The Truth Behind the National Debt Myth: Who Really Benefits?

Details: By Robert Jennings, InnerSelf.com

The Truth Behind the National Debt Myth: Who Really Benefits?

by Robert Jennings, InnerSelf.com

I’d collapse from exhaustion before finding a single person in my neighborhood who agreed with me about this myth. That’s how deeply it’s ingrained. The myth I’m talking about? The idea that the national debt is some apocalyptic monster, driven to towering heights by reckless spending on programs like Social Security and Medicare. Politicians and pundits have repeated this tale so often, it’s become gospel truth to most people.

But here’s the truth: the real driver of deficits isn’t social programs—it’s tax cuts for the wealthy, endless wars, and the selective use of deficits as a political weapon. The wealthy and their allies in Congress don’t just tolerate the national debt; they rely on it. Treasury bonds are their cash cow, providing risk-free returns while the rest of us foot the bill. And when they’re done cashing in, they turn around and use the debt as an excuse to cut programs that benefit everyday Americans. Convenient, isn’t it?

Let’s take a closer look at how we got here, why the debt isn’t the problem they claim it is, and who’s really benefiting from the system. Spoiler alert: it’s not you.

Follow the Money—Straight to the Top

Let’s start with the numbers. About 75% of the national debt is held by “the public.” But don’t let that term mislead you—it doesn’t mean your neighbor or your average American saving for retirement. No, most of this debt is held by pension funds, foreign governments, wealthy individuals, and enormous financial institutions. And these folks? They’re not losing sleep over the national debt. They’re laughing all the way to the bank. Why? Because Uncle Sam pays them interest on their Treasury bonds, making those bonds one of the safest, most reliable investments in the world.

Let’s break that down further. One major holder of Treasury bonds is Social Security itself, which holds a staggering $2.5 trillion in bonds. Yes, you read that right. The very program they keep warning us is going “bankrupt” owns a hefty chunk of the national debt. But here’s the irony: the government pays interest on those bonds, which flows back into the Social Security Trust Fund, helping to keep it solvent. So, when you hear that the national debt is a threat to Social Security, remember that they’re actually deeply intertwined in a way that benefits the program.

And it’s not just domestic entities cashing in on the national debt. Foreign governments are also big players, collectively holding over $7 trillion in U.S. Treasury securities. The top foreign holders are countries like Japan and China, which together account for more than $2 trillion. Why do they invest in U.S. debt? Because it’s the safest bet in the global economy. The U.S. government has never defaulted on its debt, making Treasury bonds the gold standard for secure investments. For these countries, holding U.S. debt is a strategic move—earning interest while keeping their reserves stable and liquid.

Here’s where the real cynicism sets in. For the wealthy, Treasury bonds are like a golden goose that lays interest-bearing eggs year after year. And guess who’s feeding that goose? Spoiler alert: it’s us—the taxpayers. The government raises funds through taxes and, when needed, borrows by issuing Treasury bonds. The interest on those bonds doesn’t come out of thin air; it comes from the government’s revenue, which includes your hard-earned tax dollars.

To put it plainly, the wealthy are making money off the national debt while the rest of us are footing the bill. Every time the government pays interest on the debt, a significant chunk goes straight into the pockets of wealthy investors, pension funds, and foreign entities. And the best part for them? Treasury bonds are tax-advantaged, making them an even sweeter deal for the rich.

Now, here’s the kicker: the national debt isn’t even a problem for the U.S. government. Unlike you or me, the government doesn’t need to “pay off” its debt in the traditional sense. Why? Because it literally has the power to create money. If Congress authorized it, the Federal Reserve could issue funds to cover the national debt with the stroke of a pen—or, more accurately, the click of a keyboard. The Fed could simply write checks to bondholders, clearing the debt without causing inflation. How? Because the money has already been spent. It’s not new spending; it’s just a financial transaction to settle accounts.

Think about that for a moment. The media loves to whip us into a frenzy over the national debt, warning of economic catastrophe if we don’t “tighten our belts.” But the reality is that the U.S. government, as the issuer of the world’s reserve currency, has tools at its disposal that make the debt a non-issue. It’s not like a household budget, no matter how many times they try to sell you that oversimplified analogy.

So why all the fearmongering? Because it’s a convenient excuse to push policies that benefit the wealthy while stripping resources from everyone else. By keeping us scared, they can justify cutting social programs, slashing Medicare and Social Security, and refusing to raise taxes on the rich. Meanwhile, the wealthy continue to rake in interest on the very debt they tell us is so dangerous.

When you hear politicians or pundits ranting about the national debt, remember to follow the money. Look at who’s holding those bonds and who benefits from the interest payments. It’s not you, and it’s not the average American. It’s a carefully constructed system that serves the interests of the wealthy and powerful, all while convincing us that the sky is falling. The truth is, the sky isn’t falling. The Fed can fix this with a simple accounting entry. But as long as they can keep us panicked, the gravy train keeps rolling for them.

The Real Driver of Deficits

It’s time to put one of the biggest myths about the national debt to bed: it’s not runaway spending on social programs that’s breaking the bank. The real culprit is tax cuts for the wealthy, coupled with other policy decisions that have left us with a $30+ trillion bill. For decades, Republican administrations have mastered the art of running up deficits while handing out massive financial favors to their rich friends. And when the debt spirals out of control? They blame Medicare and Social Security, of course. Because why take responsibility when you can scapegoat programs that actually help people?

Let’s start with the numbers. Ronald Reagan, the grandfather of supply-side economics, took office in 1981 and promptly unleashed a wave of tax cuts, primarily benefiting corporations and the wealthy. The national debt nearly tripled on his watch, climbing from $995 billion to $2.9 trillion. While Reagan’s defenders like to tout his military buildup and economic growth, the reality is that much of this debt was unnecessary. His administration leaned heavily on the idea that tax cuts would “pay for themselves.” Spoiler alert: they didn’t.

Next came George W. Bush, who doubled down on Reagan’s playbook with two massive tax cuts in 2001 and 2003. These cuts overwhelmingly benefited the wealthiest Americans and, combined with the costs of two wars in Iraq and Afghanistan, sent the debt skyrocketing. When Bush entered office, the debt stood at $5.7 trillion. By the time he left in 2009, it had nearly doubled to $10.7 trillion. To add insult to injury, none of the war spending was accounted for in the regular budget—it was all tacked onto the deficit as “emergency” spending. Convenient, isn’t it?

Then came Donald Trump, who took this formula to new heights. His 2017 tax cuts slashed the corporate tax rate from 35% to 21% and handed out a nearly $2 trillion gift to the wealthiest Americans and big corporations. The results? A deficit that ballooned even during a strong economy, when deficits should typically shrink. By the end of Trump’s first term, the national debt had climbed from $19.9 trillion to $27.8 trillion. And now, as Trump begins his second term, he’s pushing for even more tax cuts while simultaneously arguing that we “can’t afford” Medicare and Social Security. The hypocrisy is almost impressive.

But tax cuts alone don’t tell the whole story. Let’s not forget the wars in Iraq and Afghanistan, initiated under Bush, which have cost the U.S. over $8 trillion by 2023. These conflicts were financed almost entirely through deficit spending, adding to the mountain of debt. And then there’s the Great Recession, which forced both Bush and Obama to pump trillions into the economy through bailouts and stimulus programs. While these measures were necessary to prevent economic collapse, they also contributed to the growing debt.

Fast forward to 2020, and the COVID-19 pandemic brought a whole new wave of government spending. Relief efforts under both Trump and Biden—stimulus checks, unemployment benefits, and small business loans—added over $5 trillion to the debt. While much of this spending was justified, it’s worth noting that corporations and the wealthy still found ways to profit, as they always do.

When you add it all up—Reagan’s tax cuts, Bush’s wars, Trump’s giveaways to the rich, and the economic crises along the way—it becomes clear that the national debt isn’t about social programs. It’s about decisions. Decisions to prioritize tax cuts for the wealthy over long-term fiscal responsibility. Decisions to finance wars on credit while cutting taxes. Decisions to scare the public into thinking Medicare and Social Security are the villains when, in reality, they’ve been the scapegoats all along.

Here’s the bottom line: the debt isn’t about reckless spending on social programs—it’s about a system that’s rigged to benefit the wealthy at everyone else’s expense. And unless we’re willing to confront that reality, the debt will keep growing, and the same people who profited from it will keep pointing the finger at the rest of us.

Scaring You into Submission

This is where things turn truly cynical. The same people profiting from the national debt also happen to own the media outlets that constantly warn us about it. Coincidence? Not a chance. They use fear to manipulate public opinion, convincing us that slashing social safety nets is the only way to balance the budget. Never mind that these programs are lifelines for millions of Americans. Never mind that cutting them would push countless families into poverty. What matters to them is protecting the status quo—a system where they get richer while the rest of us struggle to stay afloat.

Another favorite scare tactic is inflation. “If we don’t tackle the debt, inflation will run wild!” they warn. But here’s the thing: spending causes inflation, not debt. The government could pay off the national debt tomorrow by authorizing the Federal Reserve to issue the funds. Would that cause inflation? No, because the money is already in circulation. It’s not new spending; it’s just moving numbers around. But don’t expect to hear that from the fearmongers. They’d rather keep you in the dark.

What They Don’t Want You to Know

Here’s a question that rarely gets asked: Why doesn’t Congress just wipe out the national debt? The answer is both simple and infuriating—they don’t want to. For the wealthy, the national debt isn’t a problem; it’s an opportunity. Treasury bonds, those so-called instruments of debt, are some of the safest, most profitable investments in the world. The rich park their money there, earn guaranteed interest, and sleep like babies knowing Uncle Sam has their back. Far from a crisis, the national debt is a cash cow for the wealthiest among us.

Eliminating the debt would mean cutting off this gravy train. No more safe investments yielding interest without effort. But that’s not the only reason the wealthy and their allies in Congress cling to the debt. The national debt is also a political weapon, wielded to justify refusing to raise taxes on the rich or fund programs that benefit the broader public. After all, if the debt isn’t a problem, what’s stopping us from taxing billionaires to invest in healthcare, education, or renewable energy? For the wealthy, keeping the debt around—and making it seem like an unsolvable crisis—is just good business.

And that’s where Dick Cheney’s infamous quip comes into play. When he said, “Reagan proved that deficits don’t matter,” he wasn’t just speaking about economic theory—he was revealing a strategy. Deficits don’t matter when they’re used to fund tax cuts for the wealthy or bankroll wars. Under Reagan, the national debt tripled, climbing from $995 billion to $2.9 trillion, largely due to massive tax cuts and military spending. Yet Reagan faced little political fallout because the spending served priorities that benefited the elite.

Fast forward to George W. Bush, and Cheney’s logic was on full display. Bush’s 2001 and 2003 tax cuts, paired with the costly wars in Iraq and Afghanistan, nearly doubled the debt, taking it from $5.7 trillion to $10.7 trillion. None of it was paid for, of course, because deficits were deemed acceptable so long as they served the right purposes—namely, enriching the wealthy and expanding military influence.

Donald Trump took this to new heights with his 2017 tax cuts, adding nearly $2 trillion to the debt by slashing the corporate tax rate and giving the richest Americans a massive windfall. And now, as Trump’s second term unfolds, he’s calling for even more tax cuts while simultaneously blaming Medicare and Social Security for the growing deficit. The hypocrisy isn’t just glaring—it’s baked into the system.

Here’s the real kicker: the Federal Reserve could clear the national debt tomorrow with a simple accounting entry. Congress could authorize the Fed to issue funds and “write the check” to pay off bondholders. It wouldn’t cause inflation because the debt reflects past spending, not new money entering the economy. But don’t expect this solution to gain traction. The wealthy benefit far too much from the status quo, and the debt provides them with a convenient excuse to block any progressive reform that might require them to pay their fair share.

In truth, the national debt isn’t the crisis we’ve been told it is. It’s a carefully maintained system that props up the rich while justifying austerity for everyone else. By keeping the public fixated on the debt, politicians and their wealthy backers divert attention from the real problem: a rigged economy that prioritizes their interests over ours. The question isn’t whether deficits matter—it’s who they matter for. And if you’re reading this, odds are, it’s not you.

Now That You Know

Here’s an idea: instead of cutting programs that help people, let’s start taxing those who can afford to pay. A modest wealth tax, closing corporate tax loopholes, and reinstating fair income tax rates could generate trillions in revenue. Pair that with a smarter approach to spending—investing in green energy, education, and healthcare—and we could build a future where everyone benefits, not just the elite.

We also need to push back against the fearmongering. It’s time to educate ourselves about how the economy really works. The national debt isn’t some apocalyptic threat. It’s a tool—one that’s been weaponized by the wealthy to maintain their power. But it doesn’t have to be that way. With the right policies and a bit of courage, we can use it to create a more equitable society.

The next time you hear a politician or pundit railing against the national debt, ask yourself who benefits from that narrative. Chances are, it’s not you. It’s the same people who’ve been benefiting all along: the wealthy, the powerful, the rent-seekers who see our economy as their personal piggy bank. Don’t let them scare you into submission. Demand better. Demand fairness. And remember: the debt isn’t the problem—they are.

About the Author

Robert Jennings is the co-publisher of InnerSelf.com, a platform dedicated to empowering individuals and fostering a more connected, equitable world. A veteran of the U.S. Marine Corps and the U.S. Army, Robert draws on his diverse life experiences, from working in real estate and construction to building InnerSelf with his wife, Marie T. Russell, to bring a practical, grounded perspective to life’s challenges. Founded in 1996, InnerSelf.com shares insights to help people make informed, meaningful choices for themselves and the planet. More than 30 years later, InnerSelf continues to inspire clarity and empowerment.

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Article Recap

The myth that Social Security and Medicare are the main drivers of the national debt obscures the truth: deficits are fueled by tax cuts for the wealthy, endless wars, and political manipulation. Treasury bonds enrich the elite, while fearmongering keeps the public in check. This article breaks down how the system is rigged and why the Federal Reserve could eliminate the debt tomorrow if Congress allowed it.

#NationalDebtMyth #DeficitDrivers #TaxCutsAndDeficits #SocialProgramsVsDeficits #WealthAndDebt #TreasuryBonds #USDebtExplained #DebtScareTactics #PoliticalEconomy