Federal Debt

Posted in Finance, Accounting and Economics Terms, Total Reads: 1482

Definition: Federal Debt

Debt is something which one takes for now but to return later or the money owed through unpaid bills for services. So Federal Debt is all the money which US Federal Government took and/or owes to the lenders. This debt can be because of direct lending, or securities based on debt like bonds etc. 

Main components of gross national debt :

• Public Held: This is the debt held by investors outside the government like individuals, corporations and having Treasury securities for example.

• Governmet held: All the non-marketable Treasury securities held by federal government and which it owes to beneficiaries such as Social security trust. Debt held by government accounts includes the investments in Treasury securities from the Cumulative surpluses and interest earnings

The debt was about $ 10.6 trillion when Obama became the president in 2009 and has risen by more than 70% during close to 6 years in the office

The major programs under Obama that include Social Security, Medicaid and Medicare consume Upto 50% of all the federal spending and this spending is expected to increase in coming years as more and more Americans become old and retire. By 2030, it is predicted that all these spending can consume 100% of the tax revenues.

The further increase in such entitlements is only going to make the debt problem more and more severe. To counter such a high level of debt, higher levels of taxes need to be imposed thus seriously affecting the future of millions of young Americans and also can lead to social unrest.

Hence, this concludes the definition of Federal Debt along with its overview.

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