In This Article:

• Why the deficit isn’t the real problem—it’s a political weapon
• How Trump and DOGE use deficit fear to justify tax cuts for billionaires
• The truth about government spending and why we can afford more than we think
• Why trickle-down economics failed and what billionaires do with their money
• How a Progressive Consumption Tax fixes the economy without punishing workers

The Biggest Lie in Economics: The Truth About Deficits and Wealth Hoarding

by Robert Jennings, InnerSelf.com

For decades, politicians, economists, and media pundits have drilled the same warning into the American psyche: The national debt is out of control. Deficits are dangerous. If we don’t cut spending and balance the budget, we’ll face economic catastrophe. It’s the economic equivalent of fire-and-brimstone preaching—believe in fiscal restraint or suffer the wrath of an economic apocalypse.

But what if I told you this was all a lie?

The truth is, the U.S. government doesn’t operate like your household. It never has, and it never will. Your family might have to budget carefully because you earn a fixed income. If you spend too much, you go into debt, and eventually, the bank comes knocking. But the U.S. government? It issues its own currency. It doesn’t “borrow” in the way you do, and it can never run out of money. The only constraint on government spending isn’t debt—it’s inflation. And even then, inflation only happens when too much money chases too few goods.

So why are we constantly being told that deficits are the biggest threat to our economy? Because it’s a scam—a manufactured crisis that allows politicians to justify economic policies that benefit the wealthy while gutting programs that help working Americans. When it’s time to pass tax cuts for corporations, deficits magically stop being a problem. But when someone proposes expanding healthcare, investing in infrastructure, or making college affordable? Suddenly, we’re told we “can’t afford it.” The hypocrisy is so blatant, it would be laughable—if it weren’t so destructive.

Here’s the real issue: It’s not about how much the government spends—it’s about where that money goes and who benefits from it. Right now, our economy is designed to funnel wealth to the top while leaving crumbs for the rest. Tax cuts for billionaires? No problem. Subsidies for corporations? Of course. Endless military contracts? Sign the check. But the moment working-class Americans ask for better wages, affordable healthcare, or a functioning public transit system, we’re met with lectures about “fiscal responsibility.”

It doesn’t have to be this way. If we structured government spending correctly, we could have both tax cuts and social investments without economic harm. The problem isn’t the deficit—it’s the way politicians use it as an excuse to rig the economy in favor of the ultra-wealthy.

And that’s where a Progressive Consumption Tax comes in. Instead of taxing workers on every dime they earn, we should be taxing the excessive luxury consumption of the ultra-rich. Not an across-the-board sales tax that hurts the middle class, but a progressive system where higher rates apply only to extravagant, wasteful spending—like multi-million-dollar yachts, $500 million art auctions, and speculative real estate that drives up housing prices for everyone else.

If we adopted this system, we wouldn’t need to cut essential programs or worry about whether we can “afford” tax cuts. The economy wouldn’t just be more equitable—it would be stronger, because the money would actually circulate instead of sitting in offshore tax havens and stock buybacks.

The national debt is not the crisis we’ve been led to believe it is. But the way we allocate resources? That’s the real problem. And the people pushing the debt fear-mongering aren’t looking out for you. They’re looking out for their donors, their corporate friends, and their own bottom lines.

It’s time to stop falling for the con.

The Deficit Scam: How Politicians Use Fear

If you ever need proof that the national debt is just a political weapon, look no further than the Republican Party. Deficit panic is never about economic necessity—it’s about power. When Republicans are in charge, deficits magically stop mattering. When Democrats take office and try to fund programs for working Americans, suddenly we’re on the brink of financial collapse. It’s a game, and they’ve been playing it for decades.

Let’s take a quick trip through history:

In the 1980s, Ronald Reagan slashed taxes for the wealthy, ballooning the national debt from $997 billion to $2.85 trillion—nearly tripling it in just eight years. Republicans didn’t care. In fact, they celebrated it as an economic miracle.

Then came George W. Bush, who inherited a budget surplus from Bill Clinton. Instead of using it to pay down debt or invest in infrastructure, Bush handed out massive tax cuts, primarily benefiting the wealthy, and launched two unfunded wars. The national debt doubled again, from $5.6 trillion to $11.9 trillion. And once again, Republicans cheered.

Then came Donald Trump. In 2017, he passed one of the largest tax cuts in U.S. history, adding $1.9 trillion to the deficit. The vast majority of the benefits went to corporations and the ultra-wealthy. When confronted with the fact that his policies were adding to the debt, Trump famously responded, “Yeah, but I won’t be here,” shrugging off the consequences. So much for fiscal conservatism.

And now, with Trump back in power, he’s doing it again—pushing for $4.5 trillion in new tax cuts while simultaneously demanding $2 trillion in spending cuts. If deficit reduction were really the goal, wouldn’t they be raising revenue instead of slashing it?

But here’s where it gets really absurd: The same people who cheered for Trump’s tax cuts are now pounding the table, insisting that we must make “hard choices” to reduce spending. And, as always, those “hard choices” involve slashing Social Security, Medicaid, and every other program that actually benefits working people.

The debt ceiling—supposedly the ultimate symbol of fiscal responsibility—is just another piece of their scam. Republicans only threaten to shut down the government when Democrats want to fund social programs. They raised the debt ceiling three times under Trump without blinking. But when Biden needed to do it to keep the economy from tanking? Suddenly, it was a moral crisis.

Deficit panic is not about economics. It’s a political tool. And the people using it don’t care about fiscal responsibility. They care about making sure that every last dollar flows upward.

Why Democrats Play Along

You’d think the Democrats would have figured this out by now. You’d think, after decades of being beaten over the head with the deficit club, they’d stop letting Republicans dictate the terms of the debate. But instead of exposing the scam, many Democrats play along.

During the Obama administration, Republicans held the economy hostage, demanding spending cuts in exchange for raising the debt ceiling. Obama, instead of calling their bluff, agreed to the infamous sequestration deal—austerity cuts that slowed down economic recovery from the Great Recession. It was a massive mistake, and Republicans turned around and spent freely the moment Trump took office.

Even Joe Biden, who should know better, has bragged about reducing the deficit as if it’s something to be proud of. He’s played the Republican game, reinforcing the false notion that deficits are inherently bad and need to be “paid for.” But here’s the truth: The only time the U.S. successfully ran a budget surplus was under Clinton, and that surplus helped trigger a recession because it drained money out of the economy.

The problem is that establishment Democrats are still operating under an outdated economic framework—one that treats government budgets like household budgets. They still believe they have to be “fiscally responsible” to win over voters, despite overwhelming evidence that voters don’t actually care about deficits. Poll after poll shows that Americans care far more about their own economic conditions—wages, healthcare, housing affordability—than they do about some abstract number on a government balance sheet.

The only politicians who seem to understand this are progressives like Bernie Sanders and Alexandria Ocasio-Cortez. They openly challenge the deficit narrative, arguing that the government’s real constraint isn’t debt—it’s inflation and resource allocation. But because their ideas threaten the donor class, they are constantly dismissed as “radicals,” even though they’re the only ones telling the truth.

Meanwhile, corporate Democrats stay locked in the “pay-for” trap. Anytime they propose expanding Medicare or funding universal childcare, they scramble to find “offsets” so they can claim their plans won’t increase the deficit. Republicans never do this. When they cut taxes, they don’t care about paying for it. They just do it. And because Democrats are too afraid to challenge them, they end up reinforcing the lie.

The result? We live in a country where billionaires pay lower tax rates than teachers, where the government prioritizes Wall Street bailouts over affordable housing, and where every discussion about economic policy starts with the false assumption that “we can’t afford” to invest in regular people.

The scam works because both parties, to some degree, let it work. Republicans drive the car off the cliff, and Democrats follow behind, offering to tap the brakes instead of turning the damn thing around.

It’s time to stop playing by their rules. The next time you hear a politician talk about “fiscal responsibility,” ask yourself: Who benefits from this narrative? Because history has already shown us the answer—and it sure as hell isn’t you.

We Can Afford More Than We Are Told

One of the biggest economic lies ever told is that the U.S. government needs to “earn” money before it can spend. Politicians love to compare the federal budget to a household budget, saying things like, “You wouldn’t run your household on debt forever, would you?” But this is complete nonsense. The federal government is nothing like a household. It operates under entirely different rules.

Think about it: Households don’t print their own money. Businesses don’t either. If you or I run out of money, we have to earn more or borrow it from someone else. But the U.S. government? It creates money. It doesn’t need to “borrow” dollars from anyone—it issues them. The only reason the government sells bonds at all is to give people a place to park their savings, not because it actually needs to “fund” its spending.

And this isn’t just theoretical—other countries have already proven that high debt isn’t a problem if you control your own currency. Take Japan, for example. Japan has a debt-to-GDP ratio of over 260%, which is far higher than the U.S. But is Japan collapsing under the weight of its debt? No. Inflation is low, interest rates are manageable, and the economy is stable.

Why? Because Japan, like the U.S., issues its own currency. As long as a country controls its own money supply and borrows in its own currency, it can never go bankrupt in the way a household or business can. The U.S. government will never “run out” of money any more than a scorekeeper at a basketball game can run out of points. It just doesn’t work that way.

So the next time a politician tells you we’re “out of money,” remember: they’re lying. The government isn’t constrained by money. The only thing that matters is whether the economy has the real resources to absorb new spending.

Deficits Only Matter If They Create Inflation

Okay, so if the government can never run out of money, why can’t we just print unlimited dollars and give everyone a million bucks? Because while the government is not financially constrained, it is resource constrained.

The real question isn’t “Can we afford it?” It’s “Do we have enough workers, materials, and infrastructure to handle it?” If too much money is pumped into the economy when we’re already at full capacity—when there aren’t enough workers, factories, or resources to meet demand—then yes, inflation can happen. But if we’re not at full capacity, then new spending can actually boost economic output rather than drive up prices.

Here’s an example: Imagine a town has 100 unemployed construction workers and a bunch of idle equipment sitting around. The government decides to spend money building new schools and roads. What happens? Those unemployed workers get jobs, the economy grows, and infrastructure improves. Inflation doesn’t go up because we’re using idle resources.

Now, imagine the opposite: The economy is at full capacity, every construction worker is already employed, and all available equipment is in use. If the government suddenly throws in a trillion-dollar construction program, now we have a problem. There aren’t enough workers or materials, so prices shoot up. That’s when inflation happens.

Deficits don’t cause inflation—resource shortages do. And in most cases, when politicians start screaming about “too much spending,” the reality is that we still have plenty of unused capacity.

We Could Pay for Tax Cuts & Social Spending With Deficits

Now that we’ve established that the government can create money and that deficits aren’t inherently bad, let’s go one step further: We can afford both tax cuts AND social spending without causing economic harm.

Republicans claim that tax cuts “pay for themselves” through economic growth. They don’t. But they also don’t need to be “paid for” in the way Republicans claim. The government doesn’t have to “cut spending” to make up for tax cuts. It can just run a higher deficit.

Likewise, when Democrats propose expanding Medicare or funding infrastructure projects, they shouldn’t have to scramble for “offsets” to make sure the plan is “deficit neutral.” They can just spend the money. The economy will absorb it as long as there’s unused capacity.

Here’s the real issue: It’s not about how much the government spends—it’s about where the money goes. If the government spends trillions on tax cuts for the wealthy, that money doesn’t flow back into the economy. It gets hoarded in stock buybacks, offshore tax havens, and speculative investments that don’t create jobs.

But if the government spends trillions on things that actually increase economic productivity—like education, infrastructure, and clean energy—then the economy grows in a sustainable way.

Imagine two scenarios:

• In Scenario A, the government cuts taxes for billionaires, who take that money and buy luxury real estate and fine art. The economy doesn’t grow very much because those assets just sit there, accruing value for the ultra-rich.

•  In Scenario B, the government invests that money into new bridges, clean energy, and universal healthcare. Now people are employed, infrastructure improves, and families have more disposable income to spend in their communities.

One of these scenarios helps the economy. The other just makes the rich richer.

So the real question isn’t whether we should run a deficit. It’s how we run that deficit. Do we use it to enrich billionaires, or do we use it to build a better economy for everyone?

Deficit hysteria is a weapon used to keep wealth flowing to the top. If people understood that deficits are not a problem—and that we can afford far more than we’ve been told—the entire economic scam would fall apart overnight.

The Rich Are Hoarding Money in Unproductive Ways

For decades, Americans have been sold a fantasy: If we just keep cutting taxes for the rich, they’ll take all that extra cash and reinvest it into businesses, creating jobs and prosperity for everyone. It’s the infamous trickle-down economics theory. But after forty years of this experiment, we have enough evidence to say what should have been obvious from the start: It doesn’t work.

The ultra-wealthy aren’t reinvesting in productive industries. They aren’t using their money to create new businesses or employ more people. Instead, they’re hoarding wealth in unproductive, speculative assets—things that don’t create jobs, don’t generate innovation, and don’t improve the economy for anyone but themselves.

Let’s look at where billionaire money actually goes:

$100 Million Art Speculation – A small group of billionaires treat the fine art market like a glorified stock exchange, buying and hoarding paintings that never see the light of day. These pieces aren’t displayed in museums or public spaces. They sit in climate-controlled storage units—sometimes for decades—only to be resold later for a profit. This does absolutely nothing for the economy. It’s just another way to accumulate wealth without creating anything of value.

Luxury Mega-Yachts & Vanity Projects – Jeff Bezos, Elon Musk, and other billionaires have spent hundreds of millions of dollars on yachts so large they require entire bridges to be dismantled just to be moved. These yachts employ a handful of staff but contribute almost nothing to overall economic growth. They’re floating palaces for the ultra-rich, while millions of Americans struggle to afford basic housing.

Real Estate Bubbles Pricing Out Working Families – Billionaires and hedge funds aren’t just buying homes for themselves. They’re buying entire neighborhoods, turning homes into speculative investment vehicles instead of places for families to live. When corporate landlords and private equity firms snatch up single-family homes, they don’t care about the communities they’re hollowing out. They jack up rents, let properties fall into disrepair, and drive out working families. Meanwhile, the people who actually live in these places can’t afford to buy a home because housing prices have been artificially inflated by the rich.

So, when politicians argue that tax cuts for the wealthy “create jobs,” they’re either lying or they’re too stupid to look at the actual data. The rich don’t put their money back into the economy. They lock it away in speculative assets that do nothing for working Americans.

The entire system is rigged to reward wealth hoarding instead of investment. And that’s why we’re stuck in an economy where workers get taxed on every dollar they earn, while billionaires accumulate more and more wealth without ever paying their fair share.

Instead of Taxing Labor, We Should Tax Excessive Consumption

Right now, the U.S. tax system is built on the insane idea that we should tax work more than we tax extreme wealth. If you’re an average worker making $50,000 a year, you’re taxed at a higher rate than a billionaire who makes their money from capital gains and tax loopholes. How does that make sense?

The reality is simple: We tax the wrong things. We tax wages, punishing people for working. Meanwhile, billionaires who hoard wealth in speculative assets, offshore accounts, and luxury purchases often pay nothing.

Consider this: Why should a teacher or a truck driver pay 35% in taxes on their paycheck, while a hedge fund manager can buy a $200 million penthouse in New York and pay virtually nothing in taxes? Why are we punishing labor but rewarding speculation?

Here’s the fix: A Progressive Consumption Tax.

• Instead of taxing income, we should be taxing wasteful luxury spending. This doesn’t mean taxing basic necessities like groceries or rent. It means taxing the excessive, unnecessary consumption of the ultra-wealthy.

• Under this system, a billionaire who buys a $500 million yacht would pay a significant tax.

• A person buying a normal car or a modest home would barely be taxed at all.

• A $20 million diamond-encrusted watch? Tax it heavily.

This isn’t about “punishing success.” It’s about shifting the tax burden away from people who work for a living and onto people who spend money on absurd, wasteful luxuries. It’s about taxing consumption, not work.

A Progressive Consumption Tax would do two things:

• Discourage hoarding and wasteful elite spending. Billionaires wouldn’t be incentivized to sink money into speculative assets and luxury junk just to avoid taxation.

• Let ordinary people keep more of their money. Instead of taxing wages, we let workers take home more of what they earn. The tax burden shifts to those who can most afford it—people spending tens of millions on extravagant consumption.

Right now, the wealthy use their money unproductively because they have no incentive to do otherwise. A Progressive Consumption Tax would push them to reinvest in productive industries—things that create jobs and economic growth—rather than just hoarding wealth in offshore accounts and luxury junk.

And that’s the real solution. The rich will never voluntarily put their money back into the economy. We have to structure the tax system to make sure they do.

The Debate We Should Be Having

At the end of the day, everything Trump and DOGE are doing has nothing to do with fiscal responsibility. It has nothing to do with making the economy stronger. And it sure as hell has nothing to do with helping working Americans. This is a massive wealth grab, plain and simple—wrapped in just enough economic jargon to make it sound legitimate to the average voter.

For decades, we’ve been tricked into believing that the biggest economic question is whether we can “afford” social programs or tax cuts. It’s a brilliant con, really. Make people think the government is just like a household—limited by debt, unable to spend beyond its means—so that anytime someone suggests investing in education, healthcare, or infrastructure, the knee-jerk response is “How are we going to pay for it?”

But here’s the truth: We don’t need to “pay for” tax cuts or social spending—we need to make sure money flows to productive use. The problem isn’t the deficit. It’s not the debt. It’s the fact that the money we already have is flowing straight to the top, where it sits in stock buybacks, speculative real estate, and offshore tax havens.

If we want to fix this system, we don’t need more budget cuts. We don’t need to raise taxes on the middle class. We don’t need to “tighten our belts” or “make tough choices.” We just need to stop rewarding hoarding and start taxing wasteful luxury spending.

That’s where a Progressive Consumption Tax comes in.

• It doesn’t punish workers for earning money—it only taxes extreme consumption.

• It shifts the burden away from the middle class and onto billionaires who waste money on thing like yachts and tax shelters.

• It encourages real economic investment instead of endless speculation.

• The tax collection process is already in place.

• The tax collection is not intrusive to the individual but is harder to avoid.

• A lot of our productive resources are used to avoid and pay income tax.

Imagine a world where you don't have to account for earning money; you only spend it. Sure, people could go overseas and spend their money. Well, let them use up other people's resources. Most importantly, it dismantles the biggest economic scam of all—the idea that we “can’t afford” to invest in society.

The biggest threat to America’s economy isn’t the deficit. It’s not the debt. It’s not even inflation. It’s the rigged system that rewards hoarding instead of real investment.

Until we start taxing the right things, wealth will keep flowing upward, working Americans will keep getting squeezed, and politicians will keep selling us the same tired lie about “fiscal responsibility.”

It’s time to stop falling for it.

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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This article is licensed under a Creative Commons Attribution-Share Alike 4.0 License. Attribute the author Robert Jennings, InnerSelf.com. Link back to the article This article originally appeared on InnerSelf.com

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Article Recap:
For decades, the deficit myth has been used to justify slashing social programs while the rich hoard wealth. A Progressive Consumption Tax would rebalance the economy by taxing luxury spending instead of work, ensuring billionaires contribute instead of exploiting loopholes. Deficits don’t matter—where the money flows does.

#ProgressiveConsumptionTax #DeficitMyth #WealthHoarding #TaxTheRich #TrickleDownFail #EconomicJustice #BillionaireLoopholes #TaxReform #EconomicScam #TrumpTaxCuts