Hazlitt’s point is that one cannot justify government expenditures by pointing to the benefit they do, a bridge is built, 100 people are employed, etc. One use of resources can only be justified by showing that it is more valuable to people than their best alternative use. This is precisely what entrepreneur demonstrate each time their production earns profit. Government cannot do this because it raises revenue through coercion, i.e., taxation.
It follows that the direct burden of government on society is the extent to which it diverts resources from private hands into its own. If government expenditures for wars and other programs that control the use of resources were slashed and the resources returned to private hands, then society would be better off. If the reduced expenditures were matched by reduced taxes, it wouldn’t affect the expenditures made to service the debt. (Expenditures to service the debt are those made to pay interest on the debt. There is neither a “sinking” fund to pay off the principle nor any proposals to pay down the debt by running surpluses. If there were, then total expenditures and taxes would not necessarily fall.)