The Drumbeat of Lies About “Debt” Continues

Here are excerpts from an amazing article. It’s amazing, not just because it is completely wrong, but because the source — Eleanor Pringle and Fortune Magazine — are trusted to get economics right.

Tariffs are only generating 25% of the revenue needed to pay interest on national debt—despite pitch that it would be a silver bullet

Story by Eleanor Pringle, an award-winning senior reporter at Fortune covering news, the economy, and personal finance. Eleanor previously worked as a business correspondent and news editor in regional news in the U.K. She completed her journalism training with the Press Association after earning a degree from the University of East Anglia.

When President Trump announced his plans for a new tariff regime, he said the action was “primarily to pay down debt, which will happen in very large quantity.”

We have grown accustomed to this President spouting nonsense and the MAGA crew lapping it up, like flies on poop, but to have a magazine like Fortune not even question the premise –that tariffs pay down debt — is discouraging.

But fast forward a little under a year, and the revenues generated by customs duties aren’t enough to make a dent in interest payments on national debt—let alone the headline figure.

We could collect $100 trillion in tariffs, and they wouldn’t “make a dent” in interest payment on the national debt for two reasons:

It isn’t debt; It’s deposits into accounts that are similar to bank savings account. The deposits are paid back simply by returning the dollars to their owners, the depositors. It’s a process similar to you transferring dollars from your savings account to your checking account.
Our Monetarily Sovereign federal government does not use taxes to pay down anything. The purposes of federal taxes are:

A. To control the economy by taxing what the government wishes to discourage and by giving tax breaks to what the government wishes to reward (like the rich) and,

B. to assure demand for the U.S. dollar by requiring that taxes be paid in dollars.

Unlike state and local taxes which do fund state and local spending, federal taxes do not fund federal spending. The U.S. Treasury creates new dollars for that purpose. That is the difference between Monetary Sovereignty and monetary non-sovereignty.

As of June 2026, U.S. national debt stands at $39.2 trillion according to Treasury data. That figure is growing by eye-watering sums: For the first eight months of fiscal year 2026, the Congressional Budget Office (CBO) reports the federal budget deficit has totaled $1.2 trillion.

The implication as that a growing “debt” (i.e. deposits into T-accounts) is a danger or burden on the government or on taxpayers. It is not.

The implication also is that the federal deficit — the difference between taxes and spending, and therefore the number of growth dollars the government has added to the economy — somehow is a negative. It is not.

In fact, when we don’t run deficits, we have recessions and depressions. The reason is that by definition, a growing economy requires a growing supply of dollars, and federal deficits are an important source of those dollars.

In its monthly budget review published last week, the CBO also broke down the government’s incomings versus its outgoings. For the first eight months of the fiscal year (which ends in September), the government raked in $3.66 trillion but spent $4.9 trillion.

Translation: The federal government, which has unlimited dollars, added 1.34 trillion growth dollars (minus net imports) to the economy. And this is supposed to be bad news???

Income rose quicker than spending, the CBO reported, with revenues increasing by $174 billion while spending crept up $57 billion.

However, income would need to rise significantly to have any impact on the value of interest payments the Treasury is paying to maintain debt levels.

Again, the implication is that the $174 billion income for the government (that came out of the pockets of the American public) is a good thing because it helps pay for interest. (It doesn’t.)

Comparing these interest payments to income, the CBO reports that so far this fiscal year, tariffs have generated $189 billion, a little over a quarter of the payments required merely to service the debt.

Translation: Tariffs are taxes on buyers. So, the American public paid an extra $189 billion, which did nothing whatever to help the government pay interest. The government pays all its obligations by simply pressing computer keys and creating new dollars.

That said, the tariff regime suffered some setbacks, which means revenues may have come in under initial expectations: In February this year, the U.S. Supreme Court ruled against a tranche of tariffs the White House had rolled out in 2025 under the International Emergency Economic Powers Act (IEEPA). The government was ordered to pay them back some $129 billion, according to Congressional documents.

That $129 billion will be added to the economy’s growth.

The figures did demonstrate that, before the ruling, tariffs were having a meaningful impact on the bottom line.

Finally, an accurate statement in the article, though not what Ms. Pringle might think: “tariffs were having a meaningful impact on the bottom line.” The “meaningful impact,” of the tariffs was to deduct billions from America’s Gross Domestic Product, the formula for which is: GDP = Federal and non-federal spending + Net Exports.

A new take The president has also indicated a new perspective on national debt. Previously, the White House had talked about paying down the debt, and using tariffs or visa revenues to do so.

Just as a reminder, this is what happens every time we have “paid down” the federal debt:

1804-1812: U. S. Federal Debt reduced 48%. Depression began 1807.

1817-1821: U. S. Federal Debt reduced 29%. Depression began 1819.

1823-1836: U. S. Federal Debt reduced 99%. Depression began 1837.

1852-1857: U. S. Federal Debt reduced 59%. Depression began 1857.

1867-1873: U. S. Federal Debt reduced 27%. Depression began 1873.

1880-1893: U. S. Federal Debt reduced 57%. Depression began 1893.

1920-1930: U. S. Federal Debt reduced 36%. Depression began 1929.

1997-2001: U. S. Federal Debt reduced 15%. Recession began 2001.

The reason is easy to see, even for professional economists: Eliminating federal deficits mathematically reduces two of the three factors in the equation:

Gross Domestic Product (the measure of the economy)=Federal Spending + Non-federal Spending + Net Exports.

In a recent interview with Fortune’s Editor in Chief, Alyson Shontell, Trump also shared an alternate view: That the nation’s debt is really not so bad if you see it through the lens of a real estate mogul.

The debt versus the total value of America and its natural assets, such as the Grand Canyon or surrounding oceans. “If you put down the value of these things, it’s like hundreds of trillions of dollars,” Trump says, and by that measure, “if you kept [the national debt] at $40 trillion, you’re way under-levered.”

His math is ridiculous, but he’s almost right about one thing. The debt is “not so bad.” On the contrary, it’s only bad compared to what it should be, because increasing the federal debt grows GDP. That is called algebra, which sadly seems to be alien to many economic experts.

Debt hawks are continuing to push for fiscal responsibility. The Committee for a Responsible Federal Budget (CRFB) is urging lawmakers to keep deficit reduction in mind as discussions over advancing a third budget reconciliation bill in Congress progress.

The CRFB, along with other representatives of the ultra-wealthy, has been pushing the same narrative for years. If you’ve ever wondered why the rich always push for less federal spending, here’s why:

“Rich” is a relative term.

Someone with $100 in the bank would be considered rich if everyone else had only $1. But that same person would be poor if everyone else had $1,000.

What defines wealth is the financial gap between those at the top and those below. The bigger the gap, the richer they are. So, to increase their wealth, the rich have two options:

Grab more for themselves and/or
Make sure those below them get less.

Number 1 is accomplished partly by twisting the tax laws so that the very rich pay less than the average person, which is how billionaire Trump managed to pay only a few hundred dollars is taxes for years.

Number 2 is accomplished by pretending that Medicare, Medicaid, Social Security and other benefits to average people are called “unaffordable,” “unsustainable,” and “insolvent,” and need to be fixed.

This is where the Big Lie in Economics comes into play — the lie that the federal government will run out of money and that we’ll have inflation unless federal spending for Social Security and Medicare benefits is cut.

The CRFB is calling for savings of at least $600 billion, adding: “The last two reconciliation bills are projected to add nearly $5 trillion to the debt through 2035.

Translation: Cut social benefits by $600 billion (but don’t cut tax loopholes for the rich) because the current bills will pump $5 trillion growth dollars into the economy, and those dollars will help average people. We can’t have that.

The upcoming budget resolution should instead facilitate the passage of legislation to reduce deficits, as reconciliation is intended to do.”

Final translation: “The upcoming budget resolution should instead facilitate the passage of legislation to reduce benefits to those who are not already rich.”

That’s how the rich have twisted the words “debt” and “deficit” to make themselves wealthier leaving you poorer. Ignorance comes at a high price.

The facts: Medicare, Social Security and other social benefits could be doubled or tripled, while FICA is eliminated, and the federal government still would not run out of money.

But Eleanor Pringle, Alyson Shontell, and Fortune Magazine do not tell you that.

Rodger Malcolm Mitchell

Monetary Sovereignty

Twitter: @rodgermitchell

Search #monetarysovereignty

Facebook: Rodger Malcolm Mitchell;

MUCK RACK: https://muckrack.com/rodger-malcolm-mitchell;

https://www.academia.edu/

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A Government’s Sole Purpose is to Improve and Protect The People’s Lives.

MONETARY SOVEREIGNTY

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What is the purpose of the often-referenced Debt/GDP ratio?

In a previous paper we discussed the fact that the debt/GDP ratio does not measure our government’s ability to pay. So, what is its purpose?”

Some economists still believe that a nation with a high ratio is somehow approaching insolvency in the same way a household or corporation might. But this analogy collapses when applied to a Monetarily Sovereign government such as the United States.

You can see the absurdity of the ratio here, where various nations are compared. As you will see, the ratio has absolutely nothing to do with paying debts or any other conceivable measure of financial strength.

The federal “debt” is the total of Treasury securities, which are dollar obligations payable in dollars the government itself creates. Operationally, the United States never can involuntarily run short of dollars.

T-bills, T-notes, and T-bonds are financial obligations identical to that of dollar bills, which are Federal Reserve Notes (look at the dollars in your wallet.)

Thus, the “debt”/GDP ratio is neither more nor less meaningful that a dollars/GDP ratio, i.e. not at all.

Japan, with one of the highest debt/GDP ratios in the world, continues operating with extremely low interest rates and persistent low inflation.

Thus, the debt/GDP ratio does not measure federal solvency or the likelihood of inflation. Nations with high debt/GDP ratios have experienced inflation and deflation, prosperity and stagnation, high interest rates and low interest rates — the full spectrum.

So we searched for the possibility, faint as it may be, that this much quoted might contain some useful information.

The ratio may partly represent accumulated government-created financial wealth relative to annual spending and production. But you rightly may ask, “Who cares?“

Well, a high debt/GDP ratio may indicate a strong private-sector desire to save, perhaps by an aging demographics, weak private demand, or increasing financialization relative to productive growth.

In that sense, Japan becomes especially interesting. Japan may represent that kind of society, with high savings, low consumption growth, stable institutions, and/or a persistent need for government deficits to support overall demand.

This leads to a striking realization: A high debt/GDP ratio today may beget an even higher ratio tomorrow.

Why? Because if the private sector desires to save more than it spends, the economy may require continuing government deficits simply to maintain income flow and economic stability.

Historically, economics has been built around the assumption of scarcity: scarce food, labor, energy, and production.

But automation and artificial intelligence increasingly challenge those assumptions. AI potentially weakens the ancient connection between human labor and economic production.

For most of human history survival required labor. But what happens when machines increasingly perform the work, physical, analytical, creative, logistical, and informational work? The problem shifts from production to distribution –less on “who does” and more on “who receives?”

Some claim that if the government gives people money they won’t work. This mostly comes from the people who have a great deal of money but apparently still work. The richest man in history reportedly still works long hours. Why, do you suppose?

Modern civilization still largely assumes that the purpose of economies is to maximize production. But that assumption belongs to an earlier stage of development when survival itself was precarious. Once basic needs are satisfied, human striving does not disappear. It changes form.

People seek meaning, admiration, creativity, exploration, mastery, contribution, beauty, discovery, and challenge. The enemy is not the survival struggle. The enemy is boredom. The human species has advanced and our brain has grown, because we are endlessly curious and working. So in the future, jobs still will exist, but they will be more interesting and less physically unpleasant.

A Rolls Royce does not transport a person more meaningfully than a Volkswagen. Beyond a certain threshold, wealth becomes symbolic rather than functional. And admiration itself is rarely granted solely for wealth. Mother Teresa possessed little material wealth, yet became one of the most admired humans in history.

People admire such attributes as courage, creativity, wisdom, perseverance, achievement. Human beings climb mountains, explore caves, write poetry, paint pictures, walk on the moon, and swim with sharks not for survival or money. They do these things because curiosity and accomplishment appear deeply embedded within human nature itself.

Perhaps the fear that people would become lazy in a post-scarcity civilization misunderstands humanity. Children naturally explore, ask questions, build, dismantle, imagine, climb, and discover. Even now, many people’s most meaningful activities occur outside economic necessity.

Consider how many people engage in unpaid or low-paid activities, just for the enjoyment: art, music, science, friendship, sports, philosophy, exploration. Think of all the classes people take, not to make money but for pleasure and enlightenment.

I am ninety-one years old, I still write and paint—not to survive economically, but because the act of creation itself interests me.

The ultimate goal of productivity is not endless production. Perhaps it is freedom.

In that scenario, the true measure of economic success would not be total financial value of output, but the extent to which human beings are liberated from unnecessary survival labor and enabled to pursue meaningful existence.

Artificial intelligence intensifies this question dramatically. AI may become the technological mechanism through which mere survival labor steadily declines in importance. If so, humanity faces a civilizational choice:

We can use automation to concentrate wealth and control while preserving systems built around coercive labor and scarcity. Or we can use automation to increase human freedom.

This may represent the next great evolutionary threshold. Humanity itself may be only an intermediate stage in the universe’s development. Are we just a link in the chain beginning with inanimate atoms and ending far beyond DNA life?

Well, that was quite a trip from the totally useless, but widely quoted, Debt/GDP ratio, to the future of economics and even of existence. I hope you enjoyed it.