Everyday Economics


You–personally–can eliminate the national debt.

Do you worry that the national debt will impoverish your children? Are you incensed about paying thousands in taxes just to cover the government’s interest costs? And do you long for a political hero who will dare to close the budget gap, even if it means raising taxes? If so, I have one word for you. I learned it from Ann Landers. The word is: kwitcherbellyachin’. Your share of the debt is an entirely voluntary burden. If you don’t want it, you can dispose of it this afternoon. You can do the same with your children’s share. All you have to do is pay off what you (or your children) owe.

Be careful, though: There’s a wrong way and a right way to handle this. The wrong way is to send the U.S. Treasury a contribution earmarked for debt reduction. They’ll accept your gift all right, but they won’t credit your personal account. Instead, your share of the burden–like everyone else’s–will fall by a tiny fraction of a cent.

Here’s the right way to retire your share of the debt. First, calculate how much you owe. Suppose, for example, that you’re the average American. Your share would be about $15,000. All you have to do is lend $15,000 to the government. The easiest way to do this is to buy a $15,000 Treasury bond. From that moment on, you will owe $15,000 to yourself, which is as good as owing it to nobody at all. Each year, you’ll pay taxes to cover your share of the interest on the debt, and each year, that money will come right back to you as interest on your bond. For all practical purposes, you’ll have opted out of the debt burden entirely.

If it’s your children you’re worried about, give them the bond. Let them collect interest until the day of reckoning when that political hero finally arrives to raise taxes and retire the debt. Then they can sell the bond and use the proceeds to pay their taxes.

The only possible objection to this scheme is that you have to come up with $15,000 to buy a bond. But on the other hand, if the politicians take your advice and raise taxes in order to pay off the national debt, you’ll have to come up with that same $15,000 to pay your share of those taxes. So buying bonds is no more attractive than being taxed for debt reduction, but it’s no less attractive either. If your mantra is, “Go ahead and tax me but spare me this debt burden,” it’s time to stop chanting and essentially, tax yourself.

Ageneration ago, economics textbooks used to dismiss the debt burden by asserting that we “owe it to ourselves,” meaning that some of us (the taxpayers) owe it to others of us (the bondholders). That was scant comfort to those who paid taxes but didn’t hold bonds. But the old semi-wisdom becomes genuine wisdom when embellished with the observation that anybody who wants to can become a bondholder–and that buying bonds is no more painful than paying taxes to alleviate the debt.

Whenever I hear somebody griping that the national debt is too high, I nod in apparent agreement and point out that the problem is more general than that. “Not only is the debt out of control,” I say, “but so is my front lawn. The grass is ridiculously high. When will the politicians finally face reality and force me to mow it?”

This usually has one of two desirable effects. Either the griper moves to the far end of the room, or he asks, “Why not just mow the lawn? Why would you need the government to force you?” In that case, I reply: “Well, why not just buy a bond and eliminate your share of the national debt? Why would you need the government to raise your taxes?” I don’t mean to say that everyone should buy Treasury bonds. I’m saying only that everyone who complains about the debt should buy Treasury bonds–and then stop complaining.

In dismissing bogus concerns about the national debt, I do not mean to dismiss legitimate concerns about government spending. Your share of government spending is something you can’t opt out of, short of emigrating or resorting to felonious tax evasion. That makes government spending a fair target for your indignation.

Suppose a reckless Congress decides to appropriate $10,000 of your money to finance a worthless aircraft carrier or a worthless social program. Then one of two things must happen: Your taxes will rise by $10,000, or else, your share of the debt will rise by $10,000. Either way, you’ve got a legitimate gripe.

But if Congress opts for debt over taxation, you can count on thoughtless commentators to denounce the interest payments on that debt as a second, and separate, outrage. That’s wrong, because you can (if you wish) buy a $10,000 Treasury bill that will bring all your interest payments right back to you–thereby, in effect, taxing yourself to pay off the debt right away, and limiting your damage to the initial $10,000.

The great burden of government is that it spends your money. Those politicians who have devoted their lives to exacerbating that burden–like Bob Dole and Bill Clinton–would prefer to divert your attention to relative nonissues like the deficit. Don’t fall for it.