Seven myths about the national debt that Washington finds convenient

There is a curious thing about the national debt: almost everyone in Washington agrees it is a problem, and almost no one agrees on why, and the disagreement has a convenient shape. Each side's explanation points at the other side's favorite program. Republicans blame the entitlement state. Democrats blame tax cuts. Both claim the debt will be solved by something painless, like growth, or waste-cutting, or taxing someone who does not vote in your district.

I am going to test seven of the stories. For each, I will state the claim, test it against the public record, and give a verdict. I will tell you which parts are facts and which parts are my values. Where the record cuts against conservatives, I will say so. Start with the number everyone argues about: the Treasury's Debt to the Penny reported total public debt of $40.56 trillion on November 5, 2026, up from $38.05 trillion on November 4, 2025. That is $2.51 trillion in a year, which is 6.6 percent growth (2.51 divided by 38.05). You can follow the daily figure on the national debt clock.

Myth one: "We owe it to ourselves"

The claim. The debt is not a real burden, the argument goes, because we owe the money to ourselves. Americans hold the bonds, so when the government pays interest, it is just moving money from one American pocket to another.

The test. Part of this is true and part is false, and the true part is more interesting than the false part. Some federal debt is held by the government itself, in accounts such as the Social Security and Medicare trust funds, and that is a real accounting category called intragovernmental debt (see What the Social Security and Medicare trust funds hold, and depletion day). Of the debt held by the public, a substantial share is held by foreign investors and foreign governments: Treasury's own data put foreign holdings of Treasury securities at about $9.3 trillion in August 2026. You can check the current figures in the Treasury's published foreign-holdings data. Interest paid to them leaves the country.

But even the domestic part is not harmless. Interest paid to a bondholder is taxed away from someone else. A family that pays higher taxes to fund interest is poorer, whoever receives the check. Taxes distort behavior: each dollar raised discourages work, saving or investment at the margin. A transfer is not free just because it stays in the country.

Verdict: false. The claim treats a transfer as if it cost nothing. It costs the taxes that raise it, and part of it goes abroad.

Myth two: "China holds most of it"

The claim. The opposite scare: China owns America's debt and could call it in.

The test. Two parts are wrong. Foreign holders in total own a minority of the debt held by the public, and China is not even the largest foreign holder. Treasury's data for August 2026 show Japan holding about $1.07 trillion and mainland China about $0.59 trillion. Treasury's monthly data on foreign holdings is public, and it is worth checking against anyone who gives you a figure on television.

And the idea that a creditor can "call in" Treasury securities misreads the instrument. A Treasury bond has a maturity date. The holder can sell it in the market, which would push its price down and the holder's own loss up. Dumping a large position hurts the seller first. China's real leverage is smaller than the rhetoric.

Verdict: false, but with a point worth keeping. The truth is less dramatic. The larger problem is not who owns the debt but how much of it we must roll over every year, at whatever rate the market sets.

Myth three: "We will grow our way out of it"

The claim. If the economy grows fast enough, the debt shrinks relative to GDP, and the problem takes care of itself.

The test. The first half is a true statement of arithmetic. The debt-to-GDP ratio falls if the denominator grows faster than the debt. It happened after World War II: the ratio fell sharply in the decades after 1946, through a combination of growth, inflation, interest rates held down by policy, and primary surpluses, meaning budgets that took in more than they spent apart from interest.

Now look at the conditions. In that era, spending as a share of the economy was dropping as the war ended, entitlement programs were small, and the country was not borrowing steadily in peacetime. Today the debt grows during expansions. Even with growth, the Congressional Budget Office has long projected that the debt will grow faster than the economy over its ten-year windows under current law, because the programs are on autopilot and the interest compounds. Growth helps. Growth is not a plan unless spending growth is slower than economic growth.

Moreover, if the government's policy toward growth is to raise taxes and regulations, it works against the very growth that it counts on. For a view on this, see where tax cuts pay for themselves and where they honestly do not, which argues that conservatives should not oversell the revenue effect of growth either.

Verdict: half true. Growth is necessary. It is not sufficient, and it will not by itself close a structural gap.

Myth four: "Cut waste, fraud and abuse and we are fine"

The claim. The debt could be solved by cutting waste.

The test. Waste is real, and I am all for cutting it. Agencies spend money on duplicative programs, improper payments were estimated by the Government Accountability Office at about $186 billion in fiscal 2025, and any family would be appalled by the contracts that go unexamined. But look at the structure of the budget. Discretionary spending, the part that Congress appropriates each year, including defense, is well under a third of federal outlays. The bulk of the rest is mandatory spending on Social Security, Medicare, Medicaid and similar programs, plus interest on the debt.

Arithmetic shows the problem. Suppose you could find waste equal to one full percent of all federal spending, an extraordinary achievement. You would have trimmed one percent. A one-year borrowing increase of 6.6 percent of the debt would remain, and the programs that drive spending growth would be untouched. Waste hunting is worth doing for its own sake, because a government that cannot control its small expenses cannot be trusted with its large ones. But it is not a substitute for deciding what the big programs will do.

Verdict: mostly false. It is a worthwhile reform with a small ceiling.

Myth five: "Tax the rich and it closes the gap"

The claim. The other party's version: the deficit is a revenue problem, and a tax on high earners will fix it.

The test. Start with a fact that surprises people. The federal income tax is already heavily concentrated: IRS data published each year show that the top earners pay a large share of total income tax, while a large number of households pay little or none after credits (see Who actually pays the federal income tax, read straight from the IRS tables). So one starts with a narrow base.

Next, behavior. Higher rates on the same income do not produce proportionally higher revenue, because people shift, defer and restructure. How much is a legitimate dispute among economists, and conservatives should concede it is not zero revenue. But the experience of European wealth taxes, which raised little and were mostly repealed, is a caution (see Tax the rich more? The wealth tax failed across Europe and was repealed).

Finally, the scale of the gap. The debt is growing by roughly two and a half trillion dollars a year. No rate increase that applies only to a small group of high earners has been shown to generate that amount year after year without large changes in the behavior of the people being taxed. To close the gap through revenue alone, you must tax the middle class, which is what other countries with larger governments do through value-added taxes. That is a values question, and I think a debate worth having honestly. But "tax the rich" as a full answer is a slogan.

Verdict: false as a complete answer. Revenue matters. Spending growth is the larger driver.

Myth six: "Interest rates will stay low"

The claim. Borrowing is cheap, so the debt is not a problem. Governments can run deficits indefinitely when rates are low.

The test. This is the myth with the most recent history. For years after the 2008 crisis, rates were low, and a serious school of thought said that debt was therefore cheap. But the Federal Reserve began raising its policy rate in March 2022, after holding it near zero, and Treasury's borrowing costs rose with it. Here is the mechanism that the optimists skip. The government does not borrow once. It borrows continuously: a large share of the debt is in bills and notes that mature within a few years and must be refinanced at whatever rate prevails. When rates rise, the interest bill rises across the whole stock, as each maturing security is replaced by a more expensive one.

An example, labelled hypothetical: a debt of $40 trillion at an average interest rate of 2 percent costs $0.8 trillion a year in interest (40 times 0.02). At 3 percent it costs $1.2 trillion. At 4 percent, $1.6 trillion. One percentage point on the average rate is $400 billion a year, and the average rate does not move in one step, but it moves in that direction when old, cheap debt rolls off. For the longer treatment, with the interest line itself, see do the arithmetic on $40 trillion and the interest bill it carries.

Verdict: false as a plan. Low rates were a condition, not a law.

Myth seven: "The debt never has to be repaid"

The claim. Governments never pay off debt. They roll it over forever. The only question is whether the economy can bear the interest.

The test. There is a true core and an overreach. Governments do roll debt over, and a country with its own currency and a deep bond market can carry a large debt for a long time. Japan is the usual example (see japan's debt is far larger than ours, so why has it not collapsed yet). The debt does not need to be retired to zero.

But "never has to be repaid" is not the same as "no one ever pays." In January 1835, under President Andrew Jackson, the federal government paid the national debt down to essentially nothing. That is the one time in American history it happened, and it is a reminder that the idea is not incoherent. More important, the interest is paid every year, and it crowds out other uses of the same dollars. And when creditors lose confidence, the bill comes due in the form of higher rates, inflation, or both. The theory that deficits do not matter has been tested, and I discuss the test in Modern Monetary Theory says deficits do not matter, and 2022 answered it.

Verdict: misleading. The principal may be rolled over. The cost of carrying it cannot be.

What the seven myths have in common

Every one of these claims shares a structure: it makes the problem smaller, or someone else's, or temporary. "We owe it to ourselves" shrinks it. "China holds it" outsources it. "Growth will fix it" and "rates will stay low" defer it. "Cut waste" and "tax the rich" assign it to a villain. "It never has to be repaid" abolishes it.

That is why the myths are convenient. A politician can say any of them without cutting a single program or raising a single tax. And that, I think, is the moral point: debt is the form that cowardice takes in a budget. Borrowing lets the present generation enjoy benefits and send the invoice to people who cannot yet vote. A conservative who believes that obligations run between generations, that we hold the inheritance of the past in trust for the future, should treat that as a moral failure and not merely a technical one.

And the numbers do not need exaggeration. A year of growth of $2.51 trillion in the debt, set against an economy that does not grow by that much, is a trend a family would recognize if it appeared on a credit card statement.

The case in brief

1. "We owe it to ourselves" is false: interest requires taxes, and a substantial share of publicly held debt is held abroad.
2. "China holds most of it" is false: foreign holders own a minority, and Japan holds more than China.
3. Growth helps but does not close a structural gap when spending is on autopilot, and waste-cutting, though worthwhile, has a small ceiling because most spending is mandatory programs and interest.
4. "Tax the rich" is not a complete answer given the size of the annual borrowing, and low interest rates were a condition, not a law, because the debt must be refinanced at prevailing rates.
5. The debt need not be paid to zero, but it cannot be carried for free, and the convenient myths exist to avoid saying so.

What you can do: check the day's figure on the national debt page, then write down which of the seven myths your representative has repeated and ask their office for the plan that replaces it.