Quick and dirty version. Governments create bonds, which is kind of like the opposite of a loan. It’s a request for money, and in exchange they agree to pay what you give them back with interest. Then they shop around for people to throw money into the bond. That money is then used to pay for government services, equipment, facilities, etc. and taxes are collected to pay out the bond. It’s a bit more complicated but like I said, quick and dirty version.

The general idea is you get a lot further asking people to float you a loan than you do hoarding gold or something to try to scrape together enough money to do big projects, and people aren’t going to revolt or rob the treasury for a stack of unpaid loans.

Who does the state owe the debt to? Lots of people. Mostly rich Americans but also foreign investors, other governments, retirement funds, etc.

Does the US have a problem paying its bills? It didn’t always, but in recent decades, yes.