“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.
The national debt crossed $40 trillion on August 18. Nobody threw a parade for that either.
“We Owe It to Ourselves”
The standard defense of this arrangement, a staple of mainstream economics since the 1940s, holds that the debt is no burden because “we owe it to ourselves.” Murray Rothbard spent a famous essay, “Repudiating the National Debt,” disposing of that phrase. It makes, he wrote, “an enormous amount of difference” whether, “slicing through the obfuscatory collective nouns,” you are a member of the “we” (the burdened taxpayer) or of the “ourselves” (those living off the proceeds). The bondholder lent Washington money and collects the interest; the taxpayer lent nothing and pays it. The government that borrowed the money is not the public on the hook for it. There is no “we” in Table 3. There are the people who pay, and the people who get paid.
A private borrower pledges his own house; if he cannot pay, his creditors cannot take yours. The state borrows on other terms: it signs the note, you guarantee it, yet the debt is called “ours.” Rothbard followed the logic to its end: repudiation. If the government contracted the debt and the public did not, let the government default, not the taxpayer. It shocks only because it takes the “we” seriously.
Once the distinction lands, the true nature of the interest line comes into focus. When the state spends beyond its means, it does not merely take your money today; it pledges your earnings tomorrow. Your labor is the collateral on loans you never took out, pledged by people who already spent the money, and the meter runs whether you consent or not. A man who cannot refuse the debt does not own the labor that services it. The interest tab comes to nearly $10,000 per American household this year, not for any service rendered, but to pay for the state’s past appetites. Of every five income-tax dollars Washington expects to collect this year, more than two go to interest on old promises.
Lysander Spooner drew the only honest comparison, writing in No Treason in 1870:
The highwayman takes solely upon himself the responsibility, danger, and crime of his own act. He does not pretend that he has any rightful claim to your money, or that he intends to use it for your own benefit. He does not pretend to be anything but a robber. . . . In short, he does not, in addition to robbing you, attempt to make you either his dupe or his slave.
The highwayman robs you and departs. The state robs you, borrows against your future income, and mails you the statement. Spooner’s robber never claimed to be acting in your name.
The Ratchet Only Turns One Way
How did we arrive at forty-three cents? Not through any single catastrophe, but through the mechanism Robert Higgs chronicled in Crisis and Leviathan: the ratchet effect. Each emergency (war, depression, pandemic) expands the state’s reach and borrowing; each recovery ratifies the new baseline. The milestones fall like dominoes: $34.5 trillion in March 2024, $37 trillion in August 2025, nearly another trillion in roughly ten weeks, then $39 trillion this past March and $40 trillion in August. Roughly half of it has been added since Donald Trump’s first inauguration, nearly three-quarters since Barack Obama’s. Washington’s bookkeepers see no interruption: the CBO projects the deficit growing from $1.9 trillion to $3.1 trillion a year by 2036, and the interest bill more than doubling, to $2.1 trillion. No crisis required. Neither party wants austerity; each wants to wield state power to its own ends.
The deficit had already reached $1.97 trillion with a month left in the fiscal year, past the Congressional Budget Office’s full-year projection of $1.9 trillion from February. It was run with unemployment near its sustainable rate, in the good years, when borrowing was supposed to stop. The government does not save. A government that cannot stop borrowing in the sunshine will not stop in the storm; it does not intend to. Here is the part that should keep you up at night. Interest is not a program anyone votes on each year. Federal law permanently appropriates whatever sums are necessary to pay it. No appropriations fight, no floor debate, no signature. It compounds—the one law of mathematics Congress has never repealed. Deficits add debt, debt adds interest, interest adds to the deficit. Forty-three cents this year, then forty-five, then fifty. A nation that pays its creditors before it pays for anything else is eating its seed corn and billing the grandchildren for the meal. The dead borrowed; the living pay. The unborn are pledged before they can object. Collateral that has not drawn its first breath.
Nothing Stops This Train
Lyn Alden, author of Broken Money, has mapped this trajectory for years and given it the name it deserves: “nothing stops this train.” Her argument deserves attention: no villain, no conspiracy, only arithmetic. When the debt grows this large, the central bank’s old weapons break. Raise interest rates to fight inflation and you raise the Treasury’s borrowing costs, which widens the deficit, which requires more issuance, which pushes more money-like claims into the banking system. The brake pedal is wired to the accelerator. How does that car slow down? Alden calls it fiscal dominance: the point at which the state’s financing needs, not any theory of employment or prices, dictate monetary policy.
Washington’s response this month: the president promised a $5,000 “dividend” to every adult citizen, if his party holds Congress, more than $1.2 trillion in 2027, by the Committee for a Responsible Federal Budget’s count. The word is not “dividend.” It is bribery, and the bribe is paid in seed corn, starving the youth of tomorrow to buy the votes of today.
There are four theoretical exits from a debt spiral: default, austerity, growth, and inflation. Default is unthinkable to the people whose power rests on the debt’s sanctity. Austerity is unthinkable to the people whose power rests on spending. Growth fast enough to outrun six-percent-of-GDP deficits is a fantasy no honest forecaster will sign. The likely path is a blend of evasions and whatever the blend, its active ingredient is inflation, the exit with no constituency and no ceremony. It is not a policy anyone will announce. It is the station at the end of the line.
Stepping Off the Tracks
None of this will be reformed by the next election, or the one after. The incentives run the other way, and the arithmetic has already voted. The correct response is not to beg the engineers for slower destruction. It is to stop riding. Exit is not surrender; it is the only ballot that cannot be miscounted.
That means what it has always meant. Start saving in sound monies like gold or bitcoin, and stop supporting the parties, either of them, that eat the seed corn now and plant nothing for the generations who will starve. Nothing stops this train. Get off the tracks.
