Federal debts, deficits, and the effect of the COVID-19 pandemic on both

At the start of April 2022, US outstanding debt was at $30.3 trillion, or about $89,237 per person in the US. About 79% of the federal government’s debt is owned by the public.

While the terms federal deficit and federal debt typically show up together, they mean very different things. The federal deficit describes anytime the federal government spends more than it receives in taxes and other revenue in a single year. The federal government has run budget deficits every year since 2001.

The federal debt is the total of all those yearly deficits. For most of US history, the government has had a debt of some amount. The current federal debt of $30.3 trillion is a culmination of all the yearly deficits, and the few yearly surpluses, the US ever had.

While the federal government can run deficits and accumulate debt, the same is not true for state and local governments. No federal law exists requiring those governments to have balanced budgets but practically every state prohibits running budget deficits.

From 1980 to 2019, the federal debt increased at an annual average rate of 5.6%. In 2020, it increased 18% compared with the year before as federal COVID-19 spending peaked. In 2021, the federal debt increased 2%, due to the government running a smaller deficit that year.

How does the federal debt compare to gross domestic product?

A common way to observe debt is as a percent of gross domestic product (GDP). This measure demonstrates the debt burden in relation to an economy’s output and its ability to repay those debts. If a country has a large amount of debt but it's a smaller percentage of GDP, then the country is more likely to pay off its debt.

For example, in 2017, Greece’s public debt soared to 180% of GDP. Greece later defaulted on its debt, contributing to economic struggles for the country and its European Union partner nations.

Debt held by the public measures the amount of US debt not held by the federal government. This includes debt held by households, businesses, the Federal Reserve, state and local governments, and foreign countries. Debt is most commonly held as Treasury securities, such as Treasury bills.

In 2020, the federal debt held by the public as a percentage of GDP was 100.8%, the highest mark since at least 1980. The 2020 percentage was a 21.6 percentage point increase from the year before, primarily due to federal COVID-19 assistance. As of 2021, federal debt held by the public as a percentage of GDP was 96.5%.

How much of the federal debt is owned by foreign countries?

The percent of debt held by foreign countries has been decreasing since 2008, when it reached 48.3% of total outstanding debt. In 2021, 33.4% of federal debt was held by foreign countries.

In 2021, Japan owned almost 17% of US foreign debt, followed by China at 14% and the United Kingdom at 8%. These three countries owned about $3 trillion combined. The remaining 61%, or $4.7 trillion, is owned by other countries mostly in the eurozone, such as Switzerland and Luxembourg.

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