Answering Your Questions about the Public Debt

Have you ever had questions about the national debt, such as where does the money go, how is it spent, and how is the information used in financial planning and forecasting? Over the next several months, we will attempt to answer the most commonly asked questions about the debt.

This month, our question is:

What happens to the money that is borrowed from the public and who decides where it goes?

The answer can be found in the U.S. Constitution, Article 1, Section 9:

“No money shall be drawn from the treasury, but in consequence of appropriation made by law;”

The money borrowed from the public is deposited with the Treasury and then distributed through appropriation to government agencies. An appropriation provides authority for federal agencies to incur obligations and to make payments out of the Treasury for specified purposes. Each year, Congressional subcommittees consider thirteen regular appropriations bills for the major governmental departments.

One of the ways appropriations are funded is by the sale of Treasury securities to the general public and to institutional investors. These securities include Treasury bills, notes, Treasury Inflation-Protected Securities (TIPS), and U. S. Savings Bonds. Appropriations are also funded from receipts such as individual and corporate income taxes, excise taxes, and customs duties.

To learn more, take a look at the latest Combined Statement of Receipts, Outlays, and Balances of the United States Government.

Check our home page next month for another question about the public debt.