How to Pay Off the US National Debt

Allen Faulton
17 min readOct 8, 2021

An Article of the Modern Survival Guide, Vol. II

Photo by Matthias Groeneveld from Pexels

This series is called “The Modern Survival Guide” for a reason: it’s a list of things that will help or hurt your odds of survival in the modern world. There are few things out there that will affect your odds of survival more than politics, and especially politics that harm the stability of our nation. And within the political arena, there are very few things that affect the nation more than the US federal budget.

So, you know, it’s kind of a problem that the budget is going to implode in a few years.

Right now, the government is and has been operating on truly historic budget deficits (to the tune of about $3 trillion annually), and that’s a serious issue. I don’t care what the economists at Forbes say, this deficit spending can and will screw over you, me, and everyone else who lives in the good ‘ole USA. We need to address it, and in order to do that we need to get over the kind of moral and personal cowardice that has heretofore allowed us to ignore it. And we need to do that right the fuck now

“Ok, so what’s the problem?” I hear you ask. “We’ve been in debt my entire life, why is this a big deal? We can service the debt. We mostly owe money to ourselves. What’s the big deal, Allen? Why are you freaking out?”

Well, I’ll tell you why I’m freaking out, and I’ll do it in two words: opportunity cost. We’re currently spending about 10% of the federal budget on interest payments on the national debt — this is called “servicing the debt,” and you should note that I said interest payment, NOT payments to principal. As we continue to not pay the debt, that interest payment will get bigger. And bigger. And bigger. Until it consumes a quarter, a third, however much of the federal budget it needs to in order to service the debt. Depending on how much we spend over the next few years, that number could get to be a significant (10–20%) piece of the budget by the 2030s, and then it just keeps spiraling up.²

So why am I freaking out? It’s only 20% of the budget, right? And it’s a fair ways off, right?

Ok, let me ask you, have you ever seen the federal government do anything fast? Me neither. We’re not taking a corner with a jet ski, we’re trying to turn a container ship here. It takes a lot of work to overcome inertia. We need to start now if we want to cut the debt.

Remember, that 20% number would be literally a trillion dollars every year. Do you know what we could be doing with a trillion dollars? We could feed all the poor children. Literally all of them. We could provide affordable housing for everyone, and send everyone to college. Reform the adoption system. Cure cancer. Go to the moon again. Rebuild the nation’s infrastructure (it’ll need that kind of attention again by 2030, no doubt). We could make America better, not to mention stuff we could do in the world. Hell, we could even buy another fighter program like the F-35 for that kind of money.

But if we don’t fix the debt, all we’ll be doing is paying interest and making a very small number of people very, very wealthy while every other citizen’s share of the debt goes up, and up, and up. And eventually, there won’t be enough left in the budget to pay for the things that keep America functioning. Things like healthcare, social security, defense spending, infrastructure spending, research, regulation — all the things that make our nice, safe lives possible.

I hope I have your attention, because now we start the meat of the article.

How Do We Fix this Freaking Problem??!

I hear you asking. And you would be wise to include both question marks and the exclamation point when you do so, because it’s a very, very, very thorny issue. The core problem, when you get right down to it, is that there are three (3) things that drive the US federal budget.³ And they are:

  • Health and Human Services (read: Medicaid, Medicare, and research which keeps most of the nation alive)
  • Social Security (read: money that keeps grandma from starving)
  • The Department of Defense (read: the Holy Grail, the Sacred Cow, the Cornerstone of American Foreign Policy, the Heartbeat of Congressional Politicking, That Which is Never Reduced, the Patriot’s Burden, Scourge of the World, all hail the American military industrial complex, Ia Ia Cthulu fthagn⁴)

That’s 3/4 of the budget in three bullets. You could cut the rest of the budget tomorrow, we’d still be in debt from those three things. So what do we do? Let’s start with the problem statements for each, and then work to a solution.

The Problem with Cutting Healthcare

I mean, it’s pretty straightforward: if you make cuts to healthcare funding, you kill people. Period, full stop. Politicians do not like to have their names associated with killing voters. It’s a bad look. No one is ever going to win any elections by proposing cuts to Medicaid or Medicare, and the government has already cut its research arm to the bone.

The Problem with Cutting Social Security

There is a type of problem that is referred to as “path dependency,” which is to say, a problem that exists because people acted a certain way and now the world is locked into a particular pattern. Social Security is an example. People plan to include their Social Security check as part of their retirement funding. And people who didn’t or couldn’t plan for retirement are living off of their social security check in a lot of cases. For all of these people, they are stuck on that path. If you try to cut Social Security, that means a lot of people starve in the future, and a lot more people are thrown back onto the resources of their children. Nobody is going to vote for that.

The Problem with Cutting Defense Spending

Perfectly valid conspiracy theories about the military-industrial complex to one side, there is a BIG problem with cutting the defense budget, and it is this: most of the world operates on the principle that the United States military is scary, and we don’t know what the world would look like if this were not the case. Maybe Russia would take over Eastern Europe, maybe China would invade Taiwan, maybe terrorist groups would proliferate out of control, maybe Iran and Iraq would have another war and disrupt the global oil supply. Maybe our alliances would break down and our allies would start fighting each other again. We don’t know what might happen if the Pax Americana stopped working. It’s a scary idea to anyone who likes to wake up and know that nukes won’t fall out of the sky in the morning.

Also, you know, there’s the whole military-industrial complex where a truly huge number of Americans are employed by defense contractors who make their money off of never-ending war and bottomless defense spending, all of whom hire lobbyists, but yeah. The stability argument is important too.

Cutting Gordian Knots

Alexander the Great famously solved a riddle known as the Gordian Knot: a knot that was tied with such complexity that it could never be undone. Alexander supposedly undid it by cutting it in half, thereby creating a legendary precedent for decisive action. Unfortunately our problem isn’t that simple, but it does call for some seriously decisive action, and here are my personal ideas on how that should work:

  • Reform Medicaid and Medicare
  • Cut the Defense Budget
  • Increase Taxes
  • Keep the Interest Rate Low
  • Vote for Serious, Peaceful Politicians

Let’s get into it.

Reform Medicaid and Medicare

This is a landmine waiting to happen, I know, but so are all the other items on the list. We’re cutting knots, not tap dancing through the lilies. Healthcare costs too damn much in the US, we all know this (or at least any of us who have been outside of the US know this), and there are four key drivers to this problem.

One is the cost of prescription drugs, which is ludicrously high in this country. Another is the cost of a visit to the hospital which is, again, ludicrously high. The third is that no one ever tells you what anything is going to cost. This is the secret to profitability for many healthcare providers; it’s not even a bait-and-switch model, it’s a “come in here and pay us whatever we want or you die” business model, which increases risk premiums across the board. And finally, we have the insurance industry, which is currently a necessity to allow the average Joe to pay a medical bill, but adds trillions to the opportunity cost of healthcare in general.

Ladies and gentlemen, it’s far past time for universal healthcare. The key point here is that universal healthcare can be vertically and horizontally integrated. It’s perfectly within bounds for the government to set up generic drug manufacturing facilities and distribute pills for the cost of production. It’s perfectly possible to arrange a network of not-for-profit hospitals which are publicly audited. It’s perfectly possible for such a network to have a standardized pricing list which is also publicly audited. And it’s perfectly possible for us to shift the piece of our paycheck that by law goes to insurance to go to a Medicare-for-all type system instead.

Universal healthcare is so complicated that every industrialized nation except us has figured out how to do it. We could implement a phased-in universal healthcare system over a single presidential term if we wanted to, and while it would certainly raise the percentage of federal spending allocated to healthcare, it would also significantly raise the amount of money flowing into the federal budget. Americans spent about $3.8 trillion dollars on medical care in 2019, after all, and the federal budget for healthcare was only about a quarter of that.⁵

If we shifted that flow of money into the federal budget, two things would happen: One, we would get more for our money, because government services in this area are historically cheaper than for-profit services.⁶ And two, the federal debt would go down, because we would actually be paying for the medical portion of the federal budget. All that, at no additional cost to you; you would likely even see a reduction in the hit to your paycheck, because again, government healthcare services are cheaper, especially when you cut out the insurance middleman.

Cut the Defense Budget

There are three problems we already identified with cutting the defense budget: it increases uncertainty, the war industry employs a LOT of people, and war spending makes some very influential people very wealthy. Each of these is a problem, but each rests on a logical premise which is, at best, a house of cards.

First, the uncertainty angle. There’s a lot of hand-wringing amongst people in the defense arena about what would happen if we cut the defense budget, because they simply don’t know what would happen if America’s military might were ever blunted.

Except, they do. We know exactly what the world would look like if America were unable to respond to an international provocation, it would look like the world from about 2005 through about 2015. You know, the period of time in which America’s armed forces were almost completely tied up in the War on Terror. Whatever was going on in that period of time, that’s what the world would look like if America took a step back.

It was mostly fine. We didn’t see WWIII kick off. China did not take over the Pacific Ocean, Russia did not waltz back to their Soviet-era borders. The Middle East was, let’s be honest, mostly the same. American security was not compromised.

As for the Americans employed and rich people: you spin the defense industry down over time, not all at once. You decrease funding over a period of five to ten years, give the industry and investment portfolios time to adjust. Is this still going to be painful for some people? Yes. Yes it is. Everything I suggest is going to be painful for some people. But look, folks, this is for the country. If you want the country to survive and not implode, this is one of the things that has to happen. We can mitigate some of these effects with retraining programs and other, cheaper methods of finding people work as opposed to paying them to maintain a gargantuan defense budget. And it has to be done, sooner or later.

Increase Taxes

You thought I was controversial suggesting universal healthcare and cutting the defense budget? Hooo boy. Well, here we go: we cannot fix the federal budget at the current tax rate. Doesn’t matter what else we do. We cannot make up $3 trillion+ just by cutting spending. That’s not how math works. I’m sorry. We’ve been cutting taxes for 30 years, and it’s caught up with us.

Someone has to pay more taxes.

It’s no good increasing taxes on the poor, they don’t have any money. It’s not a good idea to increase taxes on the lower-middle class either, they’re the people who drive the economy by spending. It’s still not a good idea to increase taxes on the true middle class either, there aren’t enough of them left and they’re the drivers of small businesses. That leaves the upper middle class and, of course, the rich. Start with the rich. There aren’t a lot of them, but they have most of the money, and they’re already doing some super shady things to avoid taxes, which decreases their moral superiority a considerable amount.

Then increase taxes on the upper middle class, people with a household income of $200K+. These people can afford to pay more. They just can; I’m one of them, I know. And there are a lot more of them than there are really rich people, so there’s a broader base. Then see where that gets you.

It’s also worth a try increasing taxes on corporations, or more precisely, reforming the way that we calculate taxable income on stock trades and what we allow corporations to do with moving their money to offshore accounts. This is a whole other article, and it’s not easy, but it’s something that we should probably look into at some point. No matter what, corporations will still operate in America. If corporations are willing to go to China, they are willing to come to America with slightly higher taxes. They absolutely will go where the customers are. Never, ever, let anyone tell you otherwise, because if they try to make that argument they are either ignorant, propagandized, or high on crack.

Listen, folks, no one likes paying taxes. You have to decide if you like America more than you like not paying taxes. That’s literally all there is to it. Because if we don’t start paying more taxes, we will not like living in America in about twenty years.

Above all else, do not — DO NOT — vote for any more politicians who campaign on a platform to lower taxes. Trickle-down economics does. not. work. We’ve just finished conducting a thirty-year study on that subject as a nation, and the results are definitive (because, you know, we have a national debt).

Keep the Interest Rate Low

Ok, this one’s a little more arcane, but in order to pay the federal debt we absolutely have to keep the interest rate low. What does that mean? It means that the Federal Reserve cannot — cannot — increase their interest rate beyond something like 2%. This is absolutely essential, because when you’re paying off debts inflation is your friend and interest is your enemy.

Ok, what am I talking about here? Short version: the amount of interest that banks pay to borrow money from the Federal Reserve (which is how we “print” money in the US) affects the amount of interest the banks charge everyone else to borrow money from them. This makes sense, right? If I’m paying 1% to borrow from the Fed, I need to charge you at least 1.n% to make a profit. If I can get away with it, I’ll charge a lot more and make a lot more profit.

This is also how you get inflation. The lower the interest rate, the higher the incentive for banks to borrow money so they can loan it to everyone else. That increases the amount of cash in the economy, and if you increase the amount of cash without changing much else, you get inflation because people can charge more for goods and services to soak up that cash. If you hit the gas on printing money too hard, you end up with a Venezuela situation.

Cool, so why do we have to keep interest rates low to pay off the debt? Two reasons:

One, the federal government borrows most of the money to pay the debt from US banks. That means the government is paying an interest rate that is determined, in part, by the prime interest rate determined by the Federal Reserve. The higher the Fed’s rate, the more the feds (confusing, no?) pay to service the debt, because they’re paying more interest to creditors. We want to keep that number low if we want to pay off the debt. Hence, low interest rates are key.

Two, inflation is a good idea if you need to pay off a debt. We should all know this, it’s a cornerstone of the modern economy. I want to take on debt with expensive money and pay it off with cheap money. This is why deflation is a deathknell of any modern economy, and why a ~3% rate of inflation is considered normal and more or less desirable. Note that this does not work unless your income is at least pegged to the rate of inflation, so yeah, we still need more taxes or at least an expanding tax base.

The flip side is, of course, that we don’t want runaway inflation. The good news is that the US has a strong stock market that has been absorbing the excess cash. The bad news is that we’re blowing up bubbles in the stock market which will, eventually, burst. This means, in turn, that regulating Wall Street is a huge part of controlling the national debt, because market crashes have been demanding enormous bailouts in recent years.

Vote for Serious, Peaceful Politicians

Ok, folks, repeat after me: no more populists, no more warmongers. If you see a politician advocating that we should go engage in literally any military action, vote them the fuck out of office. Why? Because almost all politicians — certainly an overwhelming majority — will vote for military action if they sincerely can find no other way of preserving the nation. That’s because people generally possess a survival instinct. But you want to avoid the politicians who engage in muscle-flexing macho bullshit, or aggressive nation-building, or people who subscribe to “domino”-type theories,⁷ because that’s how you get the War on Terror. You want to elect the sensible, peaceful, domestic-agenda politicians who want us to keep out of foreign entanglements while we rebuild the budget.

Wars are fucking expensive. Yes, I did need to use an f-bomb for emphasis there, thank you very much. If all that upsets you about war is the language I use to describe it, your priorities are perverse. Anyway, like the man said, you need three things to make war: money, money, and more money.⁸ We want to avoid spending money, money, and yet more money if we want to claw our way out from under the national debt. Hence, voting for peaceful politicians is an absolute, 100%, no-kidding, I-will-die-on-this-hill necessity. Almost any consequence is preferable to another war over the next ten years because, again, if we don’t get things under control with the budget really quickly, we’re screwed anyway.

Also, and this is another key point — stop electing reality stars to political office. I mean that in the nicest way possible. Political outsiders just don’t know enough about the system to be useful. For the next ten years at least, we need the most boring technocrats you can imagine. We need serious, buckle-down, patriotic, do-it-for-nation-not-party politicians. I have no idea where we are going to get them, but for the love of God if you see one in your local election VOTE FOR THEM.

We all have red-line issues. I get that. But try not to let people distract you with those issues for about a decade. If your chosen candidate is a raging nutbag, and you vote for them only because they’re on your side in the abortion debate, you have failed as a citizen. I’m sorry. That’s how it is. The nation does not survive with populists running the show.

We need serious, peaceful, domestic-focused politicians right now. Our foreign policy has been awful for 20 years anyway, so let’s take a step back, double down on the alliances that preserve peace, tell the ones that don’t to fuck off, and focus on getting our house in order.

The End Game

Ok, let’s cover the FAQ.

Does this fix the debt tomorrow, or the year after that, or the year after that? NO. THIS IS AT LEAST A FIVE-YEAR PLAN.

Might we have to spend more in the short term to put in place some of these changes? YES.

Is this going to be an easy sell to literally anyone: ABSOLUTELY NOT.

Is it exceedingly likely that this concept will fail, in whole or in part, because Americans are too short-sighted to realize their nation is teetering on the brink of financial apocalypse? YEP.

Will American politicians and political interest groups try to twist, bamboozle, and otherwise sell out the country for short-term gains? WHY WOULD THEY STOP NOW?

Do we have any better options? I’M ALL EARS. BUT I HAVEN’T HEARD ANY.

I think that about does it. Taking one thing with another, I’d say the nation has a better than even chance of simply imploding like Venezuela over the next twenty years. You should probably have a plan for that (hint: it’s not about stockpiling food and guns, it’s about acquiring an internationally marketable skill so you can get a work visa elsewhere). But in the meantime, this is the best plan I can come up with.

But hey, it’s a bit like tackling climate change. Even if climate change isn’t real, enacting green protocols will still improve our air and water quality, so there really isn’t a good argument not to do it. We should always, consistently, try to maintain a balanced or near-balanced federal budget. It does us no harm to implement only one or two of these goals; every little bit helps.

At the end of the day, if we do nothing, we gain nothing. If we do something, the worst that happens is that we’ve made a piece of the federal government more efficient or better funded, and that’s a worthwhile goal in and of itself.

If you liked this article, check out the Modern Survival Guide, Volume I, and my current work on Volume II! It’s an utterly random assortment of things I think people ought to know; there’s something in there for everyone.

¹Here’s a fun (and informative!) site where you can watch the debt go up in real time, it kind of brings the issue home:


³Wikipedia has a perfectly serviceable summary:

⁴Cthulu, for those of you not familiar with Lovecraft’s mythos, is a fictional god-monster which is fated to destroy the world, quite distinct from the American military, which regularly destroys pieces of the world in reality. As you may notice, I, like most millennials, have views on this subject. You have been warned.,For%20additional%20information%2C%20see%20below.

⁶Even Pfizer says so:

⁷The Vietnam War is an example of a “domino” mindset, where the powers-that-were thought we had to stop the spread of communism in Vietnam or it would somehow magically flip all the nearby nation-states to communism. Folks, that’s not how anything works in the real world. If it did, the communists would have won.

⁸That man was Raimondo Montecuccoli, and he knew what he was talking about.