Notes on the National Debt

The over $31 trillion national debt represents the historical excess in government expenditures over the revenue received. What accounts for the debt is a question that is not being adequately addressed. Its size should be qualified. According to senior writer at the Pew Research Center Drew DeSilver, almost $7 billion is owed to other parts of the government from which funds have been borrowed with social security holding “more than $2.8 trillion in special non-traded Treasury securities, or 9% of the total debt.”[1] In addition, over and above the close to $7 billion, the Federal Reserve Board, as of September 30, 2022 held “nearly $6.1 trillion in government bonds.”[2]

Below are some recent figures on the national government’s revenue compared to expenditures that shows that yearly deficits that have added to the national debt often jump during economic downturns. The size of the debt can be reduced when the government spends less money than it receives as last happened at the end of the Clinton administration.

Going into debt is not bad if the money borrowed is used for purposes that could result in improvements that benefit people and/or could generate even more wealth than the borrowed sums and the cost of paying them back.

However, when the money borrowed is used for destructive purposes that generate no benefit, the debt then represents squandered wealth. Much of the U.S. national debt has been used to finance the Pentagon, wars and enable the military industrial complex to profit. Little, if any, economic or social benefits are derived from military expenditures—they are an environmentally destructive economic waste. They neither add to consumption or production goods. Even when U.S. imperialism has expended military resources to “successfully” secure favorable conditions that allow owners of capital to extract more wealth from exploiting workers and the resources in other nations, most people impacted, often innocent civilians including children, lose far more than is gained. Many military personnel can be harmed when sent into combat on behalf of U.S. imperialism. They may be killed, suffer from terrible wounds, exposed to toxic chemicals, and/or must deal with resulting psychological problems. Then there is the suffering of family members who themselves must live with the injuries to loved ones or the loss of their lives.

The Federal Budget

How is the revenue collected in federal taxes spent? Most goes to the military, social security, Medicare, and interest on the national debt as can be seen in the figures below. If you want to have a balanced budget or massively reduce the deficit without increasing revenues, these are categories of where cuts would need to be made to avoid decimating many other government services.

Obviously, given the orientation of Congress to provide the Pentagon with even more money than the president requested under both Trump and Biden, no cuts are coming from that realm nor is the government likely to default on interest payments. That leaves only social security and Medicare. Given what was promised during Biden’s 2023 State of the Union address and, if acted upon, neither will be cut.

Here are the 2019 and 2021 figures.[4]

The significance of the four above expenditures is clear. Total 2021 government revenue was $4,047 billion of which the above items are 72.5% of all revenue.

2019 government revenue came to $3,463 billion. 79.5% of this amount was spent on the above four items.

To have a balanced budget without raising more tax revenue after no cuts to the above four items, the remaining expenditures in 2019 would have had to have been cut $984 billion. In 2021, the cuts would have been even greater, coming to $2,775 billion. Such cuts to achieve a balanced budget would have been devastating to government services and programs.

Furthermore, the amount spent on “Defense” is much greater than shown here because many categories of expenditures are not included that should be seen as part of the defense budget. They include VA benefits, homeland security expenditures, and at least part of the interest on the debt. The Center for Defense Information at POGO provides a more realistic figure, almost twice as large, of over $1.3 trillion.[7]

A Key Reason why the Government goes into Debt

Putting aside how the government spends money, the debt should be seen as a refusal to tax more heavily corporations and those with the ability to pay. Instead, to finance the debt, money is borrowed mainly from the well-off who are issued debt instruments including bonds, treasury notes and T-bills. In return, the lenders are paid back not just the funds borrowed, but interest that is generally not subject to state income taxes.

Adding to the debt has been tax legislation that, for many years with a few minor exceptions, has made heavy cuts in the taxes imposed on the rich. This has often been based on the notion that if you cut their taxes, the rich will respond by investing more funds that generate more jobs at higher pay and growth in the economy that will in turn result in the government obtaining even greater tax revenue from people having higher incomes—something that has not necessarily happened ever since Reagan enacted so called supply side economic policies. Instead, the application of the trickle-down theory has resulted in wealth droughts for the poorer member of society in the form of unmet needs and floods of excessive wealth for those at the top.

None of this should be surprising—it is the nature of the state in a capitalist society to serve the interests of the rich and powerful who generally dominate it; and to help pave the way for them to accumulate more capital. Recently, the state has been able to better serve the powerful. Among the reasons are state repression, little to no opposition from the masses resulting from smaller numbers and percentages of workers being organized in unions, and those that are organized too often belong to unions that cooperate with management, are ineffective, undemocratic and corrupt; and weak radical social movements that challenge the system demanding fundamental changes.

Major Decline in Corporate Taxes as a Percent of Total Revenue from Individual Income and Social Security Taxes

Adding to the debt have been large declines in the relative portion of government revenue financed by corporate taxes. The share of taxes paid by corporations compared to individuals has significantly plummeted since the 1950s as shown in the following table that provides figures on tax revenue paid by corporations and individuals.[8]

ss stands for Social Security taxes paid.

Column a is corporate taxes as a percent of individual income taxes

Column b is corporate taxes as a percent of both income and social security taxes

Additionally, there are many measures that allow the rich to avoid or minimize their taxes. Interest received on most money loaned to state and local government in the form of municipal bonds is not subject to either federal or state income taxes. The rate of taxation on most corporate dividends one receives and on gains made from selling stocks, bonds, and property held for more than a year are taxed at a much lower rate than income earned from a job that is subject to not only income taxes imposed at a higher rate, but also social security taxes.[9] Additionally, the rich can donate their wealth to a foundation, preferably one they control, that shelters their generally growing wealth from ever being taxed. Such “charitable contributions” can reduce their taxes by being deducted and lowering the size of their income subject to taxation which, in this case, represents a government subsidy rewarded to people avoiding taxation of their wealth, much of which may have never been taxed.[10]

Furthermore, regressive flat taxes like the 6.2% social security tax that ends after one earned from working $147,000 in 2022 results in one who made ten times as much, $1.47 million, paying the same amount of social security taxes as one making $147,000, but at a rate of .62% of their earnings instead of 6.2% paid by everyone earning $147,000 or less. By not imposing this tax on all earned income and even unearned income from investments, the government creates the claimed crisis that social security will soon run out of funds.

Wealth Taxes Should be Imposed on the Rich

A way to reduce the national debt would be to not just more fairly tax the income of the rich and corporations, but to also impose a wealth tax on all of the wealth of the rich.

Many people already pay a wealth tax on some of their assets—mainly on real estate, their homes in the form of a property taxes, or by paying rent on property owned by landlords, some of which is used to pay the landlord’s property taxes. Hence, rent is partially an indirect wealth tax on property people do not own.

Most of the assets held by the wealthy such as their stocks and bonds which tend to be worth far more than their holdings in real estate are not subject to a yearly property tax. They are only subject to an income tax when they are sold, and then only the gain, if any, from the sale is taxed. Furthermore, the tax rate on the gain, if held more than a year, is lower than the tax rate on income earned from working.

The value of all of the assets of the rich may be subject to being taxed when the owner dies in the form of estate taxes. Those taxes can be avoided by sheltering them in a foundation or in some other vehicle that prevents them from being taxed.

For homeowners in states such as California, their property tax includes a tax on their mortgage debt since the property tax is not based on one’s equity in the property, but on the value of the property. In fact, property taxes can be imposed on more than 100% of the wealth of the poorest 50% making it a greater burden on those with fewer assets compared to the extremely wealthy.

As of the third quarter of 2022, according to the Federal Reserve Board, the value of the real estate holdings of the poorest 50% was $6.17 trillion with a mortgage liability of $2.9 trillion. According to the Fed, the poorest 50%’s net total wealth stood at $4.52 trillion. Leaving out the part of rent that is used to pay the landlord’s property taxes, if their real estate tax is based on the value of their property, the poorest 50% are paying a wealth tax on the value of their real estate which comes to 136% of their net worth of $4.52 trillion. By contrast, the wealthiest 1%’s real estate holdings came to $5.43 trillion with a mortgage debt of $.59 trillion. Their real estate holdings presumably subject to a property tax represents just 11.7% of their net worth of $41.38 trillion, (an amount that exceeds the national debt by some $10 trillion.)

For most, their real estate serves a vital need of providing one with a home. To be fair to those with the least wealth, it should not be taxed, or at least a rather large amount of its value should be exempt from being taxed. Property that does not serve a vital need such as the holding of bonds and stocks by the extremely wealthy should be subject to a yearly wealth tax.


We only hear about how the debt is huge and cuts need to be made to reduce it, or to minimize it. None of this would be necessary were we to have a truly democratic society based on social justice which prioritizes meeting peoples’ needs with fair tax policies, and the significant shifting in how the government spends its revenue.



2. Ibid.

3. Table 1.3

4. Above link table 3.1

5. In the current year, Congress provided the military $45b over Biden’s request.


7. The interest expenditure is likely to increase since interest rates have recently gone up.

8. See “This year’s funding requests suggest that the total national security budget will come closer to a breathtaking $1.3 trillion.”

9. Table 2.1

10. A state disability tax of 1.1% in 2022 on the first $145,600 of income earned from working is another tax imposed on workers in California.

11. See the example of Bill and Hillary Clinton at

Rick Baum teaches Political Science at City College of San Francisco. He is a member of AFT 2121.