An alternative to popular faith
Here is the solution to the federal debt problem — a solution that involves neither increased taxes nor reduced spending.
The federal debt is caused by deficit spending. Taxpayers do not pay for deficit spending, which by definition is spending above tax receipts. Yet taxpayers find the debt worrisome for two reasons: They incorrectly believe someday, they or their grandchildren will have to pay it, and they incorrectly believe large federal deficits cause inflation.
Those concerns affect efforts to improve our health care system, crumbling infrastructure, bad schools, excessive taxes, bankrupt states, Social Security funding, poverty, joblessness and homelessness, Internet service, NASA funding, military funding, disease research and repeated recessions. The solutions require deficit spending, which debt fear prevents.
Currently the government obtains money for deficit spending by borrowing. It borrows by creating T-securities (T-bills, notes and bonds), then selling them. These T-securities are created in unlimited quantities out of thin air. This method, though still used, actually became obsolete in 1971, when President Nixon took us off the last vestiges of the gold standard. Before then, T-securities were collateralized in part by gold, which limited their issuance. Today, they are collateralized solely by the “full faith and credit” of the federal government, a resource the government has in unlimited supply.
Just as the government now creates T-securities out of thin air, it as easily and prudently could create money directly – also out of thin air and also backed only by full faith and credit.
Ending the creation and sale of T-securities would end the creation of debt. No longer would we suffer over deficits, fears that nations might refuse to lend to us and fears our path is “unsustainable.” Rather than “deficit spending” the process would be called “money-creation,” and what now is called “debt,” would more properly be called “Net Money Created.”
By eliminating debt, we would eliminate taxpayers’ concerns they or their grandchildren would pay it. Further, because the federal government now controls not only the supply, but the demand for U.S. money (via interest rates), large federal deficits have not caused inflation. See chart, below:
Since we went off the gold standard, there has been no relationship between deficits and inflation.
The elimination of T-securities would allow us to create the money to solve our many economic problems and to prevent the negative economic consequences of tax increases or spending decreases.
Rodger Malcolm Mitchell
http://www.rodgermitchell.com/
#Monetary Sovereignty - Mitchell 
When the media or politicians shout the sky is falling because of our national debt, it’s either a lie and more corruption or a complete lack of understanding?
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You are correct. Unfortunately, the myth is so deeply embedded in the public’s mind, it would require a brave politician indeed, to say the debt is not a problem.
Rodger Malcolm Mitchell
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Doesn’t make sense. Even if we eliminate deficit spending, we still have a $14T debt to deal with. Even if we could apply $500B/yr to the debt, it would still take ~30years to elimate the debt. The likelihood of our being able to apply $500B/yr to the debt is almost ZERO as people would very quickly say “hey, that’s money we could apply to education, jobs, etc. or just put it back in my pocket”. Reduce the surplus in this way and the time to repay the debt goes up ($100B/yr means 140 years to repay the debt).
The debt seems unpayable.
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David,
Here is how to eliminate the federal debt without creating one additional dollar. First you have to understand how the debt is created. You also must understand that federal “borrowing” bears zero relationship to “borrowing” as you know it. Totally different.
Federal debt is nothing more than the total of T-securities. When anyone (say, China) wishes to lend to us (i.e. buy T-securities):
1.China first must must deposit already existing dollars into its checking account at the Federal Reserve Bank.
2. Then, to lend to us, it instructs the Treasury to debit its checking account and to credit its T-security account, also at the Federal Reserve Bank. It is a simple transfer, identical with what happens when you tell your bank to transfer money from your checking account to your savings account.
3. To redeem the T-securities, the Federal Reserve Bank makes a reverse transfer. It debits China’s T-security account and credits its checking account. No new dollars are created.
People continually confuse federal borrowing with personal borrowing, and believe the federal government has the same payback constraints as people do. The two processes are completely different, like comparing butterfly caterpillars with Caterpillar equipment.
Rodger Malcolm Mitchell
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