Why the deficit and the debt are not as big of a deal as people think...

In a recent article on MSNBC, (Our national debt and spending are up despite DOGE and other federal cuts. Here's why.) an opinion piece by Maya MacGuineas, the writer outlines some basic, potentially worrisome facts about our national debt.

I would like to address some of the items in the story – but not because they are wrong per se.  I want to address them because what MacGuineas wrote, is an opinion piece but an opinion that is shared by tens of millions of people if not hundreds of millions, but I disagree with.  What I am about to write in this article will look a little like an arrogant attempt to repudiate her opinion, but that is only because some of it will be an attempt to do that. Well, why arrogant?  Because of this - Maya MacGuineas is an accomplished political operator, who started out by earning a degree in economics from Northwestern, has a master’s degree from Harvard University School of Government, is the president of the Committee for A Responsible Federal Budget, she advised the 2000 campaign for president of John McCain on Social Security and spent several years at Paine Webber as an analyst.  MacGuineas clearly has some fancy credentials and most likely knows what she is talking about.  OK, dropping the sarcasm, she is more qualified than 99% of the country and definitely more than some blog poster like me to comment on this stuff.  Yet, I find some of her statements to be of concern and because the Internet is the great equalizer for opinions to be shared, I felt that this would be a good time to take on an article written by an accomplished and well respected woman and potentially come across as the gigantic a** that I can be.  I also want it to be known that the sane version of me would be screaming were it not me writing this article, that just because someone has an opinion, and shares it on the Internet, does not put it on the same plane as an accomplished, educated and well respected person who clearly may have facts on her side.  But this is in fact my article, responding to her article, so I will forgo any self-flagellation that I would have to undertake were I a fair person, which I am not, or at very least use a chicken feather and not a whip. 

Here we go. 

1.      “There are two fundamental fiscal truths: America has a debt problem, and dealing with the debt will not be easy.” 

America does not have a debt problem.  America and Americans, by and large, have an addiction problem to debt because we lack the educational awareness about how currency works.  We don’t seem to understand the correlation between debt and wealth.  One person’s debt is another person’s wealth.  Think about it.  When you use your credit card to buy something, that becomes a debt that you must repay.  But that debt is the credit card issuer’s income.  If you don’t use your card, they don’t make money.  Do you know what a person is called in the credit card industry, who pays their bill in full every month?  A deadbeat.   Why is that?  Because the credit card company makes no money off them.  China has about 760 billion dollars’ worth of US government bonds.  That is a debt we must pay to China plus interest, but for China that debt is part of their sovereign wealth fund.  They use it to build their economy on our debt.  Our debt is their wealth.  So no, I disagree with the idea that America has a debt problem.  We have an educational problem, that is fundamentally flawed about how currency is created and how it works.  If we want to solve the debt problem, we must start learning, collectively, as a nation, how currency really works and start understanding what economic forces we are subjected to in our daily lives.  That is going to be the hard part to deal with, not the debt itself. 

2.      “…despite the Trump administration’s focus on cost cutting in the federal government and all the additional revenue coming from tariffs, the deficit is still as large as it was a year ago”

That’s probably because the money the tariffs are collecting, be they an additional expense business have taken on for a while in hopes that they are temporary, or partially passed on to consumers or a combination of both, are not bringing in new money to the Treasury.  Those funds would have eventually made their way anyway to the government, in the form of taxes paid by other means, or some other form of income such as an increased investment in Treasuries or Bonds, so the tariffs are not really increasing revenue, they are just shifting from one place to another.  In April, CNBC published an article titled,

“Trump tariffs drove a Treasury sell-off — who sold the safe-haven asset?” by Lee Ying Shan (U.S. Treasurys selloff: what happened and why) So in my humble opinion, tariffs are not increasing the government income, which is one reason why the deficit is not budging in a positive direction.  Secondly, staying on the same topic, cutting the federal workforce and expecting a drop in deficit spending is like trying to excavate a 10-foot deep, 10-foot-wide arc with a spoon.  Yes, technically you can cut it to the bone and do so for a few decades and save that 336 billion dollars we annually spend on the federal workforce, but the deficit is close to 2 trillion dollars this fiscal year.  The interest we pay on the federal debt is a trillion dollars or just about in 2025, to which the first Trump administration added 8.4 trillion to.  Of that, 3.6 trillion was Covid relief.  Ok, that’s fair, let’s remove that.  But…2.5 trillion came from tax cuts, 2.3 trillion from spending increases so really the administration that is the most responsible in the past 8 years for increasing the deficit is the first Trump Administration.  By the way, that statistic came from the website of the Committee for a Responsible Federal Budget, the president of which is Maya MacGuineas. 

3.      “All told, federal spending from January 2025 to September 2025 is up about 2% from the same period in 2024. You might wonder how that is possible, given that the government (when it was funded) has operated under the same discretionary spending levels as last year, as well as high-profile Trump administration activities such as the Department of Government Efficiency effort, downsizing of the federal workforce, the abolition of the U.S. Agency for International Development and the forthcoming closure of the Department of Education. Two words: mandatory spending.  The largest mandatory spending programs are Social Security and Medicare.”

Lets look at Social Security because since 1982, the program has been running a deficit. In fiscal year 2024, the US Federal Government spent a total of 1.5 trillion dollars on Social Security.  1.3 trillion went to retirement benefits, 155 billion to disability and 54 billion to other benefits.  Fair enough.  So, how is the social security program funded?  Well, there is something called the Old Age and Survivors Insurance and Disability Insurance trust funds that currently have a combined 2.7 trillion dollars net worth.  Also, Social Security has an income source – US workers and employers pay taxes on every paycheck that is sent to the agency.  In 2024, workers contributed 1.3 trillion dollars to the Trust Funds and the funds also generated 55 billion from income taxes on paid benefits, and 69 billion on interest.   That total is about … unless I am terrible and math… lets see… 2.7 trillion is 2700 billion plus 55 billion plus 69 billion… that’s… carry the billion… and another… and that comes out to 2,824,000,000,000  or roughly 2.824 trillion dollars in total funds against which it paid out 1.5 trillion.  So technically, yes, the funds paid out more than what they took in.  1.48 trillion versus an income of 1.42 trillion, for a depletion of 67 billion dollars.  But here is the thing.  Again.  The number of recipients of Social Security has been increasing in direct proportion to the number of baby boomer retires versus the number of workers paying into the system.  This is a temporary problem and here is why.  The number of boomers is estimated at 71.6 million – the number of millennials, is estimated at 72.1 million.  Millennials are defined as those born between 1981 – 1996 and these people are now entering their greatest earning years resulting in increased paychecks and increased payments to Social Security.  Generation X, which is the generation born between 1965 and 1980, numbers in the 65 million range and this is a fairly large and significant drop from the Boomers by at least 7 million workers.  So the Social Security system is kind of a red herring when it comes to debt boogie man-ism because the amount that will flow into Social Security will increase with time, as Millennials reach peak earning potentials and Gen Z enter the workforce.  The problem with Social Security is not one of income or anything like that – it is the raiding of the trust fund by politicians since the 1980s, to pay for things which have nothing to do with Social Security.  If I were to be concerned about the number of payers into the Funds vs the number of recipients, it would be when the Millennials start retiring in 25-30 years. We can fix the problem now, simply by stopping the looting of the Funds to give tax breaks to the wealthy, so that we don't run into a problem in 30 years that will not be fixable. This is not a debt problem - this is a theft problem.

4.      “To get borrowing under control, we’ll need to cut spending, increase revenue or some combination of the two (ideally along with economic growth). “

Well… but again, if we cut the debt by too much, we are cutting into the wealth of people.  As an example, my wife and I have retirement accounts.  We have investments in those accounts.  Those investments include government bonds and Treasuries.  If the debt is repaid in a significant manner, all those bonds will no longer be earning us interest in our retirement accounts, along with millions of other Americans’ accounts, but there will be cash sitting there which, as everyone knows, loses value faster than you can print it.  Which is ironic because printing currency is what devalues it in the first place but … that’s another topic.  What we need to do is to be able to convert the government debt into other avenues in such a manner that does not destroy a significant portion of retirement accounts. 

In other news, the Pentagon’s budget in 1982 was roughly 201 billion vs 1.076 trillion revenue.  20% or so. In 2024 the Pentagon’s budget was 850 billion vs a 5.16 trillion revenue. That is 16% give or take. That is another institution that people love to heap crap upon and sometimes it may be necessary and well done, but most often it is pointless.  Remember the $5000 hammer purchase?  That wasn’t the hammer they purchased that you’re thinking of.  There are line item purchases on the Pentagon budget that have nothing to do with the line item they are describing. 

My point with that is this. You can spin numbers and data any way you want to.  Yes, we spend more than we take in.  Yes, we spend it on stuff that makes no sense whatsoever.  Like Tax Cuts.  Or subsidies for companies.  Etc.  But those deficits are adding wealth to individuals who buy the debt, and I would venture to humbly state that the biggest fiscal problem in our country today is not the debt, it is not the deficit but the existence of rule 10B-18.  It started an avalanche in 1982, and it is still wrecking our economy today and the repeal of Glass Steagall in 1999 just added to the problem in exponentially huge numbers. 

That and the fact that the top 10 wealth owners have seen their net worth increase by 700 BILLION dollars just this year. Not have a combined net worth of 700 billion - no - their net worth increased by 700 billion to a staggering (very rough estimate) of 2.5 Trillion dollars.

10 people have more wealth than the US GDP in 1982. Think about that.