When I was a kid, a trillion dollars was an abstract number. It was a figure with more zeroes than I could comprehend, and I’d use the number to underscore a personal item’s priceless value, as in “I wouldn’t sell my Dave Keon trading card even for a trillion dollars.” As you can imagine, Toronto Maple Leafs center Dave Keon was my hero.
More than a half century later, a trillion dollars is still incomprehensible to me. Forty trillion dollars is akin to infinity, and I suspect most Americans can’t fathom the scope of that number. But they should. America’s “total public debt outstanding” officially hit $40.047 trillion this week, ticking up from $39.987 trillion a day earlier. As someone who has always eschewed debt except for home and auto purchases, I find that astronomical level of indebtedness obscenely reckless.
America has developed a political culture in which almost nobody wants to tell voters hard fiscal truths. Republicans promise lower taxes. Democrats promise more benefits. Corporate America lobbies for policies that enrich shareholders. Everyone benefits politically or financially in the short run while the national debt compounds. Arithmetic doesn’t care about politics.
The Wall Street Journal covered the milestone under the headline, “U.S. Debt Just Topped $40 Trillion: How We Got Here.”
Years ago, I’d turn to the Journal to make sense of complicated economic stories. Its debt milestone coverage explained how America reached this dubious milestone but devoted surprisingly little attention to who benefits from all that borrowing. The article’s lone attempt at perspective was to note that if Elon Musk surrendered the entirety of his nearly $1 trillion fortune, “it would barely make a dent.” Uncle Sam’s federal debt is nearly equal to what is owed by all U.S. households and businesses combined.
The Journal also neglected one of the most staggering numbers. The federal government now spends more than $1 trillion annually just servicing the interest on its national debt. According to the U.S. Department of the Treasury and the Congressional Budget Office, gross interest expense has reached roughly $1.17 trillion, accounting for approximately 15% to 19% of all federal spending.
That is why the Democratic Socialists’ “tax the rich” rallying cry is such a sophomoric answer to wealth inequality. The combined net worth of the Forbes 400 richest Americans stands at a record $6.6 trillion after increasing $1.2 trillion over the preceding year. Even if Washington confiscated every penny of that wealth, it still wouldn’t finance one year of federal spending, which now totals roughly $7 trillion annually.
Reckless borrowing is a bipartisan sport. Following passage of the 2017 Tax Cuts and Jobs Act, which slashed the corporate tax rate from 35% to 21%, gross federal debt increased by roughly $2.7 trillion in just two years—well before pandemic emergency spending began. Democrats can correctly note that they unanimously opposed those tax cuts. That doesn’t absolve them. One party consistently cuts the government’s revenue stream. The other consistently expands its spending obligations. Both routinely vote to raise the debt ceiling and finance the difference.
President Trump sold his tax cuts by arguing that CEOs would invest their windfalls in their businesses, creating a “trickle-down” benefit for all Americans. PR-savvy executives eagerly promoted that narrative.
Speaking at a Business Roundtable panel chaired by JPMorgan Chase CEO Jamie Dimon, AT&T chief executive Randall Stephenson promised that lower corporate tax rates would create 7,000 hard-hat jobs. The moment Congress passed the legislation in December 2017, AT&T announced a one-time $1,000 bonus for more than 200,000 employees—roughly a $200 million cost—and pledged an additional $1 billion in capital investment.
Television anchors earning millions naively applauded AT&T’s seeming generosity. The actual numbers told a different story. The legislation handed AT&T an immediate accounting windfall exceeding $20 billion from deferred tax liabilities, along with billions more in future cash tax savings. As for Stephenson’s promised hard-hat jobs, AT&T eliminated more than half of its 280,000-employee workforce over the next eight years.
So what did corporate America actually do with its tax-cut windfalls?
As regular readers know, much of it went into stock buybacks—a form of financial engineering designed to reduce share counts and inflate stock prices. According to Americans for Tax Fairness, the 100 largest U.S. corporations have repurchased $4.8 trillion of their own stock during the eight years since enactment of the 2017 tax law.
The corporate preference for buybacks over dividends is straightforward. Dividends trigger an immediate tax bill for shareholders. Buybacks increase the value of the remaining shares while allowing wealthy investors and executives to defer capital gains taxes until they choose to sell.
The buyback machine is accelerating. During the first six months of this year alone, American corporations spent nearly $1 trillion repurchasing their own shares. Based on Bureau of Economic Analysis data and S&P 500 regulatory filings, buyback spending exceeded 100% of six months’ worth of net profits among S&P 500 companies. Corporations dipped into cash reserves and issued fresh debt simply to keep buying back their own stock.
Salesforce earlier this year launched a $25 billion accelerated share repurchase financed by issuing $25 billion of new debt. In late May, Salesforce told investors that projected fiscal 2027 operating and free-cash-flow growth would be cut roughly in half because of the cost of carrying that debt.
Salesforce CEO Marc Benioff once positioned himself as America’s leading evangelist of stakeholder capitalism. In Benioff’s telling, corporations had moved beyond Milton Friedman’s doctrine of maximizing shareholder value and instead had a moral obligation to serve employees, customers, communities, and the environment. He wrapped that philosophy in Salesforce’s Hawaiian-inspired “Ohana” culture, portraying the company as one big family.
Put that into perspective. Corporate America spent nearly $1 trillion buying back its own stock in just six months—roughly equivalent to what the federal government now spends in an entire year servicing the national debt.
The U.S. Debt Clock estimates that every American’s share of the national debt is $119,337 and that each taxpayer’s share is $285,557. That framing misses the more important point. America’s wealthiest citizens are disproportionately the people to whom the federal government owes that money—and the ones collecting the interest.
The popular narrative suggests foreign adversaries hold America hostage. In fact, roughly 75% to 80% of U.S. Treasury securities are owned domestically. Because the wealthiest 10% of Americans control the overwhelming majority of the nation’s financial assets, ordinary workers help finance the interest through their taxes while affluent households, family offices, pension funds, and financial institutions disproportionately collect the payments through their ownership of Treasury securities.
One rarely hears self-described progressives such as Bernie Sanders or Alexandria Ocasio-Cortez sounding the alarm about the national debt. Their preferred solution is to tax the rich while adding trillions in new federal commitments to the government’s balance sheet.
Michigan’s Democratic Senate candidate Abdul El-Sayed champions Medicare for All despite having little private-sector business or fiscal experience balancing a ledger. Independent estimates compiled by the Committee for a Responsible Federal Budget project that the proposal would add between $25 trillion and $36 trillion in federal spending over a decade. Presumably, El-Sayed’s spouse—a practicing psychiatrist who reportedly does not accept government or commercial insurance—would be exempt from the system her husband wants to impose on everyone else.
Historian Niall Ferguson formulated what has become known as Ferguson’s Law: no great power that spends more servicing its debt than defending itself remains a great power for long. Whether Habsburg Spain, Ancien Régime France, or the twilight of the British Empire, history offers the same lesson.
That lesson is no longer theoretical. The United States now spends roughly $890 billion maintaining the world’s most formidable military but more than $1 trillion every year simply paying interest on yesterday’s borrowing.