The Debt, the Waste and the Tax

On October 1, 2026 the United States owed $40.26 trillion — $117,467 for every resident ($40,260.6 billion ÷ 342.739 million), $94,631 of it to the public ($32,433.8 billion ÷ 342.739 million) and the rest to government accounts, mostly its own trust funds (Treasury, Debt to the Penny). It took the country 192 years to borrow its first trillion dollars (1790 to FY1982, when the debt reached $1.14 trillion) and the last three years to borrow its most recent seven ($33.17 trillion at the end of FY2023 to $40.17 trillion at the end of FY2026; Treasury, Historical Debt Outstanding). The interest alone was $970.1 billion in fiscal 2025, 13.8% of all federal spending and, for the second year, more than the armed forces.

The debt and deficit figures are the Treasury’s and OMB’s own; the projections are CBO’s; the improper-payment estimates are the agencies’ own, as certified to OMB; the tax distribution is CBO’s and the IRS’s. The failed programs are chosen by us, from inspector-general and GAO findings, and each carries its source.

Two hundred and thirty-six years of borrowing

Every war is a step up; the debt was cut to about $34,000 in 1835 and $38,000 in 1836, the only time it was all but repaid; and the three increases that dominate the modern record — the Second World War, the financial crisis and the pandemic — were each followed by a plateau, except the last.

The shape. The debt held by the public was 106.1% of GDP in 1946 and fell, without ever being repaid, to 23% by 1974 as the economy outgrew it. It rose through the 1980s and early 1990s to 48% in 1993, fell to 31.5% by 2001 in the only sustained surpluses of the modern era, was 35.2% on the eve of the financial crisis, 78.9% on the eve of the pandemic, and 99.5% at the end of fiscal 2025. CBO’s baseline — current law, with no recession — takes it to 120% in 2036 and 175% in 2056.

Per resident. The gross debt was $25,177 per resident in 1946 in fiscal 2025 dollars, $13,142 in 1981 and $35,575 in 2000; on October 1, 2026 it was $117,467 in current dollars. In nominal terms it passed $1 trillion in 1982, $10 trillion in 2008, $20 trillion in 2017, $30 trillion in 2022 and $40 trillion in 2026.

What “the public” means. Of the $40.26 trillion, $7.83 trillion is owed by the Treasury to other parts of the government — government accounts, mostly trust funds, which hold their surpluses in Treasury securities. That debt is real to the trust funds and will be redeemed from general revenue as the funds draw down; it is why the trust-fund depletion dates and the debt are the same problem seen from two sides.

The deficits that built it

The last surplus was fiscal 2001. The fiscal 2025 deficit was $1.77 trillion, 5.9% of GDP (OMB Table 1.2) — matched in peacetime before 2009 only by 1983.

The interest

From 2022 the rates turned and the debt did not. Net interest went from $352 billion in FY2021 to $970.1 billion in FY2025 — $2,837 per resident ($970.1 billion ÷ 341.944 million) and more than national defense for the second year.

The next thirty years, by the Congressional Budget Office

On CBO’s path, everything but Social Security, Medicare and interest is flat or shrinks relative to the economy. Revenues rise, but not enough.

The arithmetic. In 2026 the government spends 23.3% of GDP and collects 17.5%; in 2056, on CBO’s path, it collects 18.8%. Interest alone rises from 3.3% of GDP to 6.9% — larger than Medicare (net of premiums) from 2028 and than Social Security from 2047, when it becomes the largest category of spending in CBO’s projection — and the deficit from 5.8% to 9.1%. The debt held by the public reaches 175% of GDP; gross debt, 190%.

The trust funds. The 2026 Trustees reports (June 9, 2026), as summarized by the Committee for a Responsible Federal Budget, put the depletion of Social Security’s retirement fund at 2032, when benefits would be cut 22% under current law; the combined retirement and disability funds at 2034 (17% cut); and Medicare’s Hospital Insurance fund at 2033 (11% cut in hospital payments). The 75-year shortfall for Social Security is 4.42% of taxable payroll, 1.5% of GDP, up 16% in a year, from 3.82% (CRFB).

The tax: where the money comes from, and from whom

The long composition. Individual income taxes were 51% of receipts in FY2025 and payroll taxes 33%. The payroll tax — flat, capped, paid from the first dollar of wages — is the second-largest source, and for the four lower fifths of the income distribution it takes more than the income tax (CBO, 2022: 8.8% against 3.1% for the middle fifth).

The tariff year. Customs duties were $77.0 billion in FY2024 and $194.9 billion in FY2025 — 3.7% of receipts ($194.9 billion ÷ $5,236.4 billion), the largest share since 1941. In February 2026 the Supreme Court held, 6–3, that the International Emergency Economic Powers Act did not authorize most of the tariffs (Learning Resources, Inc. v. Trump, decided February 20, 2026; CRS), and the Treasury began refunding them (customs refunds were $7.5 billion in all of FY2025), with net customs receipts negative in May, June and July 2026 (June: −$25.6 billion). Net customs receipts through August were $167.3 billion, about the same as a year earlier ($165.2 billion through August 2025).

Counting every federal tax, the top 1% of households paid 27.3% of all federal taxes on 17.8% of income before transfers and taxes in 2022; the highest fifth paid 70.2% of taxes on 55.8%; the lowest fifth paid an average rate of 1.4%, with a negative income-tax rate offset by payroll and other taxes (CBO). On the income tax alone, the bottom half of returns paid 3.3% (IRS data, tax year 2023, as summarized by the Tax Foundation).

The waste: what the government says it lost

“Improper payments” are what agencies themselves estimate they paid wrongly — to the wrong person, in the wrong amount, or without the documentation to know. Not every improper dollar is a lost dollar; it is nonetheless the only government-wide number there is.

The FY2025 estimate, across 64 programs, is $543 per resident ($185.8 billion ÷ 341.944 million); since reporting began in 2003 the total is about $3.02 trillion ($2,984 billion for FY2004–2025 and GAO’s $35 billion for FY2003; PaymentAccuracy.gov; GAO).

GAO estimates that $100–135 billion of pandemic unemployment benefits was paid to fraud (11–15%); the FY2021 improper-payment estimate for unemployment insurance alone was $78.1 billion. The SBA Inspector General identified $200 billion of potentially fraudulent PPP and EIDL loans and grants (June 2023), of $1.2 trillion disbursed: 8% of PPP, 33% of EIDL. By MedPAC’s estimate, Medicare will pay Medicare Advantage plans $76 billion in 2026 above the cost of the same people in traditional Medicare — 14%, from favorable selection and coding. By the IRS’s estimate, the gross tax gap for tax year 2022 — tax legally owed and not paid on time — is $696 billion; $606 billion after late payments and enforcement. 85% of tax is paid voluntarily and on time (IRS).

What is recoverable. GAO’s annual duplication-and-overlap reports have, by its count, produced $774.3 billion in financial benefits since 2011 from recommendations Congress and agencies acted on, with about $100 billion more identified and open (GAO-26-108505, May 2026). That is a measure of the waste that is found and fixed; against a budget of $7.01 trillion a year (FY2025 outlays, OMB Table 1.1) it is under 1% a year ($774.3 billion over the sixteen years 2011–2026 is $48.4 billion a year, 0.69% of $7,011.1 billion), and the improper-payment estimate alone is 2.7% of outlays ($185.8 billion ÷ $7,011.1 billion).

The programs that failed

Twenty-four cases, chosen for the quality of the finding rather than the size of the number: programs canceled after large spending, programs that missed the goal they were given, and programs whose losses the government has measured. Each row carries its cost as the source states it, or none where the source states none — these are not comparable figures and are not summed — and its outcome.

The argument

The debt is the one subject in public finance on which both parties have been right and neither has acted.

The case that spending is the problem: a government that runs a deficit nearly every year and pays $186 billion a year wrongly, by its own count. Federal spending was 23.1% of GDP in 2025 against a fifty-year average of 21.15% (the mean of fiscal 1976–2025, OMB Tables 1.1 and 10.1), and on CBO’s path every point of the increase to 2056 is Social Security, Medicare and interest. The debt held by the public has grown faster than the economy in eighteen of the twenty-five years since 2001 (OMB Table 7.1), under both parties, and the interest on it now exceeds the defense budget. On the government’s own estimate it paid $185.8 billion wrongly in FY2025 and about $3.02 trillion since 2003 ($2,984 billion + $35 billion); in the pandemic programs alone there was an estimated $100–135 billion of unemployment fraud (GAO) and $200 billion of potentially fraudulent SBA loans and grants (SBA OIG); Medicare pays private plans $76 billion a year more than it would spend on the same people in traditional Medicare (MedPAC, 2026). The program record is the same: $148 billion in Afghanistan (SIGAR, via Defense One), a medical-records system now estimated by the VA at $48 billion (Military Times), a frigate that, in GAO’s words, “now bears little resemblance to the parent design”, a repository and a fuel plant abandoned.

Taxes are not low at the top: the top 1% paid 27.3% of all federal taxes in 2022, up from 14.1% in 1979 (CBO), and the income tax is paid almost entirely by the top half of filers (96.7%, tax year 2023; IRS data via the Tax Foundation). Revenue is at its long-run share of GDP (17.3% in 2025 against a fifty-year mean of 17.32%, fiscal 1976–2025); spending is not.

The case that revenue is the problem: a country that cut taxes in every expansion and borrowed the difference. Revenues were 17.3% of GDP in 2025 (OMB Table 1.2), below the 20.0% of 2000 and below what every other large rich country collects. The average federal tax rate across all households was 20.6% in 2022 against 22.4% in 1979; the top 1%’s rate fell while their share of income rose from 9.0% to 17.8% (CBO). The tax gap — $696 billion a year that is owed under existing law and not paid on time (IRS, tax year 2022) — is nearly four times the improper-payment estimate ($696 billion ÷ $185.8 billion), and the IRS that collects it lost about 30% of its workforce, 31,273 employees, between January 2025 and January 2026 (28% net of new hires; TIGTA, June 2026).

The spending that grows is not waste: it is the retirement and health care of a population whose over-65 share rises from 18.7% in 2025 to 23.5% by 2055 (Census Bureau, 2023 projections: 63.3 million of 338.0 million, and 85.1 million of 362.5 million), promised under laws no Congress has repealed. Cutting the agencies that audit, collect and check — as 2025 did — raises the waste it is meant to cut.

The record supports an uncomfortable version of both. The deficit is structural: it was there in 2025 with no war and no recession, and it is the gap between a tax system that collects 17–18% of GDP and a set of promises that cost 23% and rising. The arithmetic admits only three instruments — the retirement and health promises, the tax rate on the broad middle, and the interest rate the country cannot choose — and the eighty-five years since 1940 show that the debt fell only when growth outran the promises or the promises were taxed for. The next thirty years, on the government’s own forecast, offer neither unless someone decides.

Where this joins the series

Who Pays and Who Gets shows the FY2025 dollars flowing from each tax to each recipient, with borrowing as the balancing line; this study shows how that line accumulated and where it is going. Every Dollar of War is the companion: it traces the defense and veterans lines, and the interest that now exceeds the defense line is traced here to its source. Every Federal Job counts the people who collect, check and audit, whose numbers fell in 2025.