Regardless of how much closer Obama’s budget brings our economy into a balance of payments not seen since 2001, we will continue to run deficits for the next decade, and the national debt will keep growing every year that happens.
While most of the country’s $14 trillion debt is held by private banks in the U.S., the Treasury Department and the Federal Reserve Board estimate that, as of December, about $4.4 trillion of it was held by foreign governments that purchase our treasury securities much as an investor buys shares in a company and comes to own his or her little chunk of the organization.
Looking at the list of our top international creditors, a few overall characteristics show some interesting trends: Three of the top 10 spots are held by China and its constituent parts, and while two of our biggest creditors are fellow English-speaking democracies, a considerable share of our debt is held by oil exporters that tend to be decidedly less friendly in other areas of international relations.
Here we break down the top 10 foreign holders of U.S. debt, comparing each creditor’s holdings with the equivalent chunk of the United States they “own,” represented by the latest (2009) state gross domestic product data released by the U.S. Bureau of Economic Analysis. Obviously, these creditors won’t actually take states from us as payment on our debts, but it’s fun to imagine what states and national monuments they could assert a claim to.
1. Mainland China
Amount of U.S. debt: $891.6 billion
Share of total foreign debt: 20.4%
Building on the holdings of its associated territories, China is undisputedly the largest holder of U.S. foreign debt in the world. Accounting for 20.4% of the total, mainland China’s $891.6 billion in U.S. treasury securities is almost equal to the combined 2009 GDP of Illinois ($630.4 billion) and Indiana ($262.6 billion) in 2009, a shade higher at a combined $893 billion. As President Obama — who is from Chicago — wrangles over his proposed budget with Congress he may be wise to remember that his home city may be at stake in the deal.
Amount of U.S. debt: $883.6 billion
Share of total foreign debt: 20.2%
The runner-up on the list of our most significant international creditors goes to Japan, which accounts for over a fifth of our foreign debt holdings with $883.6 billion in U.S. treasury securities. That astronomical number is just shy of the combined GDP of a significant chunk of the lower 48: Minnesota ($260.7 billion), Wisconsin ($244.4 billion), Iowa ($142.3 billion) and Missouri ($239.8 billion) produced a combined output of $887.2 billion in 2009.
3. United Kingdom
Amount of U.S. debt: $541.3 billion
Share of total foreign debt: 12.4%
At number three on the list is perhaps our closest ally on the world stage, the United Kingdom (which includes the British provinces of England, Scotland, Wales and Northern Ireland, as well as the Channel Islands and the Isle of Man). The U.K. holds $541.3 billion in U.S. foreign debt, which is 12.4% of our total external debt. That amount is equivalent to the combined GDP of two East Coast manufacturing hubs, Delaware ($60.6 billion) and New Jersey ($483 billion) — which was named, yes, after the island of Jersey in the English Channel. The two states’ combined output in 2009 came to $543.6 billion.
4. Oil Exporters
Amount of U.S. debt: $218 billion
Share of total foreign debt: 5%
Another grouped entry, the oil exporters form another international bloc with money to burn. The group includes 15 countries as diverse as the regions they represent: Ecuador, Venezuela, Indonesia, Bahrain, Iran, Iraq, Kuwait, Oman, Qatar, Saudi Arabia, the United Arab Emirates, Algeria, Gabon, Libya, and Nigeria. As a group they hold 5% of all American foreign debt, with a combined $218 billion of U.S. treasury securities in their own treasuries. That’s roughly equivalent to the combined 2009 GDP of Nebraska ($86.4 billion) and Kansas ($124.9 billion), which seems to be an equal trade: The two states produce a bunch of grain for export, which many of the arid oil producers tend to trade for oil.