You Are Being Swindled: The Big National Debt Economic Switcheroo

economy

The Big National Debt Economic Switcheroo

The biggest untold story about how we pay for government involves a big switcheroo by America’s wealthy.

Decades ago, wealthy Americans financed the federal government mainly by paying taxes. Their tax rate was far higher than what it is today.  

Now, wealthy Americans finance the federal government mainly by lending it money, and collecting interest payments on those loans, profiting when the rest of us pay them back.

Follow the money: As the debt continues to grow, interest payments are becoming huge. Taxpayers could soon be paying more in interest on the federal debt than we spend on the military or on Medicaid.

Interest on the debt is expected to hit $390 billion next year, nearly 50 percent more than in 2017, according to the Congressional Budget Office.

Who’s receiving these interest payments? Mostly Americans, not foreigners. And most of these Americans are wealthy investors who park their savings in treasury bonds held by mutual funds, hedge funds, pension funds, banks, insurance companies, personal trusts, and estates.

The richest 1 percent of Americans now own 40 percent of the nation’s wealth, which is more wealth than the bottom 90 percent put together.

Which means a big chunk of the growing interest payments American taxpayers make on the federal debt is going to… rich Americans.

Now, keep following the money. One of the biggest reasons the federal debt has exploded is that tax cuts, starting with the Bush administration in 2001 and extending through Trump’s 2017 tax cut, have reduced government revenues by over $5 trillion.

The Trump-Republican tax cut will cause the debt to explode even further. Trump’s own Office of Management and Budget predicts an added $100 billion a year in deficits over the next decade, adding up to $1 trillion of additional debt.

Keep following the money: Most of the benefits from those tax cuts are going to the wealthy. 65 percent have gone to the richest fifth of Americans, 22 percent to the top 1 percent.

So you see the big switcheroo? The rich used to pay higher taxes to the government. Now, the government pays the rich interest on a swelling debt, caused largely by lower taxes on the rich.

Which means a growing portion of everyone else’s taxes are now paying the rich interest on those loans, instead of paying for government services everyone needs.

America’s wealthy should pay their fair share of taxes. The big switcheroo should be reversed.

About the Author

Robert ReichROBERT B. REICH, Chancellor’s Professor of Public Policy at the University of California at Berkeley, was Secretary of Labor in the Clinton administration. Time Magazine named him one of the ten most effective cabinet secretaries of the last century. He has written thirteen books, including the best sellers “Aftershock" and “The Work of Nations." His latest, "Beyond Outrage," is now out in paperback. He is also a founding editor of the American Prospect magazine and chairman of Common Cause.

Books by Robert Reich

Saving Capitalism: For the Many, Not the Few -- by Robert B. Reich

0345806220America was once celebrated for and defined by its large and prosperous middle class. Now, this middle class is shrinking, a new oligarchy is rising, and the country faces its greatest wealth disparity in eighty years. Why is the economic system that made America strong suddenly failing us, and how can it be fixed?

Click here for more info or to order this book on Amazon.

 

Beyond Outrage: What has gone wrong with our economy and our democracy, and how to fix it -- by Robert B. Reich

Beyond OutrageIn this timely book, Robert B. Reich argues that nothing good happens in Washington unless citizens are energized and organized to make sure Washington acts in the public good. The first step is to see the big picture. Beyond Outrage connects the dots, showing why the increasing share of income and wealth going to the top has hobbled jobs and growth for everyone else, undermining our democracy; caused Americans to become increasingly cynical about public life; and turned many Americans against one another. He also explains why the proposals of the “regressive right” are dead wrong and provides a clear roadmap of what must be done instead. Here’s a plan for action for everyone who cares about the future of America.

Click here for more info or to order this book on Amazon.

Related Books

Saving Capitalism: For the Many, Not the Few
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The Common Good
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Economics In Wonderland: Robert Reich's Cartoon Guide To A Political World
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