When you need to borrow money, you go to the bank or call a friend to borrow that money from them. This is not the way the government does it.
Have you ever wondered how and from whom the United States government borrows money or how it pays back that money?
When you need to borrow money, you go to the bank or call a friend to borrow that money from them. This is not the way the government does it.
This series is about the national debt and the debt ceiling. It explains how the U.S. government borrows and spends money and how the national debt and the debt ceiling may impact the government public policy agenda. Without further ado, let’s begin.
Congress has the power of the purse. This means that Congress gives money to the Government to fund public programs. The Government can only spend money that Congress appropriates. When the Government spends more than it was given, the money it overspends becomes a national debt. To cover its excessive spending or to pay down the national debt, Congress allows the Government to borrow money.
Congress imposes a limit on how much the Government can borrow. This action is called the debt limit or debt ceiling, which only Congress can increase or lower to avoid catastrophic economic consequences. Disastrous economic consequences may result in government shutdowns due to a lack of funds, leading to furloughed government employees and the closing of national parks and other government facilities.
Now, let’s see how the Government pays down the national debt, increases its debt ceiling, and how and from whom it borrows money.
While the national debt is money the Government already spent in previous fiscal years, the debt ceiling is money congress authorizes the Government during the current fiscal year. Once the Government realizes its projected financial expenditures are lower than the amount of money Congress will give it or that it still does not have money to pay for past-year commitments, the Government, through the U.S. Treasury, requests that Congress increase its borrowing power or the country’s debt ceiling.
Suppose that Congress agrees to increase the government spending limit. The country increases the debt limit by borrowing money. However, it doesn’t go to the bank and apply for a loan. Instead, it issues debt. Confusing; is it not? Yes, the Government creates debts to sell. Issuing debts, in this case, means the Government will sell what it owns at a lower price than they are worth.
Just imagine you owing creditors and not having the money to pay them. You end up selling your lands, cars, and clothes to get money to pay them. The Government does the same thing, except that whatever they sell, they have to repurchase them.
What does the Government sell, and who purchases them?
Any American or any foreigner, for that matter, can lend money to the U.S. government.
The Government sells Treasury marketable securities and non-marketable securities. Marketable securities can be transferred from one person to another or from one person to a federal agency. They are Treasury bills, notes, bonds, and Treasury inflation-protected securities. These securities are considered liquid because they mature quickly and are easily converted into cash. Marketable securities carry a higher risk than non-marketable securities. Non-marketable securities are not bought or sold on markets and are more difficult to obtain. The Government sells them to other federal government agencies, individuals, businesses, state and local governments, and people, businesses, and governments from other countries.
In a much simpler term, People like you and I buy assets from the Government, and over time, the Government purchases the assets back from us with interests.
Congress will tell the Government how much of and which assets to sell to the public. After the Government receives the money from the sales, Congress will tell them how to spend it.
In summary, the United States government borrows money to pay for public programs and to cover excessive spending. Congress has the authority to allocate funds to the Government, and when these funds are not enough to cover the Government’s expenses, the Government is allowed to borrow money. The Government borrows money from various sources, such as the public, foreign governments, and private lenders. This money is used to pay the Government’s obligations to the people, pay its bills, and provide funds for future investments. The national debt is an important issue affecting the United States economy and must be managed to avoid severe economic consequences.
When you need to borrow money, you go to the bank or call a friend to borrow that money from them. This is not the way the government does it.
This series is about the national debt and the debt ceiling. It explains how the U.S. government borrows and spends money and how the national debt and the debt ceiling may impact the government public policy agenda. Without further ado, let’s begin.
Congress has the power of the purse. This means that Congress gives money to the Government to fund public programs. The Government can only spend money that Congress appropriates. When the Government spends more than it was given, the money it overspends becomes a national debt. To cover its excessive spending or to pay down the national debt, Congress allows the Government to borrow money.
Congress imposes a limit on how much the Government can borrow. This action is called the debt limit or debt ceiling, which only Congress can increase or lower to avoid catastrophic economic consequences. Disastrous economic consequences may result in government shutdowns due to a lack of funds, leading to furloughed government employees and the closing of national parks and other government facilities.
Now, let’s see how the Government pays down the national debt, increases its debt ceiling, and how and from whom it borrows money.
While the national debt is money the Government already spent in previous fiscal years, the debt ceiling is money congress authorizes the Government during the current fiscal year. Once the Government realizes its projected financial expenditures are lower than the amount of money Congress will give it or that it still does not have money to pay for past-year commitments, the Government, through the U.S. Treasury, requests that Congress increase its borrowing power or the country’s debt ceiling.
Suppose that Congress agrees to increase the government spending limit. The country increases the debt limit by borrowing money. However, it doesn’t go to the bank and apply for a loan. Instead, it issues debt. Confusing; is it not? Yes, the Government creates debts to sell. Issuing debts, in this case, means the Government will sell what it owns at a lower price than they are worth.
Just imagine you owing creditors and not having the money to pay them. You end up selling your lands, cars, and clothes to get money to pay them. The Government does the same thing, except that whatever they sell, they have to repurchase them.
What does the Government sell, and who purchases them?
Any American or any foreigner, for that matter, can lend money to the U.S. government.
The Government sells Treasury marketable securities and non-marketable securities. Marketable securities can be transferred from one person to another or from one person to a federal agency. They are Treasury bills, notes, bonds, and Treasury inflation-protected securities. These securities are considered liquid because they mature quickly and are easily converted into cash. Marketable securities carry a higher risk than non-marketable securities. Non-marketable securities are not bought or sold on markets and are more difficult to obtain. The Government sells them to other federal government agencies, individuals, businesses, state and local governments, and people, businesses, and governments from other countries.
In a much simpler term, People like you and I buy assets from the Government, and over time, the Government purchases the assets back from us with interests.
Congress will tell the Government how much of and which assets to sell to the public. After the Government receives the money from the sales, Congress will tell them how to spend it.
In summary, the United States government borrows money to pay for public programs and to cover excessive spending. Congress has the authority to allocate funds to the Government, and when these funds are not enough to cover the Government’s expenses, the Government is allowed to borrow money. The Government borrows money from various sources, such as the public, foreign governments, and private lenders. This money is used to pay the Government’s obligations to the people, pay its bills, and provide funds for future investments. The national debt is an important issue affecting the United States economy and must be managed to avoid severe economic consequences.