Awesome info imagep, much appreciated! So when you say a 'balanced budget', I assume that is another one of those things that is more of an accounting issue more then anything?
Sure. Our government either has to tax, or print, or borrow every penny that it spends. Since no one likes taxes, we naturally prefer to print or borrow our money. Our mechanism for printing money is essentially borrowing from the federal reserve (which can poof up an unlimited amount of money anytime that they choose to), so when we print, for accounting purposes, it is considered borrowing, and it is added to our federal debt (even though money borrowed from the fed may never have to be repaid, it just keeps on rolling over). When we borrow from sources other than the fed, it's not exactly like the US gov has to go to a bank and apply for a loan. We borrow by the treasury issuing securities, these securities are then sold through private security dealers to the public, for whatever price the securities will bring in the free market. American citizens, banks, corporations, and even foreign entities are free to purchase these securities.
Our ability to print money is only restricted by the threat of inflation. The fed is only willing to purchase gov securities up to an amount that they think will keep inflation at about their target rate (assumably about 3% inflation). In theory, if our federal budget was small enough, and if our productivity was increasing fast enough, the gov could print all the money that it needed without having to borrow or tax. But in reality, since our gov spending is much higher than what could be funded by printing ( without having excess inflation), then we have to borrow or tax the rest of our government funding.
If we broke down our federal debt into subcategories, we would find that there are several very different debts. Debt to the fed is a biggie, but it's not really a problem because it is totally an accounting issue and has little other significance since it never has to be repaid.
Intergovermental debt is also a biggie, thats where one part of the government owes money to another part of government - like the social security trust fund has excess money, so it uses that money to purchase treasury securities, which is the most logical thing for it to do. the other option would be to simply store the excess money in a vault, which would be pointless and yield no return. Intergovernmental debt is legitimate debt, but it is debt to ourselves, so it's not really of that much concern.
Then the remainder of our debt is debt to all other entities, which includes individual savers, corporations who choose to invest in the US government, and foreign countries and citizens who are using the US gov debt more or less like a savings account. Many entities happen to have excess money that they don't need immediately, so they purchase treasuries with their extra money, as an alternative to investing in real estate or the stock market or corporate bonds. They do this mostly because they feel that treasuries are the safest investment in the world. The US government, unlike individual states, or even many countries like Greece, is monetarily sovereign, meaning that the US can print it's own money. The US government can NEVER go bankrupt or default on it's debt obligations due to a lack of money because it can print all that it chooses to. And indeed, the US government has NEVER defaulted on a debt obligation.
Due to our trade deficit, many foreign entities hold excess dollars that they do not currently have a need for, so they repatriate that money by purchasing US Treasury securities (assumibly because they feel that treasuries are the safest investment in the world). The foreign debt is the only part of our debt that we should have much concern with because it represents a potential claim against US goods, but until we start running a trade surplus, this part of the debt will not need to be repaid.