Ellen Brown
SEPTEMBER 2, 2026

In August 2026, the U.S. debt reached a gravity-defying $40 trillion, with an estimated fiscal year 2026 deficit of $2.1 trillion. Interest on the debt hit a record $1.4 trillion over the last 12 months and now consumes more than any federal program except Social Security and Medicare, eclipsing defense spending for the first time in U.S. history. Paid with borrowed money, interest compounds exponentially, making it the fastest-growing part of the budget, far outpacing economic growth. By 2036, the Congressional Budget Office projects interest costs will double to $2.1 trillion, with debt held by the public reaching 120 percent of GDP. The CBO director has declared the trajectory to be “not sustainable.”

Increasingly, prominent analysts are saying the United States will have to “print” its way out. But using whose printing press, printing what?

Today “printing” normally means Federal Reserve monetization (Quantitative Easing or QE). The Treasury first issues debt – bills, bonds and notes – which are sold by primary dealers on the open market. If there are insufficient buyers, the Fed as “lender of last resort” may buy the securities with “reserves” created with accounting entries in bank reserve accounts. But Fed Chair Kevin Warsh is trying to reduce the Fed’s balance sheet by selling federal securities, not buy them. And even if the Fed did engage in QE, it would not work today to reduce the debt or the interest. The Fed is required to return its profits to the Treasury after deducting its costs, but ever since 2008 it has paid the banks interest on their reserve balances (IORB) as a policy tool to control inflation; and since 2022, the total sum the Fed has paid in IORB has been higher than the interest it received from the Treasury on its securities. The net result is that instead of the Fed remitting profits to the Treasury, the Treasury now owes the Fed money to cover the gap in IORB, increasing the federal debt and the interest bill. The Fed printing press is running, but it is running in the wrong direction.

Meanwhile, $4.1 trillion USD in marketable federal securities are maturing this year; and many are long-dated bonds yielding low interest, for which there are insufficient buyers. So the Treasury under Scott Bessent has had to take over the business of buying them, using funds raised by selling short-dated Treasuries for which there is a ready market. Some commentators are calling this “Treasury QE,” but the policy is not pumping new Treasury dollars into the market. Other commentators say the buyback expansion is more like the Fed’s earlier “Operation Twist” — just an asset swap, old debt for new.

An August 22, 2026 article in Forbes compares the effect of Fed and Treasury bond purchases like this:

“Under quantitative easing, the Fed buys Treasury securities and pays for them by crediting the reserve accounts of banks.… Base money, the sum of currency and those reserve balances, expands one for one with the purchase.

Treasury has no such keystroke ability. It spends out of the Treasury General Account, its checking account at the Fed, and every dollar in that account got there through taxes or borrowing. “

The Treasury’s Keystroke Power 

So says conventional analysis, but the Treasury at the direction of Congress actually does have keystroke ability. It is a sovereign power that our forebears used to finance the American Revolution, the Civil War, and some of the most explosive periods of economic growth in U.S. history. From the “colonial scrip” that Benjamin Franklin credited with the prosperity of the colonies, to the Continentals that funded the Revolution, the power to create money was viewed as a public utility. The U.S. Constitution formalized that power in Article I, Section 8, granting Congress the power “to coin Money [and] regulate the Value thereof.”

After Lincoln’s Treasury printed enough U.S. Notes or “Greenbacks” to win the Civil War, the Supreme Court twice affirmed its authority to do so. But that power was captured and handed to a banking cartel that met in secret on Jekyll Island in 1910, where they designed a system in which every new dollar must be borrowed into existence from bankers who simply write deposits into their borrowers’ accounts. And thus was the government’s sovereign power to create its own currency captured by private profiteers.

The Lincoln Precedent

The greatest proof of concept for debt-free sovereign currency remains Abraham Lincoln’s Greenbacks. Facing a fractured nation and usurious interest rates from international bankers, Lincoln bypassed the private credit market. Through the Legal Tender Acts of the 1860s, the Treasury issued $450 million in United States Notes (Greenbacks), which funded the North’s victory in the Civil War and extensive national infrastructure development.

In 1871, the Supreme Court upheld the Legal Tender Acts in Knox v. Lee, ruling that the government’s power to issue currency that was not redeemable in specie (coins) was an inherent attribute of sovereignty. But in 1878, the Greenback supply was capped at less than half a million dollars, ensuring that as the economy grew, the sovereign dollar would be dwarfed by private bank credit backed by gold reserves. In Juilliard v. Greenman (1884), however, the Supreme Court confirmed that the power “of making the notes of the United States a legal tender in payment of private debts” was “included in the power to borrow money and to provide a national currency”.

The Populist Allegory: The Yellow Brick Road

By the late 19th century, the scarcity of credit caused by the bankers’ “Cross of Gold” led to a major depression and a grassroots uprising. In 1894, the march of “Coxey’s Army” on Washington—the first of its kind—would become the inspiration for The Wonderful Wizard of Oz (1889).

In that classic American allegory, the “Yellow Brick Road” (the gold standard) leads to a deceptive Emerald City (Washington D.C.), where the Wizard (the President) pulls levers of illusion. William Jennings Bryan, the “Cowardly Lion” of the Greenback movement, had the roar of a great orator but ultimately lacked the courage to stick to the Greenback solution, instead pivoting to bimetallism (silver). [For more on that see E. Brown, Web of Debt.]

In 1912, Bryan was appointed Secretary of State by Pres. Woodrow Wilson. Bryan vigorously opposed the Aldrich Act, which would have handed the “money power” to the bankers; but the bankers won, and the Federal Reserve Act passed. Since that time, the United States has financed itself not with sovereign money but with interest-bearing debt, rolling it over year after year until the interest bill itself has become the fastest-growing federal expense.

That is how we got caught in a debt cyclone in which interest is compounding at a voracious rate. Congress will be coming up against the debt ceiling soon and will need to vote either to raise the ceiling, cut social services and the military, raise taxes, or authorize the Treasury to print its way out. Granted, Congress is unlikely to resort to the sovereign money alternative until it has no other option but to default, but that alternative is approved by both the Constitution and by statute, and it need not raise consumer prices – in fact it can lower them — if the new money is used to create new goods and services, keeping supply and demand in balance. (More on that shortly.)

The Statutory Keys

A statutory mechanism proposed to deal with earlier debt ceiling crises involves 31 U.S.C. § 5112(k), under which the Treasury Secretary is granted the discretion to mint platinum coins in any denomination. The proposal was to mint trillion dollar coins, which would represent a profit to the Mint (seigniorage) rather than loans, so their value does not count toward the statutory debt limit defined in 31 U.S.C. § 3101. See e.g. Paul Krugman’s whimsical endorsement here.

The “Treasury General Account” (TGA) is essentially the government’s only checking account and is held by the Federal Reserve. Fo the sovereign dollar to work, the Fed would need to credit the TGA with the face value of the coins on deposit but that mandate is also statutory. Under 12 U.S.C. § 391, the Federal Reserve Banks are must act as “fiscal agents” for the United States; and under 31 U.S.C. § 5103, all coins minted by the U.S. Treasury are “legal tender for all debts, public charges, taxes, and dues.”

Despite those mandates, when the trillion dollar coin was raised as a solution to an earlier debt ceiling deadline in 2013, then-Fed Chair Ben Bernanke called it “unworkable”; and in 2021, facing another debt ceiling, Janet Yellen called it a “gimmick.”

Perhaps, but the coin is no more a gimmick than the Fed’s own “Quantitative Easing,” which extends the use of a section of the Federal Reserve Act far beyond its intended purpose. Section 14 of the Act (12 USC Sec. 355), authorizing Open Market Operations, was intended only for small-scale adjustments to keep interest rates stead; but during the 2008 and 2020 crises, the Fed used that authority to create billions of dollars in reserves to bail out bankrupt mega-banks.

If the Fed can create trillions in currency to save the banks, why can’t the Treasury do it to save the taxpayers? If trillion dollar coins seem too much like a gimmick, Congress can just lift the 1878 cap on Greenback issues and issue U.S. Notes directly. The GENIUS Act authorizes new forms of digital coins. Why not a digital Greenback coin backed by the full faith and credit of the United States?

Quelling Inflation Concerns

Combining the Legal Tender power (confirmed in Juilliard), the Minting discretion (31 U.S.C. §5112), and the Fiscal Agency mandate (12 U.S.C. §391), the tools are already in place for Congress to issue currency directly. So what is holding it back?

The standard objection is that Treasury-issued money is more inflationary than borrowing, because borrowed money will eventually be paid back, extinguishing the newly created deposits. But the federal debt has not been paid off since Andrew Jackson did it nearly two centuries ago. The debt is just rolled over from year to year, and so is the interest. In fact the interest burden grows faster than the debt, because it is largely deficit-financed. Interest paid on interest compounds exponentially.

Contrary to conventional theory, borrowing money into existence has been shown to be more inflationary than printing it directly. Both add new dollars to the money supply, since the debt-created dollars spent by the government are never paid back. But the interest burden on those dollars drives up taxes, and the Fed attempts to dampen inflation by raising interest rates, which raises the interest that producers must pay on their own debts. Producers then raise their prices to cover these additional costs, inflating consumer prices.

Supporting Data

The additional inflation risk from government-borrowed money is not just theory. In an excellent 2018 academic paper titled “Bringing the Helicopter to Ground,” monetary economists Josh Ryan-Collins of University College London and Frank van Lerven of the New Economic Foundation examined government finance across 13 advanced economies from 1900 to 2011. For roughly 40 years, from the 1930s to the 1970s, 40 to 50 percent of government debt in the countries studied was funded by the creation of new money rather than by borrowing existing wealth from private savings or foreign investors. The new money was created as credit on the books of both central and commercial banks. The authors highlight that this period also had the lowest incidence of banking crises in modern history, and it coincided with the century’s longest sustained period of low government debt-to-GDP and highest GDP growth. Inflation remained manageable until the shocks of the early 1970s.

After the 1970s oil shock, Milton Friedman’s dictum that “inflation is always and everywhere a monetary phenomenon” became official dogma. But the historical record showed the opposite: price inflation rose in the 1970s, while new money creation fell. Prices were driven up by a shortage of supply rather than an excess of monetary demand.

Money Creation Needs to Be Productive 

One particularly compelling experiment in publicly-issued money discussed by Ryan-Collins and van Lerven involved New Zealand. Today, nearly all U.S. states are dealing with housing crises. After the Reserve Bank of New Zealand was nationalized in the 1930s, the government solved its housing crisis by using central bank-issued funds to finance housing, infrastructure, public works and support for farmers. Over a four-year period, The Bank created NZ£30 million for the government, real GDP rose 30 percent, and price inflation remained stable.

Why? Because the new money was not bidding for a fixed stock of goods. It was putting unemployed people and idle resources to work to increase the supply of housing, food and other goods.

That is actually the key to avoiding the inflation trap (“too much money chasing too few goods”). If the money is spent on infrastructure and investments that produce new goods and services, supply and demand will rise together, keeping prices in balance.

In fact we may soon be facing the opposite problem – too little money chasing too many goods. Artificial intelligence and robotics promise large increases in productive capacity while threatening the wage income on which consumer demand depends. The solution in that case will be to add new debt-free money to the economy. See my earlier article series here.

The Hamiltonian Option: Grow Our Way Out

An alternative for dealing with the federal debt that is being advocated by the current Administration is the Hamiltonian approach: increase GDP and grow our way out of the debt, as the U.S. did after World War II. It’s a good idea, but financial commentators say it is not enough. Conditions are far different now than in the post-war period, and the numbers won’t work.

Before GDP can grow, funds must be available for labor and supplies; and the Treasury simply does not have them. Treasury-issued dollars could fill the breach and be sustainable, if the money were directed into infrastructure and development, increasing supply along with demand.

Contrary to the Friedman dictum, inflation is not “always and everywhere a monetary phenomenon.” The relevant question is not just how much money is circulating in the economy but where it is circulating and whether it is connecting productive capacity with human needs.

Today, U.S. factories are operating at only 76% capacity, and the American Society of Civil Engineers projects a shortage in infrastructure funding of $3.7 trillion, while trillions in liquid M2 capital are sitting idle in the stock market or circulating strictly within its walls. In fact corporations are now draining hundreds of billions of dollars out of their productive operations to buy back their own stock, further removing financial wealth from the real economy. If newly created dollars were invested in the economy’s industrial slack or the infrastructure gap, goods and services would be produced for the consumer market, raising supply to balance demand and keeping prices from rising.

The most dramatic modern illustration of this principle is China. In the last three decades, China’s M2 money supply has increased by a dramatic 5500%, yet prices have remained stable. Why? Because the money has been invested in infrastructure and development, increasing supply along with demand. For a detailed explanation and references, see my earlier article here.

What If Greenbacks Retired the Debt?

What if new Treasury money were used to gradually redeem some existing federal securities as they mature? This too would be unlikely to drive up consumer prices. Treasury securities are largely held by funds, banks, insurers, foreign institutions and wealthy investors, who are not likely to spend the money on consumer goods but will seek other investments paying interest. An institutional holder of a $1 million Treasury bond which receives $1 million in sovereign dollars has not suddenly gained $1 million in net wealth. One federal liability has just been exchanged for another: an interest-bearing security for non-interest-bearing money. What has changed is just that the government has been relieved of the obligation to keep paying interest on the retired debt.

Conclusion: The Government Has the Power to Bypass the Interest Trap

As Thomas Edison observed in a New York Times interview in 1921:

“If our nation can issue a dollar bond, it can issue a dollar bill. The element that makes the bond good, makes the bill good, also. The difference between the bond and the bill is that the bond lets money brokers collect twice the amount of the bond and an additional 20%, whereas the currency pays nobody but those who contribute directly in some useful way.”

It is absurd to say that our country can issue $30 million in bonds and not $30 million in currency. Both are promises to pay, but one promise fattens the usurers and the other helps the people.

Congress has the constitutional power to issue sovereign money directly – interest-free and debt-free – and viable precedents are available for implementing that policy without driving up consumer prices. The question is whether Congress will reclaim this hereditary power before the interest trap snaps shut completely.

Postscript: In October of this year, the Public Banking Institute will be holding a conference on these and related issues in Philadelphia, the city in which Pennsylvania’s “land bank” first proved the power of publicly-issued credit and Benjamin Franklin’s printing press supplied its currency. For more information, see http://PublicBankingInstitute.org.

Published on Scheerpost.com.

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This month Congress passed the GENIUS Act, an acronym for the “Guiding and Establishing National Innovation for U.S. Stablecoins of 2025.” Designed to regulate stablecoins, a category of cryptocurrency designed to maintain a stable value, the Act is highly controversial.

For most people, however, the whole subject of stablecoins is a mystery, so this article will attempt to throw some light on it. It will also explore some historical use cases demonstrating how the government might incorporate stablecoins into a broader program for escaping the debt crisis altogether.

Stablecoin Mania.

The cryptocurrency craze began with Bitcoin in 2008. Conceived as a decentralized alternative to government-issued currency, Bitcoin uses blockchain technology — a transparent, tamper-resistant ledger that all users can view and verify — to facilitate peer-to-peer transactions without relying on banks or payment intermediaries. But to be widely accepted, a currency must have a stable value, and Bitcoin’s value has vacillated wildly. Stablecoins were devised to solve that problem. They are cryptocurrencies that are backed by safe assets (e.g., short-term U.S. Treasuries). Supposedly, holders of stablecoins can redeem the coins at par and at will for cash, just like demand deposits and money market funds.

Stablecoin use has exploded in recent years. As of March 2025, their total market capitalization reached $232 billion, a 45-fold increase since December 2019. Projections suggest this figure could hit $400 billion by year-end and as much as $2.8 trillion by 2028. Stablecoins Tether (USDT) and USD Coin (USDC) dominate the market, holding 86% of it. In 2024, stablecoins processed $27.6 trillion in transfer volume (the total value of stablecoin transactions recorded on blockchains), surpassing the combined volume of Visa and Mastercard. Daily volumes could hit $300 billion in 2025.

Stablecoins are said to be transforming cross-border payments, remittances and DeFi (decentralized finance). They offer faster, cheaper transactions and are used in 71% of cross-border payments in Latin America. In crypto markets, stablecoins account for 60–80% of trading volume on major exchanges. Latin America and Sub-Saharan Africa lead retail and professional-sized stablecoin transfers, with over 40% year-over-year growth. Major banks and fintechs are also integrating stablecoins or have started stablecoin initiatives, including Bank of America, Wells Fargo, Stripe, JPMorgan, PayPal and Société Générale.

Despite their name, however, stablecoins are not entirely stable. They have faced liquidity crises and transparency issues and are vulnerable to runs. Hence the need for regulation. The GENIUS Act of 2025, signed July 18, 2025, requires stablecoin issuers to be banks or approved nonbanks, to maintain 1:1 reserves in safe assets (e.g., U.S. Treasuries, cash) that are audited monthly, and to comply with KYC (Know Your Customer) and AML (Anti-Money Laundering) rules.

The “Backdoor CBDC” Issue.

Was the intent of the Act to create a “backdoor CBDC”? The concern of critical commentators is with privacy and “programmability” — the ability of the issuer to program a digital currency in order to control or block its use.

Skeptics of the backdoor CBDCs theory note that President Trump signed an executive order banning CBDCs in January, citing privacy and economic stability concerns, and that stablecoins are not centrally issued but have many private issuers globally. Any digital currency is “programmable” unless specifically protected against it, and most of our currency is already digital, created on the ledgers of banks when they make loans.

It has been argued that programming the use of deposits could actually be done more easily with our existing network of banks than with globally scattered stablecoin issuers, just by sending the banks orders in automated messages by API. (An API, or “application programming interface,” is “a set of rules or protocols that enables software applications to communicate with each other to exchange data, features and functionality.”) In a July 22 Substack post titled “Has Brazil Invented the Future of Money?”, former New York Times columnist Paul Krugman writes:

“[T]he government can access private bank records under certain circumstances and certainly has the technological ability to watch every financial move you make. The only thing that keeps it from doing so is the law, specifically the Right to Financial Privacy Act. If we ever do create a CBDC, it will surely involve comparable privacy protection.”

Krugman suggests that it is really the banks that are afraid of CBDCs, because people will withdraw their funds from their private bank accounts in favor of their central bank accounts, cutting out the banker middlemen and their much higher fees. He points to Brazil, which has a CBDC-like system called Pix – a sort of publicly-run Zelle in which transactions settle in three seconds on average, versus two days for debit cards and 28 days for credit cards; and the Brazilian authorities have set a requirement that Pix be free for individuals. It is used by 93% of Brazilian adults, compared to a mere 2% of Americans using cryptocurrencies for trade.

Financial commentator Mark Goodwin contended in a recent interview on the Corbett Report that a programmable currency issued by a private stablecoin company could actually be more dangerous than a CBDC. Some of these companies aren’t even domiciled in the United States, and they are not subject to Federal Reserve control. In a July 26th podcast, macroeconomic historian Miles Harris explained that risk like this:

“In the GENIUS era, private stablecoin issuers function as offshore central banks. Liquidity creation occurs outside the Fed’s control, but the underlying collateral—U.S. debt—remains on public books. This creates a governance gap: liquidity is generated by private actors driven by profit, not monetary stability, yet systemic risk returns to the public sector if things unravel. During the Bretton Woods era, confidence in the dollar was theoretically anchored to gold. Today, no such backstop exists. The Anti-CBDC Act prohibits the Federal Reserve from issuing a central bank digital currency (CBDC), leaving no public digital dollar to counterbalance private stablecoins.”

To explain all that might take another article, but in any case the GENIUS Act has passed and is a done deal. Whether or not we approve, we now need to consider its ramifications. Its main purpose seems to be to salvage the federal bond market, which is in perilous straits.

Propping Up the Bond Market and the Dollar. 

The rapidly expanding stablecoin market is projected to be able to fill the void left by disenchanted governments that are dumping Treasuries and “dedollarizing” in response to Western sanctions and U.S. tariffs. According to Senator Bill Hagerty (R-TN), who sponsored the GENIUS Act, it could lead to stablecoin issuers becoming the “world’s largest holders of U.S. Treasuries by 2030.”

Treasury Secretary Scott Bessent says stablecoins are a strategic tool to “lock in dollar supremacy.” As financial commentator Lyn Alden observes, when residents of countries with unstable currencies (such as Argentina) purchase U.S. stablecoins to protect their savings from runaway inflation, the stablecoin issuer uses the local currency of the purchaser to buy U.S. Treasuries. In effect, the local currency has been converted to U.S. currency. That is also true for other institutional uses of stablecoins.

The problem with privately-issued money, however, is that untrustworthy issuers are subject to destabilizing bank runs; and that has been true for centuries. Gaining the confidence of users requires regulation to establish the stability and liquidity of the stablecoins, and hence the need for the GENIUS Act.

How Lincoln Solved His Debt Crisis.

In a 2023 research paper titled “Taming Wildcat Stablecoins,” Professors Gary B. Gorton and Jeffery Y. Zhang compared stablecoin issuers to the private “wildcat banks” that issued their own paper currencies as banknotes during the Free Banking Era before the Civil War. Private state-chartered banks issued their own paper banknotes, which were thinly capitalized and of uncertain reliability and exchangeability. Bank runs were common. The problem was solved through the National Bank Acts of 1863 and 1864.

The Acts sought to stabilize a very chaotic system of private currencies by encouraging banks to acquire national bank charters that would allow them to issue a uniform national bank currency. To ensure its uniformity and stability, the banks were required to back their National Bank Notes 1 to 1 with federal bonds or precious metal coins deposited with the U.S. Treasury. This pool of liquidity — the forerunner of today’s central bank “reserves” — not only stabilized the currency against runs but helped fund the war effort and created a market for federal debt.

It helped, but the bonds purchased by the banks were not sufficient to fund the government’s needs. British-backed bankers were demanding 24–36% interest on loans — usurious terms that risked “recolonizing” the U.S. through debt. President Lincoln avoided that crippling debt by reverting to the funding mechanism of the American colonists – government-issued paper money. Under the Legal Tender Act of 1862, the Treasury issued $450 million in U.S. Notes or Greenbacks — fiat currency spent directly into the economy for soldiers, supplies and contracts.

These innovations allowed Lincoln’s government to bypass foreign lenders, fund the Civil War, and preserve the country from colonization by debt. A similar approach could arguably solve the government’s debt crisis today.

Fast Forward to 2025.

The United States now grapples with a $36.72 trillion federal debt and an interest burden projected to be $952 billion for 2025, consuming 18.4% of federal revenues. The debt to GDP ratio is an unsustainable 124%. Neither raising taxes nor slashing the federal budget will solve what is essentially a math problem: the debt-at-interest is growing faster than the economy itself.

The GENIUS Act, requiring stablecoins to be backed by U.S. Treasuries, follows the same funding model as the National Bank Acts, and it has the same limitations as a funding model. Stablecoins can bolster the market for U.S. debt, but they won’t tame the voracious interest monster that is consuming the federal budget. President Lincoln largely met his funding crisis with currency issued directly by the Treasury, and President Trump could do the same.

This would have to be done, however, through the Treasury, not the Federal Reserve. The Fed can only issue “bank reserves” and is not allowed to fund the federal debt by buying Treasuries directly from the government. It must buy them on the open market, with reserves injected into the reserve accounts of the banks of the sellers. The banks then credit the sellers’ deposit accounts with dollars, but the dollars go to the sellers, not to the Treasury; and the interest on the bonds goes to the banks, due to the Fed’s controversial policy of paying interest on the banks’ reserves.

Today, this interest paid to the banks is actually greater than the interest the Fed earns on the bonds it buys from them, resulting in a negative balance in its portfolio. In a recent interview on Fox News Business, Treasury Secretary Bessent said the Fed was “losing $1 billion a year because of a mismatch in the bond portfolio from the short-term rates.” In 2023, this loss amounted to $114 billion; and it actually accrues to the Treasury, since the Fed is required to rebate its profits to the Treasury after deducting its costs. The Fed has now amassed a negative balance that will take years to pay off.

Thus Federal Reserve purchases of federal securities through “quantitative easing” won’t solve the debt problem. Treasury-issued currency, on the other hand, is legal and constitutional, as established by Lincoln’s Greenbacks and the subsequent legal tender cases of the Supreme Court; and it could actually solve the debt crisis.

Dealing with the Inflation Question.

Printing the whole $37 trillion needed to pay off the federal debt would no doubt be inflationary, and Congress would consider it a bridge too far in any case. But the Treasury could print enough to cover the interest on the debt, or to buy the debt as it comes due, or to cover the budget deficit.

The risk, of course, is that an out-of-control Congress will run the presses as a “magic money tree” to fund all of its pet projects; but limits could be put on these expenditures. They could be required to be “productive,” adding to GDP, lowering the debt to GDP ratio to manageable levels. The German government did this in the 1930s with Mefo bills, avoiding speculative exploitation of the funds by issuing them as payment for specific industrial output.

The People’s Bank of China has hugely increased the money supply of that country without creating price inflation. Prices have been kept stable by increasing supply (GDP) along with demand (money). (For details, see my earlier article here.) Increasing the country’s GDP has been facilitated by China Development Bank, the world’s largest development bank, which has funded massive infrastructure and development across the country.

HR 4052, The National Infrastructure Bank Act of 2023, is currently before Congress and has 48 co-sponsors. Like the Reconstruction Finance Corporation that pulled the U.S. economy out of the Great Depression, the bank is designed to be a source of off-budget financing, without adding new costs to the federal budget. It follows the model of the First U.S. Bank established by Alexander Hamilton. Capitalization is to be with debt-for-equity swaps: Treasuries held by the public will be traded for shares in the bank, paying 2% over the interest earned on the Treasuries. For more information, see the Coalition for a National Infrastructure Bank’s website.

At the local level, state-owned banks could do something similar. Currently our only state-owned bank is the Bank of North Dakota, but it is a very successful model that not only funds state infrastructure and development but generates income for the state and acts as a “mini-Fed” for local banks. For more information, see the Public Banking Institute website.

The GENIUS Act can stabilize the bond market, but it is only a stopgap measure, buying time in the battle against an ever-growing debt. To escape altogether, as Lincoln’s government did, Congress needs to issue some of its own “sovereign” money. If issued for productive purposes in a sustainable way, this money could arguably fuel the economy without reliance on federal debt markets at all.

First published on Scheerpost.com.

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By Ellen Brown / Original to ScheerPost

In February, President Trump said that tariffs would generate so much income that Americans would no longer need to pay income taxes.

The latest plan, according to U.S. Commerce Secretary Howard Lutnick, is to abolish income taxes for people who earn less than $150,000 yearly. That move would affect roughly 75% of workers, according to U.S. Census Bureau data. On its face, this could narrow the wealth gap by boosting disposable income for low- and middle-income households without raising taxes on the wealthy — a politically clever alternative to progressive tax hikes.

Eliminating the burden of income taxes is an exciting proposition, due to savings not just in money but in man-hours — the time spent anguishing over ledgers, forms and receipts. In 2024, according to the Tax Foundation, Americans spent 7.9 billion hours complying with IRS tax filing and reporting requirements. That is equivalent to 3.8 million full-time workers—roughly the population of Los Angeles — doing nothing but tax paperwork for the full year.

The question is, can tariffs and DOGE replace income taxes? If not, how else could the government fund itself? Is a growing debt bubble that is now carrying a $1.2 trillion interest tab, which must continue to expand just to sustain itself, the only alternative?

How Eliminating Middle Class Taxes Would Affect the Budget.

In a March 21 article titled “Ending Taxes Below $150,000 Would Lose $10 to $15 Trillion,” the Committee for a Responsible Federal Budget concludes:

“Even if enacted in a targeted manner, we estimate such a change would reduce revenue by roughly $10 trillion through 2035 if applied to income taxes only and $15 trillion if applied to employee-​side payroll taxes as well. …

If enacted relative to current law, ending taxes on income below $150,000 would boost debt by $12 to $18 trillion with interest, increasing debt-​to-​GDP to between 145 and 160 percent – compared to 118 percent under current law.… Importantly, Commerce Secretary Howard Lutnick has said the proposal would be contingent on achieving budget balance first.”

Dividing the $10 trillion lost over 10 years (2025–2035) gives a $1 trillion loss per year on average, though there may be year-to-year variations. Trump’s team proposes to offset this loss with savings from the Department of Government Efficiency (DOGE) and new tariff revenues, but the math doesn’t look good.

The Prospects from Tariffs and DOGE.

Elon Musk’s DOGE has identified significant areas of federal “waste, fraud and abuse,” but the program was originally projected to save $2 trillion by slashing misused funds. At Trump’s cabinet meeting on April 10, Musk said he expects the agency to find $150 billion in savings in fiscal year 2026, a number significantly lower than even the $1 trillion he said in February he was confident DOGE would find.

Tariffs remain Trump’s primary funding mechanism. He has frequently referenced the 19^th century, when there was no income tax, and tariffs were the principal source of revenue for the U.S. government. In his Liberation Day speech on April 2, he said, “From 1789 to 1913, we were a tariff-backed nation, and the United States was proportionately the wealthiest it has ever been.” Trump’s particular hero is Pres. William McKinley, whose 1890 tariff of nearly 50% was a high point of the tariff policy.

The problem is that in the 19^th century, the U.S. government had far fewer costs. Among other expenses, there was no Social Security, no Medicare and no trillion dollar interest to be paid to investors.

As originally proposed, Trump’s tariffs included a 10–20% universal tariff and up to 60% on Chinese imports. At that rate, the Tax Foundation estimated that the tariffs could raise $1 trillion over a decade ($100 billion/year) after accounting for reduced imports, while the Tax Policy Center put the figure as high as $2.8 trillion ($280 billion/year).

These projections remain speculative, since the results of the trade deals being negotiated are yet to be reported. On April 30, the president stated that negotiations had already resulted in $8 trillion in promised investment in U.S. production, an impressive number, but investments take several years to manifest as new tax income.

For the near term, DOGE cuts at $150 billion per year and tariffs estimated at $280 billion per year would cover less than half the trillion dollar loss projected from middle-class tax cuts. And that is without touching the $1.9 trillion deficit already projected by the Congressional Budget Office, something Commerce Sec. Lutnick said would have to be eliminated before income tax relief could be considered.

The Elephant in the Room.

Even if new trade deals manage to cover the full deficit, the unprecedented federal debt will continue to loom. Currently standing at $36.21 trillion, the debt comes with interest payments projected to hit $1.2 trillion in 2025. That works out to $3.3 billion per day. In effect, all of our middle-class income taxes are being spent just to pay interest to bondholders, foreign and domestic.

Interest costs are expected to rise from 9% of federal revenue in 2021 to 23% by 2034, crowding out federal priorities like infrastructure and healthcare. And that assumes bond buyers keep rolling over the debt at current rates. For FY 2025, an estimated $9.2 trillion — fully a quarter of the debt — will come due and need to be refinanced. What if foreign countries, which hold approximately 30% of the debt, decide to invest elsewhere?

The most efficient to fill the trillion dollar hole left in the budget if middle-class income taxes are eliminated might be to take an axe to the trillion dollar interest tab and the federal debt sustaining it. But how?

Even Quantitative Easing Won’t Work to Eliminate the Interest Burden.

Many economists think new rounds of quantitative easing (QE) are necessary, as the only way to keep Treasury interest rates low. QE is a maneuver by which Treasury debt is purchased by the Federal Reserve with newly issued bank reserves. The debt could theoretically be eliminated by having the Fed buy the securities as they come due. Assuming $9.2 trillion in debt maturing annually, the whole debt could be moved onto the books of the Fed in about four years, and since the Fed is required to rebate its profits to the Treasury after deducting its costs, this could theoretically eliminate the interest burden. But there are two wrinkles:

1. The Fed is not allowed to buy federal securities directly from the Treasury. It primarily conducts its open market operations, including QE Treasury purchases, through primary dealers, a select group of large financial institutions designated by the Fed to act as its counterparties in the open market.
2. Ever since 2008, the Fed has been paying interest on the banks’ reserve balances (IORB), which counts in the costs it deducts from the profits it returns to the Treasury. The rate on IORB set by the Fed is 4.4% as of May 2, 2025, while the average interest rate on the federal debt is approximately 3.3% for the fiscal year-to-date 2025.

Thus if the Fed were to buy $9.2 trillion in federal securities this year, it would receive $9.2 trillion × 3.3% in interest but would have to pay IORB on the same $9.2 trillion at 4.4% to the banks, a net loss to the Fed. In effect, the banks would be receiving the interest rather than the Treasury, unless a couple of laws were changed, and changing them would no doubt meet with heavy resistance from the powerful banking lobby.

Why, you may ask, does the Fed feel it needs to pay interest on bank reserves? Good question. It’s a monetary policy tool designed to curb inflation by setting a floor on the fed funds rate, the rate at which banks lend to each other. Since banks won’t lend at rates lower than they can safely earn from the Fed, it’s a way to keep interest rates high. But the result has been that the banks have simply reduced their lending. Why lend to risky local businesses when they can sit back and collect a safe and ample return from the Fed itself?

It’s a controversial windfall to the banks, to support an interest rate that is itself controversial. But the bottom line is that the Fed is not able to bail out the government from its trillion dollar interest tab. What then is to be done?

A Radical Alternative Whose Time Has Come.

Given the president’s predilection for 19th century economics, he could go a bit further back than to President McKinley. Abraham Lincoln, the first Republican president, avoided a crippling national debt by resorting to the funding mechanism of the American colonists: let the government print the money directly, not through a banker-controlled central bank but through the Treasury. The government could buy back its debt with U.S. Notes or “Greenbacks,” as permitted under the Constitution (Article I, Section 8) and declared legal by the Supreme Court. These new currencies could then be used to repurchase maturing Treasury securities debt- and interest-free.

Critics will cry “hyperinflation,” arguing that the newly-issued currency would flood the economy, spiking demand and prices. But if new money is directed to productive investments — for example infrastructure, energy, and healthcare — supply and demand will rise together, stabilizing prices. The Chinese demonstrated this in the 25 years from 1996 to 2025, when their domestic money supply was inflated from 4,840 CNY (Chinese yuan) to 320,526 CNY, or by 5500%; yet the price level remained stable and low. For a fuller explanation with data, see my earlier article here.

To ensure that the Greenbacks finance growth, a national infrastructure bank could channel funds into projects such as affordable housing, high-speed rail, broadband, the power grid and large water and transportation projects. China is again the modern model. It has three giant “policy banks” assigned to implement the policies of the government, including China Development Bank, the world’s largest infrastructure and development bank. A U.S. version could prioritize projects with high economic returns, vetted by transparent, DOGE-like algorithms to prevent waste and cronyism.

We desperately need infrastructure funding, and the current federal budget has no room to adequately address those needs. A viable proposal for a national infrastructure bank, H.R. 4052, currently has 47 cosponsors. The bank would use off-budget financing on the model of the Reconstruction Finance Corporation, the federal financial agency that rebuilt the country’s infrastructure during the banking crisis of the 1930s. For more information, see the NIB Coalition website.

For state and city governments, public banks on the model of the Bank of North Dakota could address local infrastructure needs. See my earlier article here and the Public Banking Institute website.

Prosperity Without Debt.

It has been argued that “just printing the money” would jeopardize the federal government’s credit rating. Perhaps, but we wouldn’t need credit if we could create our own, debt-free. To repeat an editorial directed against Lincoln’s debt-free Greenbacks attributed to the 1865 London Times, which may be apocryphal but nevertheless demonstrates the possibilities:

“If that mischievous financial policy which had its origin in the North American Republic during the late war in that country, should become indurated down to a fixture, then that Government will furnish its own money without cost. It will pay off its debts and be without debt. It will become prosperous beyond precedent in the history of the civilized governments of the world. The brains and wealth of all countries will go to North America. That government must be destroyed or it will destroy every monarchy on the globe.”

Lincoln’s Greenback policy was indeed destroyed, along with the president who dared to implement it. But the U.S. government is powerful enough today to pull that “mischievous financial policy” off. A Greenback-funded debt buyback could offer a way to pay down debt without interest costs, while spurring growth through targeted investments monitored through a national infrastructure bank and local public banks to absorb demand productively. In several years, the whole $1.2 trillion interest tab could be slashed from the budget, making our trillion dollar middle-class income tax payments that barely cover that expense unnecessary.

The full budget could even be funded with Treasury-issued Greenbacks, eliminating the need for taxes at all. DOGE has demonstrated the possibilities for monitoring the government’s expenditures transparently and accountably with artificial intelligence. And as AI progressively replaces jobs, the government will need some form of universal basic income to supplement or replace worker salaries, perhaps “Social Security for All.”

Granted, that raises new issues around the privacy and programmability of a government-issued digital currency. But as Cornell Prof. Robert Hockett argues in his book, The Citizens’ Ledger, these can be overcome with cryptographic protections. For people leery of digital government-issued dollars, the Treasury could exercise its constitutional power to issue coins and paper dollar bills. Those are all complicated issues for another article, but the possibilities are provocative. We can escape the debt trap engineered by a private banking system that creates money as debt at interest – and escape the middle-class income taxes paying for that interest – by returning the sovereign power to issue money to the Treasury.

First published on Scheerpost..com.

Shared via Creative Commons.

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