The national debt, at the beginning of November, exceeded $23 trillion. Consequently, debt per U.S. citizen is approximately $70,000.

The word “debt” in federal financing of spending is a complete misnomer when we attempt to apply it to anything in the private sector. To unpack a discussion such as this it is almost necessary to back up to the point of “what money is” and begin again in the proper context.

Our Constitution gave Congress a monopoly patent on the nation’s currency in Article 1: Section 8, along with a mandate that it creates that currency “for the common welfare”. While almost anything can be created or utilized as a currency it is only valuable if it is generally accepted to conduct commerce. The founders fixed this by also giving Congress the power to levy taxation payable only in the currency it creates at will. This authority created a need for the currency in the private sector and made resources and labor available to provision the government without requiring it to have its own revenue stream.

The U.S. government collected $3.46 trillion in taxes during F.Y. 2019 but spent $4.44 trillion. Therefore it had to borrow $984 billion just to meet expenses.

The US Congress has never needed its currency back to enable its spending, but it does need us to need its currency and occasionally to have less of it to control inflation or achieve social goals. To establish this condition it is necessary to spend more than it taxes back to provide the private sector with a store of value/savings. Otherwise, the people would quickly realize that the government was effectively stealing resources and labor by clawing back all payments for them with taxation, which is what a balanced budget does.

When we did that gold nonsense the amount of currency in circulation had to be less than the value of the gold reserve that it was convertible to. Treasury bonds swapped non-convertible investment vehicles that paid a small return for convertible cash reserves to allow Congress to anticipate tax collections and overspend the reserve value of our gold until taxes could be collected to draw down the total cash reserves. This also leveled out the wild swings of cash reserves between spending and tax collection and stabilized the banking system. At no point, however, were those bonds revenue for spending or an obligation of taxpayers.

Creditors keep lending the United States cheap money because the U.S. Dollar is the world’s dominant reserve currency.

The US dollar is self-funding and the number of them required to purchase a bond must be created first as Treasury only accepts dollars. Spending funds bond sales, not the other way around. The idea that the monopoly issuer of the dollar needs to borrow its own dollars back to fund spending is absurd, as should be obvious to anyone. Treasury bonds were retained in the system after we left the gold standard to allow the Fed leverage to manipulate interest rates (monetary policy) upward and to provide a secure store of value for the private sector. not to fund anything.

Where would creditors get money to lend to us if they didn’t already exist? They, like all of us, only have money because Congress created it in excess of taxation, which is the definition of the deficit. Dollars never leave the US banking system except for some minimal amounts of cash. Our economy is just a big spreadsheet that the Fed shares with Treasury as its clearing bank. China is one of the largest holders of US Treasury bonds because we buy a lot of their stuff. They can’t make dollars any other way. What we owe China is a bank statement and a return of dollars they got by trading real resources and labor for dollars. Given that we can create those dollars as easily as we can for any other purpose, China has no financial leverage on us.

Congress spends with votes, not dollars. It decides what it wants to fund in the private sector and the Fed, with authorization from Treasury, marks up accounts with keystrokes as necessary to achieve the purpose of the appropriation by Congress. Every dollar created in the private sector is matched with a dollar of debt in the public (government) sector to track and error check the money flow. This is a requisite of dual entry spreadsheet accounting used worldwide. The dollar and the debt cannot both exist in the same sector, as they cancel each other to zero.

The public sector holds debt (liabilities) and the private sector holds the dollars (assets) until dollars are used to pay a federal tax obligation or purchase a Treasury bond. The private sector (us) cannot be responsible for the debt or it would be paid automatically by accounting functions and we would have no money. Conversely, the public sector (government) can never “have” money from any source waiting to be spent. The government is always “broke”, by design, because it never needs money to spend.

Over time, as the United States’ debt increases, the value of the U.S. Dollar will eventually decline, and the interest rate on U.S. debts will skyrocket.

Once investors start dumping the U.S. Dollars and rushing to other currencies, demand for U.S. Treasury Bonds will fall, and interest rates will spike.

This would be possible, “IF” bonds were a funding mechanism, but they are not and serve little purpose except in setting interest rates. The Fed, as I mentioned above, shares a balance sheet with Treasury. This means it can buy Treasury debt at no net cost to either, so it will always be the gorilla in the room for bond sales.

I know several economists that are in favor of ending Treasury bonds completely and just using interest dividends on excess Fed reserves to regulate monetary policy. This is largely because of the political fodder of “debt” that pays interest being such low hanging fruit to create the aversion to public purpose spending that is so badly needed in America.

However, if interest rates returned to the level they were during the 1981–82 recession, the U.S. would have to spend 44% of its tax revenue on interest. At such a level, the U.S. government would struggle to finance Medicare, social security, defense spending, and the massive welfare state.

Those rates were purposefully set by the Fed to create a somewhat controlled recession to set back the inflation caused by the oil embargos and rapidly rising energy costs resulting from that. With a fiat currency and floating exchange rate, the government could have easily purchased all oil needed at market price and sold it at a price that didn’t inflate the economy so quickly, but that would have been opposed to Reagan’s rhetoric that made people believe their federal government can’t do anything for them.

The federal government, being the monopoly issuer of sovereign fiat dollars, can “afford” anything that can be purchased with dollars at any price. It can never “run out of” dollars or fail to pay any obligation denominated in dollars. Taxing and spending are separate operations and are only connected by mostly meaningless accounting entities of deficit and debt.

Interest payments are also net injections of dollars into the private sector, not burned money. Future spending is not dependent upon past spending or tax collections as long as the resources and labor exist to accomplish the goals the spending is deployed to accomplish. As much as people want to relate their own budgeting experience to their government, they are not the same, and more often opposite, unless someone has a legal printing press in their basement to produce as much money as they wish.

Many European Union leaders want the Euro to replace the U.S. Dollar as the world’s reserve currency. However, E.U. political divisions and economic stagnation prevent central banks in Europe from fully embracing the Euro.

Those countries that gave up their sovereign currencies to adopt the Euro reduced their options severely and subjected themselves to a currency they cannot create or control. They are now in a situation very similar to what the states in the US find themselves in when the central bank doesn’t properly fund their economies. As much mileage as conservative politicians get out of Greece’s problems I would rather be poor there than in Mississippi.

A U.S. debt crisis may becoming very soon. To avoid economic depression, the U.S. government has to reduce future entitlement spending.

There it is. The purpose behind the false rhetoric around the deficit and debt that has been pushed on us for decades. To make America successful we must make sure its people aren’t? The wealthiest nation in world history can’t “afford” to allow its people to be secure from destitution when they become sick, or simply live too long to be useful to “markets” any longer? We can’t afford to provide education and a first-world infrastructure to assure future generations of a shot at competing in an ever-shrinking world?

This is much more complex than “tax the rich”, or “everyone paying their fair share”. This goes to the basic fundamentals of how our monetary system works and the forces that promote a falsehood for their own enrichment. Wealth is a comparative thing, not an absolute measure. The best way to deal with wealth is to make it irrelevant to funding America’s prosperity. Then, if they don’t contribute to America with investments that benefit it, we can feel secure in making sure they don’t remain as comparatively wealthy as they currently are, and make subverting our democratic process with their wealth a “real” criminal action.

As long as people can be kept desperate and made to believe “their” money funds the government they will resist any social or public purpose spending, especially if it benefits someone deemed “unworthy”. Fear is a powerful motivator, especially if it resonates with their own experience as “users” of the nation’s currency and their fear can be expanded into a general fear for their loved ones and country. The truth is that their government “funds” them and that any misery in this rich country is entirely a political decision, not economics.