Debt subject to limit has two components: debt held by the government and debt held by the public.
Debt held by the government.—Represents the holdings of debt by federal trust funds and other special government funds. For example, when a trust fund is in surplus as is presently the case with Social Security, the law requires that this surplus be invested in government securities.
Debt held by the public.—Represents the holdings of debt by individuals, institutions, other buyers outside the federal government, and the Federal Reserve System. The change in debt held by the public in any given year closely tracks the unified budget deficit for that year.
[The Congressional Budget Process: An Explanation, Appendix J (Glossary), Committee on the Budget of the U.S. Senate, S. Prt. 105-67 (Revised December 1998).]
From the Department of the Treasury:
Total Public Debt Outstanding vs Debt Subject to Limit
November 8, 2004 — What is the difference between the total public debt outstanding and the total public debt subject to limit?
The Total Public Debt Outstanding represents the total par (principal amount) of marketable and non-marketable securities currently outstanding. Marketable securities include Treasury bills, notes and Treasury Inflation-Protected Securities (TIPS), all of which can be bought and sold in the secondary market at prevailing market prices. Non-marketable securities include savings bonds as well as special securities issued only to state and local governments and Federal trust funds such as Social Security. Non-marketable securities are payable only to the person(s) or entities to whom they are registered.
The Total Public Debt Subject to Limit is the maximum amount of money the Government is allowed to borrow under authority granted by Congress.
Total Public Debt Subject to Limit is defined as the Total Public Debt Outstanding less the Unamortized Discount on Treasury Bills and Zero-Coupon Treasury Bonds, old debt issued before 1917, and old currency called United States Notes, as well as Debt held by the Federal Financing Bank and Guaranteed Debt.
The authority to borrow on the full faith and credit of the United States is vested in the Congress by the Constitution. Article I, Section 8, Paragraph 2, states “[The Congress shall have power]…to borrow money on the credit of the United States.” In 1917, Congress, pursuant to the Second Liberty Bond Act, delegated authority to the Treasury Department to borrow, subject to a limit. This action mitigated the need to seek congressional authority on each issuance, providing operational convenience. The debt limit essentially achieved its modern form in the early 1940s.
For more information, visit our “Public Debt Online” page.
See also the Monthly Statement of the Public Debt from the Department of the Treasury