Introduction to Finance

national debt
 
is the total debt owed by the government and consists of debt held 
by the public and intergovernmental holdings. The cumulative amount of historical annual 
defi cits and surpluses resulted in a national debt of about $5.8 trillion at the end of fi scal 
2001. Since then, the cumulative impact of large annual defi cits has caused the national debt 
to increase to $18.1 trillion by the end of fi scal 2015, and then the national debt surpassed the 
$19 trillion level by early 2016.
5 
This more than $13 trillion increase in the national debt in 
less than 15 years has kept the Treasury busy issuing more and more government securities to 
fi nance the underlying annual defi cits. The ownership of the U.S. public debt, as well as the 
maturities of the debt, will be discussed in Chapter 8.
Debt management
involves funding budget defi cits and refi nancing maturing Treasury 
securities previously issued to fund the national debt. The Treasury has formulated three debt 
management goals:
• Fund defi cits and refi nance maturing debt at the lowest cost to taxpayers over time.
• Manage Treasury’s cash fl ows in an uncertain environment.
• Manage the risk profi le of outstanding debt.
The Treasury carries out its debt management policy by operating in a “regular and pre-
dictable” manner to minimize disruption in the fi nancial markets and to support fi scal and 
monetary policies formulated by the other policy-making groups. Treasury security auctions 
are scheduled and announced well in advance of the actual auctions to allow investors to plan 
their security purchases.
6
The last surplus federal budget occurred in fi scal 2001. Since then, the Treasury has been 
actively involved in defi cit fi nancing each year. As discussed earlier, the national debt increased 
from less than $6 trillion at the end of fi scal 2001 to a little over $18 trillion by the end of fi scal 
2015, meaning that the Treasury had to fi nance cumulative annual budget defi cits of more than 
$13 trillion. At the same time, the Treasury had to refi nance trillions of dollars of maturing