Public Debt, Private Gain: How National Choices Starve Local Needs.
Public Debt, Private Gain: How National Choices Starve Local Needs.
“We rarely hear, it has been said, of the combinations of masters, though frequently of those of workmen.… Whoever imagines, upon this account, that masters rarely combine, is as ignorant of the world as of the subject.” — Adam Smith, The Wealth of Nations
Like the quiet alliances Adam Smith observed among the powerful, the myths we tell about the national debt shield its beneficiaries and shift blame onto its victims. Economic power seldom needs smoke‑filled rooms or grand conspiracies; when incentives, lobbying muscle[1], and social networks all point the same way, coordination happens in plain sight. That perspective anchors the sections that follow.
From Numbers to People: The Human Face of Federal Debt
Federal debt is often discussed in abstract terms, but its consequences are lived locally—on transit routes, clinic floors, and city streets. Washington’s red ink is typically framed as a macroeconomic abstraction, expressed in trillions, ratios, and forecasts. On a balance sheet that may suffice; on the ground it is inadequate. In Detroit the abstraction is a shuttered mental‑health clinic; in New Orleans, an unrepaired floodwall; in New York, a mother weighing insulin against rent; in Miami, slower hurricane warnings, less accurate storm tracks, and billions in flooded apartments, lost wages, and avoidable damage.
Those trade‑offs do not spring mechanically from “big government.” They arise because interest payments, tax cuts, and procurement contracts consume dollars that might otherwise reach neighborhoods.
With debt already near the size of the entire economy (~100 percent of GDP in 2025) and on track to exceed 150 percent by mid‑century, scale matters. Yet the more urgent question is distributive: who is paid first, who waits, and who is never paid at all?
Three Policy Streams That Filled the Red Ink
Three major policy choices—tax cuts tilted to the top, rising military spending, and crisis responses that protected capital—have driven much of the debt’s growth while concentrating its rewards.
Tax cuts tilted to the top. Corporate receipts, once 2 percent of GDP in the early 2000s, now struggle to reach 1 percent—a structural, not cyclical, shortfall. The 2001–03 Bush cuts and the 2017 Tax Cuts and Jobs Act (TCJA) together removed well over five trillion dollars from the revenue base. Under most independent estimates, the One Big Beautiful Bill Act (OBBBA) will add somewhere in the neighborhood of $4 trillion over the next decade, pushing debt to 124% to 133% of GDP by 2034.
Rising military spending. Since 2001, U.S. military spending has grown sharply, with Pentagon outlays nearly doubling in inflation-adjusted (2023) dollars. While military spending as a share of GDP has declined from its post-9/11 peak, annual defense budgets remain far above pre-2001 levels, and much of the increase has been financed through borrowing.
According to Brown University's Costs of War project, total post-9/11 war-related military spending—including interest on borrowing—exceeds $8 trillion. A handful of major contractors—Lockheed Martin, RTX, General Dynamics, Boeing, and Northrop Grumman—consistently secure the largest shares of these funds, posting profit margins well above most non-defense firms.
Congress routinely funds weapons systems such as M1 Abrams Tank upgrades or Littoral Combat Ships that the Pentagon considers low priority—often to protect defense industry jobs or shore up political support in key districts. Meanwhile, the Department of Defense fails to account for tens of billions in annual spending, as its own audits repeatedly show. This misallocation burdens the national debt without delivering meaningful gains in military effectiveness or long-term security.
Crisis responses that protected private capital. Pandemic relief was indispensable but steered enormous sums toward asset holders. Roughly 70 percent of PPP dollars went to firms that would have maintained payrolls anyway, while the Fed’s emergency facilities boosted bond prices and executive share awards.
None of these streams flooded the federal ledger by accident. Each had well‑financed champions, clear talking points, and bipartisan votes. Smith would have recognized the silent coordination.
A Matter of Interest
The debt isn’t just a fiscal burden—it’s an income stream, providing steady, low‑risk returns to those who need them least, while draining resources from communities that need them most.
A growing share of the federal budget now goes to servicing the debt—nearly $900 billion annually—redirecting public funds away from direct investment in people and places. That money flows to holders of Treasury securities: pension funds and foreign governments, yes, but also some of the wealthiest households, who often pay lower tax rates on interest income than many workers pay on wages.
Defense contractors draw another $400 billion-plus each year in federal payments, much of it through cost-plus contracts that reward spending over savings. Meanwhile, large banks treat Treasuries as pristine collateral, using them to backstop fee-generating trades in the financial system. The result is a fiscal structure that steadily channels public money into private hands, reinforcing existing inequalities with each passing budget cycle.
Meanwhile, cities and states—legally bound to balance their books—cut bus routes, shudder community health centers, delay school repairs, and raise regressive fees. Because these decisions happen piecemeal and locally, they are framed as management failures rather than predictable fallout from federal priorities: austerity without an explicit austerity vote.
Myths That Shield the Status Quo
Powerful interests don’t need secrecy and conspiracy to preserve advantage—they just need stories that make inequality seem inevitable, and responsibility seem misplaced.
One prominent such story says, “social programs caused the debt.” Data show otherwise: tax cuts, wars, and interest dominate post‑2000 debt growth.
One says, “paying the debt punishes workers.” Only if policymakers ignore those who gained most from the current structure.
Another says, “growth will wash the problem away.” Baseline projections already assume growth, yet debt still outpaces GDP; without redistribution, growth merely channels more money upward.
And another, “cities mismanage resources.” Urban budgets collapse when federal aid shrinks and state mandates rise; an unfixed levee is federal cost‑shifting, not mayoral neglect.
Yet another, “the burden lies in the distant future.” The burden is present whenever a transit agency suspends weekend service so bondholders can be paid on time.
Principles for a Just Fiscal Program and Their Opponents
Turning the tide requires clear principles, practical tools, and the political will to challenge those who benefit from the current arrangement:
Tax wealth like work. Equalize capital‑gains and ordinary‑income rates, close offshore loopholes, and levy a modest tax on unrealized gains at the very top—enough to fund universal pre‑K, replace every lead pipe, and still reduce debt.
End selective corporate subsidies. Restore a 28 percent corporate rate, enforce a global minimum, tighten rules on stock buybacks—reclaiming roughly $2 trillion in a decade.
Target defense expenditures toward real security, not contractor margins. Trim procurement overruns, cancel redundant systems, and right‑size overseas footprints—saving billions annually without touching pay or benefits.
Strengthen social insurance. Empower Medicare to negotiate drug prices, lift the payroll‑tax cap, add dental and vision coverage—securing the program for decades and easing household budgets.
Equip cities with low‑cost tools. Zero‑interest federal infrastructure bonds and streamlined municipal debt restructuring would let local governments rebuild without mortgaging future revenues to Wall Street.
None of these steps asks working families to sacrifice basic services; each ensures that sectors enriched by past policy now contribute proportionately.
Resistance will be fierce: the wealthiest one percent, five defense giants, and a finance industry living off federal IOUs finance campaigns and hold advisory posts. Mechanisms that diffuse influence—automatic sunsets on tax breaks, public audits of defense contracts, progressive state ballot initiatives—are essential. Transparency alone won’t solve everything, but it makes tacit combinations harder to hide.
Conclusion: Choice, Not Fate
The national debt is a ledger of political choice. When those choices siphon resources upward, as so many of those in the United States currently do, the ledger becomes an instrument of dispossession, felt most acutely in neighborhoods far from Capitol Hill and Wall Street.
Today’s budget says a coupon payment outranks a safe bus stop in Baltimore, a missile of dubious utility outranks a dialysis clinic in Tucson. Reversing those priorities does not punish success; it recognizes that prosperity built with public commitment carries an obligation to the entire public.
Adam Smith warned against mistaking coordinated advantage for coincidence. Acknowledging coordination is not conspiracy—the evidence is in tax statutes, appropriations bills, and CBO tables. If those documents created the problem, new documents—written with equity in mind—can solve it. The path forward starts by discarding myths, tracing dollars, and insisting that the masters of twenty‑first‑century finance shoulder the civic load once expected of twentieth‑century workers.
At stake is more than a balance sheet; it is the possibility that a nation with unmatched resources can again make good on its simplest democratic promise: government as a common project, not a private ATM.
Bill Bowen
[1] Lobbying by Defense Industries alone in 2024 was $149,370,898