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How does the U.S. Government borrow money?

Here’s where the Government is different from individual people and businesses. When the Government borrows money, it doesn’t go to the bank and apply for a loan.  It "issues debt." This means the Government sells Treasury marketable securities such as Treasury bills, notes, bonds and Treasury inflation-protected securities (TIPS) to other federal government agencies, individuals, businesses, state and local governments, as well as people, businesses and governments from other countries. Savings bonds are sold to individuals, corporations, associations, public and private organizations, fiduciaries, and other entities.

Here is how Treasury securities - such as savings bonds - generally work. People lend money to the Government so it can pay its bills. Over time, the Government gives that money, plus a bit extra, back to those people as payment for using the borrowed money.  That extra money is "interest."

This is how the U.S. system of debt works:

  • The U.S. Treasury issues or creates the debt.
  • The Bureau of the Fiscal Service manages the Government’s debt. That means it keeps records, takes care of selling the debt, and handles paying back people who loaned the Government money.
  • The U.S. Treasury and the Bureau of the Fiscal Service do not decide how the money is spent. The legislative branch of Government (Congress) decides how the money is spent.
  • There is a maximum amount of debt the Government can have. This is known as the “debt ceiling.” To raise that amount, the U.S. Treasury must get Congress to approve a new and higher limit.


Debt Facts:  By 2009, the debt had reached more than $10 trillion! TIPS:  Treasury Inflation Protected Securities (TIPS) protect your investment by adjusting its face value based on inflation - possibly paying you more at the end of its term.