—Drew Dickinson (Mentor: Lawrence C. Reardon)
National debt in the United States has the potential to impact every citizen and resident of the nation, due to increased taxes on a federal level or downstream impacts on programs provided by the government. Some of this debt is held internally—meaning by entities within the United States, such as the Social Security Administration. Foreign or external debt, on the other hand, is debt held by an entity, like a nation, that is outside the United States. Through a capstone-level political science course, I researched the impacts of externally versus internally held debt on the United States’ overall indebtedness, using 2008–2018 as a case study. The cost of debt increased during this time because of additional stimulus spending to mitigate the impact of the 2008 recession. This decade also illustrates a time when the United States relied heavily on external debts (ECLAC, 2023). One key finding of my research was that external debts are typically held at higher interest rates than debts held internally. In the 2010s, the national debt of the United States was largely held by Japan and China who subsequently decreased their holdings of US debts just after the 2008 financial crisis and continued to divest through the end of the study period, 2018 (ECLAC, 2023). My research showed that a reduction in investment by these nations did not inherently correlate to a reduction in national debt, because the debts were not being eliminated altogether, but instead shifting primarily to internal holdings. Although the United States’ national debt was not reduced from decreasing external debts, longer term, this gradual move from external to internal debts should have a positive impact on overall indebtedness because of the often-lower interest rates on debts held internally.
