(“A trillion here, a trillion there, pretty soon you’re talking real money!”)
Occasionally, an impoverished nation, say Haiti or a central African republic, is in significant distress. Part of the international aid includes debt forgiveness, wherein presumably we don’t repossess or put a boot on Port-Au-Prince til they can go downtown and pay the file clerk between the hours of 9 and 11… but rather eat the debt (or, at least, work out much more favorable repayment terms than what was originally agreed).
Does THAT lost revenue count against that 18 trillion? Drop in the bucket though it may be?
The debt is money the federal government owes to other institutions and people. That is one-way. It does not include any possible money that is owed to it, which is a completely different thing. Assets and liabilities are different things. Just because you have a lot of assets doesn’t immediately change your liabilities. If the rest of the world magically owed the US federal government 40 trillion dollars, that would not immediately change the fact that the debt is 18 trillion. The debt would only change after some of those assets were used to pay down the liabilities. That would not necessarily have to happen.
And for the record, a country like Haiti largely owes money to the World Bank, the IMF, the Inter-American Development Bank. The US government is not a major direct lender.
It’s a bit of a strange question so let me back the issue up to the beginning, and you can draw your own conclusion.
Each year, the Congress passes a budget which allows the Government to spend up to $3 trillion. (Rounding off for simplicity.) That doesn’t mean the U.S. has $3 trillion in the Treasury. Tax revenues fill up the Treasury to a certain amount, and then the Government sells bonds to raise cash to deposit in the Treasury.
The annual deficit is the difference between how much the Government spends in any year (not how much it is allowed to spend; it’s how much actually is paid out) compared to how much tax revenue comes in. When we are in deficits, the amount of bonds issued is pretty much the amount of the deficit. (Simplifying again.)
The national debt is the running total of how much in bonds have ever been issued.
So, let’s say we give $10 million to some country and expect it to be paid back. We use money raised by taxes, fees, and bond sales deposited in the Treasury to send the $10 million to whomever. As that $10 million leaves the Treasury, it increases the deficit.
If the country were to pay us back, that money received would go back into the Treasury, just like a bank account. It wouldn’t retire the bond issued; it would just be more money in the Treasury, sitting alongside tax revenue and bond revenue. But that repaid $10 million would slightly reduce the deficit whenever the money is received.
If we tell whomever that we don’t want the $10 million back, then really nothing happens. The national debt doesn’t change because the bonds were sold before the money was sent overseas to begin with. But, future bond sales would likely be $10 million greater because the deficit will be slightly greater in whatever year we expected repayment because we didn’t receive revenue that we expected.
The US government forgiving debts owed to it increases the deficit now (if the debt forgiven was immediately due and payable) or at a future debt (when the debt would have been due, if not forgiven). But that doesn’t in itself result in a bond issue, thus increasing the US’s indebtedness. It might result in that, or it might result in a tax increase, or it might result in expenditure being trimmed, or some combination of any or all of these. That’s a political decision.
Plus, what Hellestal said. Relatively little of the money owed by heavily indebted states looking for debt forgiveness is owed to the US government, so the forgiveness of the debt does not directly affect revenue flows to the Treasury. (It may indirectly affect it, of course.)