Awhile back my brother and I got into one of our (sometimes seemingly endless) debates about various aspects of politics and war. He was quite incensed (understandably) that the federal deficit had ballooned recently. I quickly asked him, "well, who do you think owns all that debt?" My contention was the American people actually own it, his was that the Japanese did, and challenged me to prove otherwise.

Well, I've found at least a partial proof:

Approximately 55% of the national debt ($3.25 trillion) is owned by private investors ... About one third of the privately held debt (approximately 22% of the total debt) is held by foreign investors.
...
The remaining $2.45 trillion is held the Federal Reserve and other "federal government accounts."

So, in actual fact, we do own most of our own debt. We are, in effect, loaning our own government money voluntarily instead of having it taken from us via taxes. We are then getting paid interest that comes out of tax revenue, which is taken from us. A sort of green-backed oroborus, if you will.

The article cited then goes on to explain the largest federal holder of debt is the Social Security Administration, and rings some dire notes that give the impression Congress has raided that particular cupboard bare to pay for things like F-22 Raptors and the University of Arkansas Chicken Research Station (I am not making this up.)

While genuinely worrisome, it is not quite the whole truth. The Social Security system has been funded with a surplus for some time now, since the mid-80s I believe (due to an act of Congress), to ensure homeless elderly boomers do not in fact end up camped out on their children's front yard*.

However, federal agencies aren't allowed to maintain surpluses on the books... they must put the money somewhere. Since they are prohibited from investing it in the private sector (a "great idea" that should sound familiar to anyone in Poland, Russia, what used to be Czechoslovakia, Hungary, etc.), they loan it back to the general treasury. Which is, of course, controlled by that paragon of fiscal virtue, the Congress.

At least, that's how it all works according to P.J. O'Rourke. And if you can't trust a journalist to get the details right...