When you hear the term national debt, what probably comes to mind is a government that has failed to manage its finances or is close to bankruptcy.
But interestingly, the United States (US), known as the world's number one economic power, is actually the country with the highest debt in the world!
The US national debt has exceeded $34 trillion as of 2025. How could this happen, and who does America actually owe?
What is National Debt?
National debt refers to the amount of money borrowed by the government when spending is greater than income collected through taxes.
To cover this gap, the US government issues debt instruments such as Treasury Bills, Notes, and Bonds - a type of loan certificate that can be purchased by investors.
Why is the United States in Debt?
Despite being the world's largest economy, America's debt continues to increase due to several main factors:
Chronic Budget Deficit - The government often spends more than it receives in taxes, especially in the areas of defense, public health (Medicare, Medicaid), and people's pensions (Social Security).
War and Military Costs – America has the world’s largest military budget, in addition to the trillion-dollar costs of the wars in Iraq and Afghanistan.
Economic Crisis & Public Assistance – From the 2008 financial crisis to the COVID-19 pandemic, governments have issued trillion-dollar aid packages.
The Role of the US Dollar in the World – Because the US dollar is the world’s primary reserve currency, many countries and foreign investors are willing to buy US government bonds because they are considered the safest.
Who Does the United States Indebted to?
American debt can be divided into two main groups:
1. Intragovernmental Holdings – about 20%This portion is held by government agencies themselves, such as the Social Security Trust Fund. In short, the US government owes “itself”.
2. Public Debt – about 80%
Domestic US Investors – banks, pension funds, insurance companies, and wealthy individuals.
Foreign Investors & Foreign Countries – foreign countries buy US bonds as reserve holdings. Among the largest holders are:
Japan – around $1.1 trillion
China – around $800 billion
United Kingdom, Switzerland, Saudi Arabia, and several other countries.
Despite the huge debt, the world still trusts US government bonds because they are considered the safest and most stable investment with the world's confidence in the country's economy, technology, and military.
In addition, the US dollar, which is the global reserve currency, is also a factor in the world's trust in investment in America.
Conclusion
The US debt is not a sign that the country is poor or weak, but rather reflects its position as a global financial center. The world still buys American debt because it is confident in the strength of the economy and the status of the dollar as the world's main currency.
In short, America owes its own people, domestic financial institutions, and foreign countries such as Japan and China.
As long as confidence in the US dollar does not waver, America's debt can continue to increase without threatening its position as the world's number one economic power.
