Notes Book

The National Debt Myth

We often hear that the government debt means that every man woman and child in the USA owes X dollars, with the X being a highly variable quantity depending on the latest shenanigans of the US Government.

It shouldn't take 30 seconds of serious thought to realize that this is just not true. The debt is not distributed evenly over the population. There are those that owe the debt, and there are those that are owed the debt. Those that owe the debt are US taxpayers, and those that are owed the debt are distributed around the world. Most are in the USA, but substantial numbers of holders of US government debt are foreign citizens.

The national debt is not a burden distributed evenly over the population. It is especially a burden on those who are born poor, and it has historically been a blessing on those who are born rich. Of course there are some rich people who don't own government debt, but who do pay taxes. They are almost certainly in the minority. On the other hand, with increasing amounts of the debt being owned by foreigners, that minority is growing. After the US government defaults on its debt, those who don't own US government securities will be much better off.

The government has sold a lot of future tax revenues to foreigners. They do not pay US taxes, but do collect interest. They will take a loss when the US defaults on its debt, and I would imagine they are starting to get nervous. The National Debt Clock FAQ gives the following breakdown of “our” creditors.

From this we would gather that foreigners own 22.7% of the debt. But the Federal Reserve and Government, State and Local Government, and State and Local Government Pension Funds are just bookkeeping fictions of one branch of government owing another branch. This is the snake eating its own tail, so to speak, and should be discounted for purposes of determining how much of the debt is owned by foreigners. If we do that, we find that foreigners own an astonishing 43.9% of the debt. I don't see that as a good thing for the United States or for the foreign owners of the debt.

To those who doubt a default is coming, consider that the debt has never been paid off and has always increased. No government in history has ever paid off such a debt, and there have been very few instances on our history of the debt actually being paid down. Paying of the debt would be the wise thing to do, of course, but it is not politically possible. Default has been proven to be politically possible in country after country.

We hear people like John Kerry talking about the national debt being a burden on “our children”. It certainly is a burden to my children, but it is almost as certainly a blessing to the extremely wealthy children of John Kerry, George W, and most of the members of the political and corporate elite that rule this country. The wealthy holders of the debt will receive a little over 300 billion dollars in interest in 2003, and they still own the principle.

And this debt has been passed down from parent to child for generations. There seems to be no way out, legally. The poor can't declare bankruptcy and not pay. It's not like taking a loan on a car or a house where you can just default if the deal goes sour. The security of this loan is your body and your freedom, and there is no way you can default on that. The children of the poor are born into debt bondage and we are all born into tax slavery.

A burglar can steal an art treasure worth a million dollars, wait till the statute of limitations runs out on his crime, and then be free of the fear of prosecution. But no poor person can ever escape the fine imposed for being born a US citizen.

Our rulers routinely lie and cheat and expect us to forget about it, but they have remembered every cent of this “national debt” for centuries. If one obligation is subject to the statute of limitation, then all other obligations should be treated the same. As it is now, some have to pay their “debt to society” and some do not.

Of course, if we all decided to ignore the government thieves, they would have to either take up honest work or starve. Sooner or later, an increasingly sophisticated population will wake up and realize they have been had again and again. When that happens, the government game will end. Even if that doesn't happen the government may default on its obligations at any time due to a host of possible failure modes.

The deal the US government gives the masses of poor people is worse and worse, and there is no way out. If you don't pay, you will go to jail, or worse, and those who control the government revenue stream just keep on raking in the cash.

As far as I know, there is little or no evidence that all or most of the transactions that have led to this sorry situation have been fair, and a lot of evidence that they have been blatant rip-offs of various sorts.

The politicians keep telling us our children will pay for government extravagance for years to come. Personally, I hope and believe that our children will be smarter than we are. They will refuse to pay.

It's obvious to anyone with a smidgeon of historical knowledge that the pyramid scheme that is the US government must fall someday. The sooner it happens the less painful it will be.

Our children already know that social security will not be there for them. How long will it be until they realize that they could arrange it so the government is also not there on their backs? They could live in a world where they pay only for services they want, and do not have to pay for state sponsored political boondoggles.

Freedom can not be guaranteed by words written on pieces of papers. Armies, jails, cops, soldiers, lawyers, judges, bureaucrats, laws, and lies are the measures of tyranny, and we have all those in great abundance in the USA. Freedom is measured by the lack of these impediments to the pursuit of happiness. The “national debt” myth is one of the lies that keep us in chains and we should get rid of the myth and then get rid of the debt.