How large is the federal debt, and what does it consist of?

Total federal debt—also known as gross debt—is the amount of the federal government's outstanding debt issued by the Treasury and other federal government agencies. Total federal debt, which was about $19.7 trillion at the end of fiscal yearAny yearly accounting period, regardless of its relationship to a calendar year. The fiscal year for the federal government begins on October 1 of each year and ends on September 30 of the following year; it is named by the calendar year in which it ends. Prior to fiscal year 1977, the federal government began its fiscal year on July 1 and ended it on June 30. The third quarter of 1976 is a stand-alone quarter between the previous and current definitions of the fiscal year for the federal government. 2016, consists of two components: (1) debt held by the public and (2) debt held by government accounts, also known as intragovernmental debt.

Fiscal Year 2016 Debt Held by the Public and Intragovernmental Debt

What is debt held by the public?

Debt held by the public is the value of all Treasury securities Treasury securities are debt instruments issued by the U.S. Department of the Treasury to raise the money needed to operate the federal government. They include Treasury bills, bonds, and notes.sold to the public—i.e., investors outside of the federal government. When the government's spending exceeds its revenue, it must borrow to finance the difference. Thus, debt held by the public is essentially the amount the federal government has borrowed to finance cumulative cash deficits. This debt is owed to a wide variety of investors, including international investors, domestic private investors, the Federal Reserve, and state and local governments. Debt held by the public represents a claim on today's taxpayers and absorbs resources from today's economy. In addition, the interest paid on this debt may reduce budget flexibility because, unlike most of the budget, it cannot be directly controlled.

Estimated Ownership of Debt Held by the Public (End of Fiscal Year 2016)

Source: GAO analysis of data from the Department of the Treasury, Treasury Bulletins and the Federal Reserve, Financial Accounts of the United States.

What is debt held by government accounts?

Debt held by government accounts represents the cumulative surpluses, including interest earnings, of government accounts that have been invested in Treasury securities.

The special Treasury securities held in these government accounts represent legal obligations of the U.S. Treasury and are guaranteed for principal and interest by the full faith and credit of the U.S. government. This debt reflects a future claim on taxpayers and the economy. Whenever a government account needs to spend more than it takes in from the public, the Treasury must provide cash to redeem debt held by the government account. The government must obtain this cash by increasing taxes, cutting spending, borrowing more from the public, retiring less debt (if the budget is in surplus), or some combination thereof. Trust fundsFederal budget accounts that are so designated by law. These accounts usually have a designated source of revenue, which is authorized to be spent for the programs and activities supported by the trust funds. Examples are the Social Security and Medicare trust funds. are the primary type of government account that holds federal debt. Trust funds for Social Security, Medicare, Military Retirement and Health Care, and Civil Service Retirement and Disability account for the vast majority of the total debt held by government accounts.

Distribution of Federal Debt Held by Government Accounts (End of Fiscal Year 2016)

Source: GAO analysis of Department of the Treasury data.
Notes: See GAO, Financial Audit: Bureau of the Fiscal Service's Fiscal Years 2016 and 2015 Schedules of Federal Debt.

Of the two types of federal debt, only debt held by the public is reported as a liabilityA probable future expenditure or other sacrifice of resources as a result of past transactions or events. Generally, liabilities are thought of as amounts owed for items or services received, assets acquired, construction performed (regardless of whether invoices have been received), and advance payments for goods or services yet to be rendered. on the consolidated financial statements of the United States government.The consolidated financial statements present consolidated and summarized financial information from 154 entities, including Chief Financial Officers Act agencies, significant entities and funds, and a portion of legislative and judicial branch entities. These statements are part of the Financial Report of the United States Government, referred to as the Financial Report (FR). The goal of the FR is to make available to every American a comprehensive overview of the federal government's finances. Debt held by government accounts is an asset to those accounts but a liability to the Treasury—as such, they offset each other in the consolidated financial statements.