Ok, closer. Money is debt- that much is true. But you’re still misunderstanding what that means. Money created by the government is debt (an IOU) in the sense that it is redeemable for tax credit. That is, when the government issues a dollar in exchange for goods and services, it is saying “I owe you one dollar of tax credit”. When you pay your taxes, the debt is redeemed. Notice that government spending comes first. How can you pay taxes before the money is issued? You can’t. The government doesn’t need tax dollars to spend. It spends dollars and then collects them back via taxation. Remember, the US government is the ONLY entity that can create dollars. There is no ‘burden’ on future generations. It doesn’t work like that.

What we need to worry about is inflation, employment, social welfare, etc. The nominal debt level and debt-to-GDP ratio don’t tell us anything interesting about what our policies should be. The fiscal deficit might be interesting, because that tells us whether the government is creating more dollars than it is ‘destroying’ (via taxation) at any given time. But even the deficit is not really a guide to policy. It’s just a data point.

Corporate accountant and former auditor with degrees in philosophy and accounting.

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