The U.S. government issues Treasury securities to fund the deficit between the amount of money that it takes in through taxes and other sources, and the amount of money that it spends on defense, welfare programs, and the interest it pays on its current debt. For 2019, the Congressional Budget Office (CBO) projects that the U.S. government will take in $3.5 trillion in revenue, while having outlays of $4.4 trillion, leading to a budget deficit of around $960 billion. The previous deficits combined with the $960 billion deficit for 2019 will put the government's total debt at around $22.9 trillion.
The debt is held in two categories: intragovernmental debt and public debt. Intragovernmental debt is debt owed to other federal agencies and makes up 26% of outstanding debt. This includes Social Security, military retirement funds, Medicare, and other retirement funds. The remainder of the 74% is public debt, with foreign governments and investors holding approximately 30%. So which countries hold the most?
Japan is the largest holder of U.S. debt with $1.13 trillion in Treasury holdings. In 2019, Japan increased its U.S. debt holdings to its highest levels in two years to eventually beat out China as the largest holder of U.S. debt. The increase in Japan's holdings this year was also its largest since 2013. The low and negative yield market in Japan makes holding U.S. debt more attractive. Japan now makes up 5.3% of total U.S. debt and 23.5% of foreign debt.
China gets a lot of attention for holding a big chunk of the U.S. government's debt and for good reason, given its rapidly expanding economy. China takes the second spot among foreign holders of U.S. debt with $1.11 trillion in Treasury holdings, just behind Japan. China has trimmed its holdings and this is the lowest amount held in the last two years. It currently holds 5% of total U.S. debt and 23% of foreign debt.
The United Kingdom has increased its holdings in U.S. debt to an eight-year high to $334.7 billion. It has increased in rank as Brexit continues to weaken its economy. This is 1.5% of total U.S. debt and 7% of foreign debt.
Brazil is the fourth-largest holder of U.S. debt among foreign countries, while having the ninth-largest economy in the world. Brazil holds $310 billion in U.S. Treasuries, just slightly behind the United Kingdom. Brazil holds 1.4% of total U.S. debt and 6.5% of total foreign holdings.
It would appear odd that Ireland is the fifth-largest holder of U.S. debt, particularly when comparing its economy to other European nations, such as Germany. However, a big factor in Ireland's place is the fact that many U.S. multinational companies, such as Alphabet/Google, set up shop there for more favorable taxes on foreign returns.
Dublin is a focal point for international fund management but also represents the European branches of U.S. technology and pharmaceutical companies. However, there has been a drop in Ireland's U.S. debt holdings, signaling a possible change in multinational attitudes as they move money back to the U.S. as rules on how foreign earnings are taxed change. Ireland holds $258.2 billion in U.S. debt, which is 1.12% of total U.S. debt and 5.4% of foreign debt.