The United States government carries a staggering national debt of $36 trillion, but who exactly is owed this enormous sum? A significant portion of this debt is actually held internally within the government itself, particularly through programs like Social Security and federal employee pensions. This internal debt, known as intergovernmental debt, accounts for about 20% of the total, or over $7 trillion. The remaining $29 trillion is owed to external entities, including domestic financial institutions, foreign governments, and individual investors. Understanding the nature and implications of these debts is crucial for assessing the fiscal health and sustainability of the U.S. government.
Social Security and Intergovernmental Debt: An Internal Financial Mechanism
One of the most prominent examples of intergovernmental debt involves Social Security. For many years, this program collected more in payroll taxes than it paid out in benefits, creating a surplus. By law, this extra money was invested in government securities, effectively loaning funds to other parts of the federal government. While the government spent this money on various initiatives, it promised to repay Social Security when needed. Now, with spending exceeding revenues, the government is paying back these loans, along with interest. However, this cushion is expected to run dry by 2035, necessitating new funding mechanisms for Social Security.
Intergovernmental debt, such as that owed to Social Security, functions as an accounting tool rather than traditional marketable securities. It does not influence borrowing costs or mortgage rates because it is not traded in financial markets. Instead, it represents a promise from one part of the government to another. This internal borrowing has allowed the government to manage its finances during periods of surplus and deficit, but it also highlights the need for long-term planning. As the population ages and more baby boomers retire, the pressure on Social Security will increase, making it imperative for Congress to address this issue before the trust fund runs out.
External Debt and Its Impact on Fiscal Sustainability
The majority of the U.S. national debt—$29 trillion—is held by external entities, including domestic financial institutions, foreign governments, and individual investors. This public debt must be financed through the issuance of treasury bonds and bills, which are actively traded in financial markets. Domestic institutions like pension funds, banks, and insurance companies hold a substantial portion of this debt, considering it a safe investment. Additionally, the Federal Reserve owns about 15% of the public debt, having purchased large quantities during economic crises like the Great Financial Crisis and the COVID-19 pandemic. Foreign entities, primarily central banks in countries like China and Japan, also hold a significant share, though this percentage has been declining in recent years.
The growing national debt raises concerns about the fiscal sustainability of the U.S. government. Currently, the debt exceeds the size of the entire U.S. economy by 20%, and it continues to grow at an unsustainable rate. Economists warn that without corrective measures, this trajectory could jeopardize the country's economic stability. The focus should shift from merely understanding the composition of the debt to addressing the underlying fiscal challenges. Policymakers must consider reforms that ensure long-term financial health, balancing the need for social programs with responsible fiscal management. The sustainability of the U.S. economy depends on addressing these issues proactively.
The St. Louis County Board has made a significant move to bolster the local workforce by expanding its scholarship program to include training in the building and construction trades. The unanimous decision, announced during a recent board meeting in Hermantown, will provide financial assistance to residents seeking careers in these fields. This expansion reflects the county's commitment to fostering professional development and addressing labor shortages in essential industries. Since 2018, the county has allocated $150,000 annually to support students at four local colleges. Starting in 2025, this amount will increase to $187,500, with additional funds directed towards the Duluth and Iron Range Building and Construction Trades Councils. Advocates of the initiative highlight its potential to enhance career opportunities and economic growth in the region.
In an effort to address the growing demand for skilled labor, the St. Louis County Board has taken a decisive step by broadening its Tom Rukavina Mineral Royalties Scholarship Program. This initiative, initially established to assist students pursuing higher education, now extends its reach to individuals entering the trades. The decision was met with enthusiastic support from representatives of the Duluth and Iron Range Building and Construction Trades Councils, who emphasized the importance of such funding for apprentices. Emily Matzdorff, a fourth-year apprentice with IBEW Local 242, shared her personal experience, noting that even small expenses like purchasing tools can be challenging without financial aid. The expanded program aims to alleviate these financial burdens, ensuring that more individuals can access the training they need to succeed in their chosen fields.
Since its inception in 2018, the scholarship program has consistently provided $150,000 each year, divided equally among four local two-year colleges: Minnesota North – Hibbing, Mesabi Range, Vermilion, and Lake Superior College. Each institution receives $37,500, which is then distributed to students based on criteria set by their respective foundations. Typically, scholarships range from $1,500 to $2,500 per recipient. The eligibility requirement remains consistent: applicants must have graduated from a high school within St. Louis County. With the upcoming changes, starting in 2025, the total annual scholarship fund will grow to $187,500, with an additional $37,500 allocated to the Duluth and Iron Range Building and Construction Trades Councils. This increased funding will directly benefit participants in recognized building and construction trades programs, providing them with the necessary resources to advance their careers.
Commissioner Keith Musolf, who proposed the expansion, expressed gratitude for the board's support and highlighted the significance of using mining royalties to invest in future professionals. He noted that this initiative not only creates job opportunities but also honors the legacy of Tom Rukavina, who originally championed the scholarship program. Dan Olson, Vice President of the Duluth Building and Construction Trades Council, echoed the sentiment, stating that the inclusion of apprentices in the program would greatly enhance their training opportunities. Jason Quiggin, President of the Iron Range Building and Construction Trades Council, added that apprentices often face substantial costs, from textbooks to tools, making this financial support invaluable. Commissioner Keith Nelson reminded everyone of the source of the scholarship funds, emphasizing that they originate from the mining industry, underscoring the interconnectedness of local industries and educational initiatives.
The expansion of the scholarship program marks a pivotal moment for St. Louis County's efforts to strengthen its workforce. By increasing financial support for aspiring tradespeople, the county aims to cultivate a skilled labor force capable of meeting regional demands. The involvement of key stakeholders, including state legislators, underscores the collaborative nature of this endeavor. Moving forward, prospective students interested in applying for these scholarships are encouraged to contact their college’s foundation office or the relevant trades council. This initiative promises to create new pathways for career advancement and contribute to the economic vitality of Northern Minnesota.