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508 THE CREATURE FROM JEKYLL ISLAND
By 1993, net interest payments on that debt were running $214
billion per year- That consumed about 14% of all federal revenue.
It now represents the government's largest single expense; greater
than defense; larger than the combined cost of the departments of
Agriculture, Education, Energy, Housing and Urban Development,
Interior, Justice, Labor, State, Transportation, and Veterans' Affairs.
These charges are not paid by the government; they are paid by
you. You provide the money through taxes and inflation. The cost
currently is
about $4,500 for each family of four. All families pay
through inflation but not all pay taxes. The cost to each taxpaying
family, therefore, is higher. On average, over $5,000 is extracted
from your family each year, not to provide government services or
even to pay off previous debt. Nothing is produced by it, not even
roads or government buildings. No welfare or medical benefits
come out of it. No salaries are paid by it. The nation's standard of
living is not raised by it. It does nothing except pay interest.
Furthermore, the interest is compounded, which means, even if
the government were to completely stop its
deficit spending, the
total debt would continue to grow as a result of interest on that
portion which already exists. In 1995, interest on the national debt
was already consuming 57% of all the revenue collected by income
taxes. At the present rate of expansion, it will consume 100% by the
year 2010. That includes corporate taxes. Interest will consume
100% of our personal income taxes much sooner.
Amazing isn't it? Without interest on the national debt, we
would save enough to reduce corporate taxes and eliminate
personal income taxes altogether. Unfortunately, under present
policies and programs, that is not going to happen, because
Congress does not live within its income. Many expenses are paid,
not from taxes, but from selling government bonds and going
deeper into debt each year. So, even though we could save enough
to eliminate personal income taxes, it would not be enough. The
1. The gross interest was running $300 billion. Some of that money, however, is
paid to federal agencies which hold some of the debt, so it is a case of the government
paying itself. Furthermore, the Federal Reserve returns to the Treasury some
of the interest it receives—the amount left over after the cost of operating the
system.
2, See Harry Figgie, Jr., Bankruptcy 1995: The Coming Collapse ofAmerica and How to
Stop It (Boston: Little, Brown and Company, 1992), pp. 24, 68. Also "Historical
Tables," Budget oftte United States; Fiscal Year 1996, pp. 22, 103.
DOOMSDAY MECHANISMS 509
government would still go into the red to keep up its present life
style. However, if a reduction in the size and scope of the
bureaucracy were accomplished at the same time, then personal
and corporate income taxes could be entirely eliminated, and the
government would have an annual surplus.
THE DOOMSDAY MECHANISM
Unfortunately, the locomotive is running in the opposite direction.
The size of government is growing larger, not smaller. There
are more people working for government than for all manufacturing
companies in the private sector. There are more bank regulators
than bankers, more farm-bureau workers than farmers, more
welfare administrators than recipients. There are more citizens
receiving government checks than there are paying income taxes.
By 1996, welfare benefits in 29 states were higher than the
average secretary's wage; and in 6 states, they were more than the
entry-level wage for computer programmers. When it is possible
for people to vote on issues involving the transfer of wealth to
themselves from others, the ballot box becomes a weapon with
which the majority plunders the minority. That is the point of no
return, the point where the doomsday mechanism begins to
accelerates until the system self-destructs. The plundered grow
weary of carrying the load and eventually join the plunderers. The
productive base of the economy diminishes further and further
until only the state remains.
The doomsday mechanism is also operating within government
itself. By 1992, more than half of all federal outlays went for what
are called entitlements. Those are expenses—such as Medicare,
Social Security, and government retirement programs—which are
based on promises of future payments. Many of them are contractual
obligations, and millions of people depend on them.
That does not mean they cannot be eliminated. For example,
entitlements include $24 billion per year for food stamps. There is
no contractual obligation to continue those, only political expediency.
By now, most Americans have stood in grocery lines and
J- The federal government derives substantial revenue from sources other than
income taxes, such as excise taxes and import taxes. These, plus occasional assessments
to the states, were the only taxes which the founding fathers intended for the
federal government. The arrangement worked well for 135 years until the incometax
was adopted in 1913.