National Debt

National Debt is Our National Asset

© by Mark Dempsey

Conservative pundits like George Will and his colleagues from the Koch-funded American Enterprise Institute want the Federal government’s budget to balance, just like a household budget. But there’s a fundamental distinction between Federal and household budgets. The Federal government makes dollars; households use them. Federal “Debt,” if we can call it that, is completely different from household debt if only because that obligation is to pay something the government can make virtually without limit or cost: dollars.


Federal “debt” is also the inverse of household debt, just as your assets in bank accounts are the bank’s liabilities. The headlines never read: Bank Depositors say ”Your debt to us [i.e. our accounts] is going to crush our grandchildren!”--that would be crazy. Nevertheless, there’s a well-funded campaign to persuade the American public that National “Debt” is harmful, even though that “debt” is, in fact, the population’s savings.



That’s right, the dollars in your wallet amount to checks made out to cash. They appear on the Federal Reserve’s books as a liability, just as your checking account is a bank liability. The common name for the total of all dollar financial assets in circulation: “National ‘Debt.’”


Reduce the “Debt,” and you’ll reduce the population’s savings--money available for emergencies, among other things. Historically, waves of loan defaults, asset forfeitures and foreclosures follow such “Debt” reductions. The false equivalence between households that use money and the government that creates it has persuaded American politicians to reduce National “Debt” significantly seven times since 1776. The last such reduction was the Clinton surplus. The time before that occurred in 1929. What follows such "Debt" reductions 100% of the time? A Great Depression-sized hole in the economy.


Reducing deficits produces disastrous results, and is the foundation of the non-working austerity policies we now enjoy. “Austerity was tried, and tried again--its application was not wanting--and it simply didn’t work. In fact, its repeated application made things worse, not better, and it was only when states stopped pursuing austerity that [their economies] began to recover.” (Mark Blyth, Austerity: The History of a Dangerous Idea)


This also means the Federal government is not funded or provisioned by its tax revenues; money is an unlimited public monopoly and taxpayers do not fund fiscal expenditures--meaning that we can have nice things like single-payer healthcare, and free college tuition without raising taxes, just as government funded multi-trillion-dollar bank bailouts and wars without raising taxes.  Government spending is not constrained by money deficits, only by real resources.


Government must spend the money before it can ask for some back in taxes. Taxes make the money valuable, they don’t fund expenditures. Government leaves some dollars in the economy--it doesn’t tax them all--so we can conduct our business.


What do we call the dollars left in circulation? “National Debt”! Do we need to spend less on Social Security because we’re running out of dollars? Did the financial sector hear that when bank bailouts were the topic discussed? (Hint: no)


National “Debt”...we reduce it at our peril.