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Its all funky accounting and in reality just a big circle jerk.
When the government spends more money then it takes in it has to have on the books loans to technically cover these amounts. Kind of like if you write checks that people don't have money for you give them overdraft protection and they get a float.
Keep in mind the US prints money so what you can't have happen is money printed without some kind of accountable backing system for economic purposes. It used to be backed by Gold until 1973 when Nixon took us off the Gold standard.
So the Treasury conducts auctions and sells the deficit spending into the future by having people buy bonds and T-bills and other securities.
Who buys these debt instruments? Pension funds, foreigners, corporations, individuals, etc.
So in essence its a big circle. Because the government in reality is us. So its like we're loaning to ourselves money to cover our own debts that went beyond our true spending means. With the exception of the foreign buyers of course.
However with the foreigners we loan money to countries or give them a lot of business to make up for the debt we sell them. For example Saudi Arabia is one of the biggest investors in the US, I forget the exact figures off hand but its over $100 Billion. So we buy oil for exhorbinant amounts and they turn around and lend the money back to the US by investing in US government securities which are considered the world's safest.
Everything is pretty much circular when you get to the core. But its the circularity that creates and nourishes economic prosperity as the circles get ever larger.
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