Who owns the national debt?

The national debt has topped $18 trillion. There’s a perception that most of this money is owed to foreign investors, but as NC State University economist Mike Walden explains, this isn’t the case.

“And, indeed, if you talked to people on the street they would probably say China owns all of the national debt. And actually the numbers tell a totally different picture. Of that $18 trillion, two-thirds is owed to domestic investors. This would be the Federal Reserve, this would be the Social Security Administration, as well as private investors.

“A lot of people might be surprised that if they have a mutual fund probably some of that money is in the national debt, which is considered very, very safe investment. So two-thirds to domestic investors, one-third to foreign investors.

“Now if we break down the foreign investors, China is indeed the largest holder among foreign investors of our national debt. But of our total national debt — that total $18 trillion — China owns only 7 percent. And Japan is next at just under 7 percent. And then the United Kingdom and South Korea are also major investors.

“So again, thinking about the national debt, you have to keep in mind that it is not all owed to foreign investors. Actually, most of it is owed to ourselves, either through government agencies or through private investors.”