Net interest and entitlement 98.4% of tax receipts

 

This is a crazy number - over 98% of all Federal Government Receipts go to net interest and entitlements. Only 2% of tax receipts cover the other expenses, the real activity of government. Put differently, we pay for all our non-entitlement programs, like the military, by borrowing money. I don’t think the American public knows this. I don’t think they may care. We aren’t even accounting for future commitments we have made that we will not have the money for. 

The only good news is that entitlements and net interest, if held by domestic investors, can be viewed as a large transfer payment with deadweight costs. We borrow from citizens who then pay taxes to meet the interest payment. We tax citizens and then give the money back to other citizens. Significant money moves between taxpayers and entitlement recipients, from one set of consumers who may save more to another set of citizens who spend more. It could be worse, but that doesn’t mean this money is being used productively. It is a great transfer of wealth