The federal government borrows money, in part by lending money from one government entity to another, and in part through selling Treasury bonds. Money lent from one government entity to another is called an intragovernmental holding. "[I]t's a liability that represents future government payments to itself." (5) The Social Security Trust Fund is the largest example of this. Payroll taxes dedicated to Social Security are larger than the benefits presently being paid out. Thus, there is a surplus in the SS trust fund. That money is not set aside in a bank (or lock box) but is loaned to other parts of the government to fund other programs.

Public Debt, on the other hand, is "all Federal debt held by individuals, corporations, state or local governments, foreign governments, and other entities outside of the United States Government less Federal Financing Bank securities. Types of securities held by the public include, but are not limited to, Treasury Bills, Notes, Bonds, TIPS, United States Savings Bonds, and State and Local Government Series."(6)

Interest rates have been steadily rising over the last few years. When Treasury bonds, issued at lower rates than exist today, come due, the government will have to sell new bonds at the now higher interest rates just to maintain the same amount of debt. Simply stated, the amount of the budget dedicated to paying interest on the national debt will get larger. "Soaring interest rates will cause the federal deficit to jump, as Treasury bond buyers demand much higher returns." (7)

As of September 11, 2006 the publicly held debt was $4,913,395,514,125.35 and the intragovernmental debt was $3,617,769,914,579.04. The daily debt amounts are recorded daily on the U.S. Treasury website.

Increasingly, the publicly held U.S. debt is being held by foreigners. "The average Chinese earns around $1,500 per year but has personal savings of 23 percent of his income and is lending a large chunk of these savings, via the People's Bank of China, to the average American." (8) "At the end of 2004, foreigners (central banks, especially) held 44% of publicly held Treasury debt, up from only 19 percent ten years ago." (9) "To say that it doesn't matter if Americans own their own economy is like saying that there is no difference between being a landlord and being a sharecropper." (10) "As 2005 draws to a close, foreigners hold about $3 trillion (yes, that's trillion) in US dollars, Treasury bonds, and other government securities such as Fannie Mae mortgages. Two thirds of this is held by four Asian countries Japan, China, Taiwan and Korea." (11)

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U.S. Debt Historically