National Debt

Current Congressional Posture

The current federal national debt is justified by Modern Monetary Theory (MMT), endorsed by nearly all the economists in the current administration.

It suggests that governments can and should use fiscal policy, such as taxation and spending, to manage their economies. In this approach, the government’s budget is not constrained by the need to balance its spending with tax revenue. Instead, the government can print money to fund its spending, as long as the economy has the capacity to produce the goods and services needed to absorb the increased money supply.

Key Principles of Modern Monetary Policy

1. Fiscal Policy as the Primary Tool: MMT emphasizes the use of fiscal policy, such as taxation and spending, as the primary means of achieving full employment and stabilizing the economy.
2. Monetary Policy as a Secondary Tool: In MMT, monetary policy, such as setting interest rates and adjusting the money supply, is seen as a secondary tool to support fiscal policy.
3. No Limit on Government Spending: According to MMT, there is no limit on government spending, as the government can always print more money to fund its activities.
4. Inflation Control: MMT proponents argue that inflation can be controlled through fiscal policy, such as increasing taxes or reducing government spending, rather than relying solely on monetary policy.

Debt has grown, but it has allowed our government to fund exceptional social benefits. To bring it back down we simply need to increase taxes on the wealthy while continuing to stimulate the economy through fiscal policy. If we drastically cut spending by the government, who do we start with? Everyone wants it to start with someone else, but that’s the essential problem.

Danger of Debt

Modern Monetary Theory has been the driving force behind the explosive growth of the national debt to $34.7 Trillion, which continues to grow by $1 Trillion dollars every 100 days. This is irresponsible and short sighted.

When interest rates were close to zero federal lawmakers could ignore this growth without accountability. Now that interest rates seem to be here to stay for the foreseeable future, just the interest on the debt in 2024 is roughly 16% of federal spending** which makes it the third highest item in the budget, only surpassed by Health & Human Svcs at 26% and Social Security at 22%. This is more than National Defense (12%), Veteran's Affairs (5%), Agriculture (3%), Education (3%), Transportation (2%), and all others (11%)*.

Again, this is only the interest on the debt, not paying down of any of the debt itself. The irresponsibility of years of poor legislative decisions are now blatantly obvious and poised to cause a serious budgetary hardship.

Some Modern Monetary Theory proponents suggest we can let the debt be dissolved by inflation in coming years and increasing taxes. Runaway inflation has a disastrous effect on nearly every American except the wealthiest, impacting the poor and middle class the most. The problem with increasing taxes is the resultant decrease in federal revenue that typically follows.***

Everyone who has run up a credit card bill until it is unmanageable knows the painful result. Modern Monetary Theory has been the congressional excuse to please everyone by running up the bill. When interest on the debt was near zero, the consequences were easy to hide. Now that interest is higher, the problem can’t be covered up. The additional reality of Social Security defaulting by 2035, which suddenly doesn’t seem so far off, casts an ominous specter. It’s time for a serious and sweeping change in Washington.

* US Federal Spending in 2024 Fiscal YTD by Category, ** As of May 2024 it costs $728 billion to maintain the debt, which is 16% of the total federal spending in fiscal year 2024. *** Over Simplification of lower tax rates accompanying government revenue increases.