What if we spent less money on defense?
Not less money for Ukraine or whatever, just the regular old defense budget
It wouldn’t make a dent. Defense as a whole makes up ~$750 billion out of $5.8 Trillion in expenditures.
Of that $290B goes to normal Ops and maintenance of existing equipment and infrastructure, and $170B goes to personnel. $170B goes to RDT&E which actually does expand out into regular life all the time (hello internet and GPS).
The $136B in procurement is what most people think the rest of the budget goes to. This is the defense contractors building overpriced things the government buys. The F35s, Raytheon missiles, multi billion dollar aircraft carriers, etc.
The mandatory expenditures are the big ticket items though, with a combined $4.1 Trillion.
Health care is the biggest one weighing things down. Medicare, Medicaid, and the ACA tax credits cost a combined $1.442 Trillion a year.
Social security is another big one at $1.213 Trillion.
Moving to a universal healthcare system, and eliminating the social security tax cap (currently any income over like $150k is not taxed for social security), would do a TON to actually cut costs and raise revenues.
Raising the cap on social security taxes should be a no brainer, especially if you raise the floor for it too, should be a no brainer. Exempt then first 10k in income and eliminate the cap and social security would be funded forever while the working class would also see a significant tax cut.
Eliminate the cap and exempt any income below the median, currently about $40k I think. This would be an extra $2400 over the year for someone making $40k, no change for someone making $200k, and $6200 more tax for someone making $300k. The math may even play out to where we could lower the tax rate itself. If the rate were cut in half, anyone earning under $360k would see a tax cut.
Even if we cut 100% of defense spending, it wouldn’t hit a trillion. The issue with the debt here is that interest rates have spiked for the Federal government.
Who are we paying these interest payments to? Retirement accounts? Billionaires? Other countries?
A plethora of bond holders.
Social security is a big one actually. Any time you hear about the feds raiding social security, they’re buying bonds with the funds and using the cash reserves.
It’s generally safer long term to hold cash in bonds and the government needs liquid cash all the time, so it makes sense. As they collect social security taxes, they issue bonds instead and spend the cash, and pay the bonds back over time with interest in a steady pace.
$7.2 Trillion is intergovernmental. One Federal agency giving cash to the general fund in exchange for a bond.
Beyond that, basically any entity holding bonds. $26.2 Trillion is everyone else.
Every remaining pension system (the federal government retirement system, pretty much every state and local government retirement system, and all private companies that still offer a pension) all invest in bonds for long term fund security and the interest payouts are integral to managing those funds. They also sell off bonds as needed to fill gaps in their funds.
Every 401k, every IRA, every college endowment, etc.
Then yeah plenty of billionaires and huge companies that park money in bonds.
About 1/3 is held by other governments. Japan being the single largest holder. China follows closely in second.
About a third to other countries and foreign investors, about 2/3s to domestic investors and domestic banks, if memory serves.
The US itself owns 38% of the debt, and private US investors own another 38% So, 76% of that trillion either goes back to the Treasury Department or remains in US circulation for further investment. Which is the rest of the story.
You have to keep in mind that borrowing money from the Treasury but then not paying it back is also known as “printing money”, and is one of the single most direct drivers of inflation that exists.
If you borrow ten billion dollars but then pay it back (with interest matching the inflation rate), then the net amount of currency in circulation is essentially the same. If you just print that money instead and never pay it back, then you have ten billion more dollars in circulation representing the same collective economy, meaning that every dollar must be worth less.
And refusing to pay back loans from private US investors would immediately tank the government’s credit worthiness, making it much more expensive for the government to ever borrow money again and thus causing a substantially bigger problem.
but then not paying it back
It is always paid back. Not paying it back would be a default.
What is actually going on is that the government currently has a surplus in the fund responsible for Social Security benefits. A few decades ago there was a debate about what to do with the surplus. Some people suggested investing it in the stock market, but the public was overwhelmingly against that idea. Yet leaving it in a non-interest bearing account also seemed foolish. So the money was used to buy government bonds.
The government is literally paying interest to itself. That may sound pointless, but it’s a natural consequence of using dedicated funds to pay for projects like Social Security.
Yes, printing money and inflation is good for the ruling class.
It’s how they convince people everything is fine while taking them for a ride. Raising taxes on the wealthy impacts their wealth. Printing money impacts the wealth of the working class.
Once it’s too late, they leave the country with their wealth and we have to deal with the aftermath.
Inflation directly erodes wealth, so the wealthy hate it more than most people. If you had a million dollars in the bank, would you rather be able to buy 300,000 gallons of gasoline or 200,000 gallons?
Inflation also makes businesses less efficient and reduces profits, so investors hate it more than noninvestors.
However, fighting inflation often causes unemployment, so working people are generally more resistant to inflation than those who don’t work (particularly if inflation is accompanied by wage increases). During the last round of inflation, the Fed literally said they wanted to increase unemployment.
Federal Reserve Chairman Jerome Powell said Wednesday it will be almost impossible for the central bank to beat inflation without hundreds of thousands of Americans losing their jobs… The Fed’s projections show that it is willing to accept over a million more unemployed over the next few years.
Wrong. The wealthy like inflation because they get to raise prices to outpace wages.
It’s how they recoup any gains the working class has made, with interest.
When inflation goes unchecked, as it has in many other countries, wages go up at the same rate as prices. Unchecked inflation means everything goes up at once. Even here, wages have been going up.
You are confusing the cure and disease. If wages increase more slowly than inflation, it’s because there are policies aimed at keeping them down. Those policies are an attempt to control inflation throughout the economy.
Finally, inflation doesn’t “let” anyone raise prices, it’s a measure of how much they have already raised prices. And it doesn’t “recoup” anything, because investors care about inflation-adjusted gains not nominal gains.
Treasury buys 11% of debt. The US Government owns 27%. When the government borrows money it uses a vehicle like a bond. When it pays interest, it all goes to Treasury. So, actually the government is borrowing money from all the bond holders and creating debt by expenditures paid from Treasury and when it pays interest that also goes to Treasury. But, only 11% of debt is held by Treasury so in the scope of things there is not much borrowing going on with Treasury. But, they do see interest as a book transfer
If only there were some way the government could collect money that they could use to pay for their stuff in real time and even a bit extra to pay down loans.