We've been hearing a lot lately about the growing national debt and
the interest that the government must pay on it. What I would like to
know is this: What are the mechanics of making those payments? Does
the Secretary of the Treasury send a wire transfer of funds to some
entity? If so, what entity and how often are such transfers made?

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Clarification of Question by nautico-ga on 09 Feb 2005 11:16 PST

From Jack....

"I don't know the exact mechanics for all parts of the debt actually
being paid, I'm sure it is very different depending on who the money
is owed to.  But the treasury does send out checks to people who cash
in their government bonds as they mature.  I have seen that first
hand."

Yes, I understand that's how the portion of the debt owed to buyers of
government bonds is paid off. What's unclear to me (and you) are the
specific mechanics by which other government creditors are paid back.

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Clarification of Question by nautico-ga on 10 Feb 2005 01:46 PST

Thanks, Evan. That's enough info for me to be able to close this question.

The interest on the national debt is around $370 billion this year.

Here is a pie chart of who the money is owed to (data from 1999 but a
fairly good representation still today):
http://www.brillig.com/debt_clock/faq.html
The interest rates on this debt is very low (currently around 4% for
much of it) because it are considered among the safest investments in
the world (the US is not likely to go bankrupt and cancel their debt).

It has been a very rare occurance the past few decades for the
government to actually pay off its debt.  Instead, it simply borrows
more money in order to pay its current obligations (including
obligations to pay back some of its debt every year).  So the debt
doesn't decrease unless there is less borrowing than there is paying
off.

I don't know the exact mechanics for all parts of the debt actually
being paid, I'm sure it is very different depending on who the money
is owed to.  But the treasury does send out checks to people who cash
in their government bonds as they mature.  I have seen that first
hand.

http://www.publicdebt.treas.gov/sec/secgovpa.htm

Bureau of the public debt is the governments Registrar and Transfer
agency.  They keep the records of who owns what and send the payments.
 They are part of the treasury department.

The money is sent out on by both check and wire tranfer to anyone who
is listed as a registered owner on their books (a computer database I
assume we paid too much for).  Basically anyone who bought a goverment
security from the government or an individual gets paid by the
government or through their broker (financial intermediaries get paid
then pay their customers).

Method depends on the setup of the accountby the owner. I doubt the
Secretary of the treasury has anything more to do with this part of it
than the obligatory laser printed signature on the checks.

Transfers/checks are made depending on when payments are made. 
Government has debt ranging from Short term (daily, monthly or
quarterly) to as long as 30 years.  Payments could be daily, monthly,
quarterly, or annual.

Hope that helps a little.  I could also explain a lot more of the
mechanics but they are extremely boring and depend on who owns the
security and how they hold it.