America’s $40 Trillion Debt: Who Really Pays?

Interest on the national debt now consumes roughly 43 cents of every income tax dollar Washington collects, and the government now spends more servicing its debt than funding the military. Defenders of perpetual deficits insist the debt is harmless because “we owe it to ourselves,” but that comforting phrase hides the reality that taxpayers are pledged as collateral for borrowing they never agreed to. The following article was originally published by the Mises Institute. The opinions expressed do not necessarily reflect those of Peter Schiff or SchiffGold.

“There is no means of avoiding the final collapse of a boom brought about by credit expansion. The alternative is only whether the crisis should come sooner as the result of a voluntary abandonment of further credit expansion, or later as a final and total catastrophe of the currency system involved.” — Ludwig von Mises, Human Action

The Treasury Department released its August statement of receipts and outlays with all the ceremony the occasion deserved: none. No press conference, no address, just a PDF on a government website, the way a man slips a foreclosure notice under the door. Buried in Table 3 sits a number that would have been a scandal in any saner era: of every dollar Washington expects to collect in income taxes this year, forty-three cents will go to interest on the national debt. Not to pay it down. Just to carry it.

Run the arithmetic; Treasury prints it in plain sight. The full-year estimates call for $2.63 trillion in individual income taxes and $399 billion from corporations. Call it $3 trillion extracted from the productive economy. Against that stands $1.3 trillion in interest. Through August, the ratio ran higher still: nearly forty-five cents on the dollar. The full-year interest estimate exceeds the $914 billion budget estimate for Defense Department military programs. Interest now costs more than the Pentagon. Even after subtracting the interest the government owes itself, the rest still topped defense spending.…