US Debt and Your Savings: How to Find Your Real After-Tax Return

The US national debt passed $40 trillion, and the usual headlines warn of a crisis. The video makes the opposite argument: nothing dramatic is likely to happen, and that is exactly how the debt gets handled. The mechanism is a quiet gap between two numbers the government publishes itself, and it shows up in the real return on ordinary savings.

The video opens with a clip of Jerome Powell saying the level of US debt is “very much sustainable,” but the path of the deficit is not. Here is how the video explains why both halves can be true, and how to calculate what the gap means for your own money.

How big is the US debt, and what does it cost?

According to the Treasury’s Debt to the Penny page, total public debt outstanding on September 8, 2026 was about $40.08 trillion. About $32.4 trillion of that is held by the public: investors, funds, pensions and foreign central banks. The rest is owed by the government to itself.

The video argues the size alone tells you little. What matters is the rate. The Treasury’s monthly table of average interest rates on US Treasury securities showed a blended rate of 3.49% on total interest-bearing debt at August 31, 2026. Interest expense in the first 11 months of the 2026 budget year came to about $1.27 trillion.

What is the real interest rate the government pays?

The real rate is the interest rate minus inflation, and it was close to zero. The Bureau of Labor Statistics’ Consumer Price Index stood at 323.048 in July 2025 and 333.918 in July 2026, a rise of 3.36%.

Put next to the 3.49% the government pays, the real rate on $40 trillion of debt is about positive 0.13%. In the video’s words, the largest borrower in the world is borrowing almost for free.

What do savers actually earn after tax?

Savers do worse, because the tax code taxes the whole interest payment, including the part that only compensates for inflation.

The video’s example is a holder in the 32% federal bracket earning 3.49%. About 1.12 percentage points go to federal tax, leaving about 2.37%. With prices up 3.36%, the real after-tax return is about negative 0.99%. The saver loses buying power and pays tax along the way.

Federal bracket	Real return after federal tax (approx.)
22%	-0.64%
24%	-0.71%
32%	-0.99%
35%	-1.09%
37%	-1.16%

Every bracket is negative at these published numbers. On $500,000 of safe money in the 32% bracket, the video puts the annual loss of purchasing power at about $4,960. That loss never appears on a statement, because the balance still goes up.

Has this happened before?

Yes. The video points to a 2011 NBER working paper, number 16893, by economists Carmen Reinhart and Belen Sbrancia, titled “The Liquidation of Government Debt.” They estimated that for the US and UK, negative real interest rates liquidated debt equal to 3% to 4% of GDP per year, on average, between 1945 and 1980.

The Treasury’s historical tables show how it played out:

1. June 28, 1946: total federal debt was about $269 billion, the post-war peak.
2. June 30, 1974: total federal debt was about $475 billion, a 76% increase.
3. Over the same period, the CPI annual average rose from 19.5 in 1946 to 49.3 in 1974 and 82.4 by 1980.

The debt was never paid off and there was no default. Yet, by the video’s calculation, a dollar lent in 1946 was repaid in 1974 in money worth about 39 cents, and by 1980 in money worth about 23.7 cents. A saver who bought long-term government bonds in 1946 and held them received every payment in full and still lost roughly three-quarters of their purchasing power.

The Federal Reserve’s own published history describes part of the mechanism. In April 1942, at the Treasury’s request, the Fed committed to a 3/8% rate on short-term Treasury bills and implicitly capped long-term bond rates at 2.5%. It said that maintaining the peg meant giving up control of its portfolio size and the money stock. The arrangement lasted until March 1951.

What does the inflation-protected bond reveal?

The Treasury issues bonds protected against inflation, where the principal is marked up as prices rise. Because that protection costs money, the Treasury reports it as its own line, inflation compensation. According to the video, it came to about $70.1 billion on publicly issued securities in the first 11 months of the 2026 budget year, and over $132 billion including the government’s internal accounts.

The same Treasury table shows these protected bonds paying an average rate of about 1.134%, compared with 3.490% on everything else. The video’s point: on the protected bond, inflation is paid openly. On the rest, it isn’t.

Why it may not repeat exactly

The video presents the strongest objection. In the 1940s, money couldn’t easily leave the country, so savers had nowhere else to go. Today savings can move into foreign currencies, foreign markets, gold or crypto from a phone. The video concedes this makes the outcome less certain, while noting the arithmetic is already negative at current published rates.

It also quotes the current Fed chair, at his first press conference, saying inflation has run well ahead of the Fed’s 2% goal for more than five years, and that “there’s only a target and it’s 2%.” And it returns to Powell’s clip, in which he said the US is running a very large deficit at essentially full employment and the fiscal picture is “not really being addressed.”

How to calculate your own real after-tax return

The video’s four-step method, which it suggests repeating once a year on the same day:

1. Get the rate you’re actually paid. Use your statement, not the headline rate in an app: Treasuries, CDs, money market or savings.
2. Get the current inflation number directly from the Bureau of Labor Statistics release, not a headline about it, which may quote a different measure.
3. Multiply your rate by one minus your top tax rate, meaning the rate on your last dollar earned, federal and state. Most people forget the state part.
4. Subtract inflation. What’s left is your real after-tax return.

What to watch next

The two numbers that drive all of this update every month on public government websites: the Treasury’s average interest rates table and the BLS CPI release. If the government’s average rate stays at or below inflation, the video argues, buying power keeps moving quietly from savers to the borrower. Checking both once a month, and your own real return once a year, tells you whether that gap is affecting you.