United Airlines’ frequent flyer deficit in 2024 was $298 million, bringing the total frequent flyer debt to $7,441 billion. This is a ticking time bomb.
The $7.4 billion in frequent flyer debt is yet another stunning reminder of the terrible state of United’s finances. Spending miles and receiving miles are woefully out of balance – to the tune of nearly $3 million annually and rising – and instead of addressing this imbalance, United keeps choosing to make things worse.
Except this is all nonsense.
It’s a lift from an August 12, 2025, article by the Committee for a Responsible Federal Budget (CRFB), which is a regular fountain of nonsense. Here is precisely what the CRFB article said.
“The gross national debt hitting $37 trillion is yet another stunning reminder of the terrible state of federal finances. Spending and revenue are woefully out of balance – to the tune of nearly $2 trillion annually and rising – and instead of addressing this imbalance, Congress keeps choosing to make things worse.”
There are direct parallels between United Airlines’ frequent flyer miles and U.S. federal deficits and debt:
1. Infinite Issuer
United: Can issue as many miles as it wants. There is no operational limit.
Federal Government: Can issue as many dollars as it wants. There is no operational limit.
(Federal Reserve Chairman Ben Bernanke: “The U.S. government has a technology, called a printing press or, today, its electronic equivalent, that allows it to produce as many U.S. dollars as it wishes at essentially no cost.”)
Neither needs to “get” miles or dollars before creating them. Dollars and mileage credits are not physical; they both are nothing more than bookkeeping notations.
2. Deferred Redemption (a.k.a. “Debt”)
United: When miles are awarded but not yet redeemed, they show up as a liability (“deferred revenue”) — in 2024, that was $7.441 billion.
Federal Government: When the Treasury spends more than it taxes, the difference (the so-called “debt”) is really just outstanding government securities — promises to accept back the dollars it created in the first place. Both a dollar bill and a T-bill are dollar-denominated obligations of a government that can make an infinite number of dollars.
In both cases, these “debts” are just obligations to honor the thing the issuer itself controls.
3. Deficit as Ongoing Flow
United: Each year, miles created exceed miles redeemed — a “miles deficit.” But that’s precisely what keeps the program alive and attractive. If miles were never made in excess, the system could not function.
Imagine what would happen if United were to demand that its customers give back more miles than they received — similar to the federal government running a surplus. The entire system would collapse, just as the economy collapses when the government runs a surplus.
Depressions and Recessions Begin With Federal Surpluses
1804–1812 48% 1807 Depression began in 1807
1817–1821 29% 1819 Depression began in 1819
1823–1836 99% 1837 Depression began in 1837
1852–1857 59% 1857 Depression began in 1857
1867–1873 27% 1873 Depression began in 1873
1880–1893 57% 1893 Depression began in 1893
1920–1930 36% 1929 Depression began in 1929
1947–1948 3.6% 1949 Recession began in 1949
1969–1970 3.4% 1970 Recession began in 1970
1997–2001 15% 2001 Recession began in 2001
Federal Government: Each year, dollars spent typically exceed taxes collected — a “fiscal deficit.” But that’s precisely what keeps the private economy supplied with net financial assets. Without it, economic growth stagnates, and we experience recessions or depressions.
4, Control over Rules and Laws
United has complete control over all the rules about the use of its mileage credits.
The federal government has complete control over all the laws about the use of dollars.
5. Not a Threat
United’s miles: Nobody worries that a growing balance of unredeemed miles will bankrupt the airline. In fact, the mileage program is the airline’s largest profit center. (The airline loses money on flights.)
Redemption is completely under United’s control; it determines how mileage points are used, and predictable breakage occurs. Additionally, United can always issue more points if it wishes.
Federal “debt”: Likewise, it’s not a threat to the U.S. government. The federal government has the infinite ability to pay debts, interests or any other financial obligation denominated in dollars. The danger comes only from artificial limits (e.g., debt ceiling politics), not from the mechanics of issuing dollars.
IN SUMMARY
United’s “mileage debt” is not a financial danger to United. It is a profit center. Likewise, the federal “debt” is not a financial danger to the government. It is a profit center for the economy.
United’s mileage program and the government’s deficits are artifacts of accounting terminology, not solvency constraints. Both have minimal cost and are highly profitable — the former for the airline and the latter for the economy.
The danger isn’t in the numbers—it’s in the myths we build around them.United Airlines’ mileage program and federal finances. United has an infinite supply of mileage credits; the government has an endless supply of dollars. The supply of mileage credits and dollars is entirely controlled by their issuer.
This is an update of the many, many previous posts showing the seemingly never-ending warnings about “federal debt” (that isn’t federal and isn’t debt).
The purpose has been to demonstrate how, year after year, so-called experts claim the U.S. is about to enter catastrophe because federal debt is “too high,” while the experts are proven wrong year after year. The economy grows and grows and is healthier than ever.
I’ve been doing this for over 20 years; the experts have been wrong for over 85 years, and they never seem to learn. While I find it frustrating, I’ve tried to remain civil and merely recite the facts. But now, as I pass my 90th year, and the road ahead is short, I’ve grown impatient with civility, and I’ve decided to call it like it is: BULLSHIT.
Last year, what set me off is a BULLSHIT tweet (or whatever “X” calls them now), from the richest man in the world, who, despite his great wealth, seems to know diddly-squat about federal finance:
No Elon, the U.S. federal government, being Monetarily Sovereign, cannot go bankrupt. Even if tax collections fell to $0, and spending tripled, the federal government could continue to pay all its bills, forever.
The Big Lie in economics is: “Federal taxes fund federal spending.” Wrong. Wrong. Wrong.
Control the economy by taxing what the government wishes to discourage and by giving tax breaks to those the government wishes to reward (mainly the wealthy).
Assure demand for the U.S. dollar by requiring taxes to be paid in dollars.
That’s it. Taxes do not fund federal spending. Period.
The U.S. federal government is not like state/local governments, not like euro governments, not like businesses, and not like you and me.
It is uniquely Monetarily Sovereign. It cannot, unwillingly, run short of its own sovereign currency, the U.S. dollar. As real experts have said:
Former Federal Reserve Chairman Alan Greenspan: “A government cannot become insolvent with respect to obligations in its own currency. There is nothing to prevent the federal government from creating as much money as it wants and paying it to somebody. The United States can pay any debt it has because we can always print the money to do that.“
Former Fed Chairman Ben Bernanke: “The U.S. government has a technology, called a printing press (or, today, its electronic equivalent), that allows it to produce as many U.S. dollars as it wishes at essentially no cost. It’s not tax money… We simply use the computer to mark up the size of the account.”
Statement from the St. Louis Fed: “As the sole manufacturer of dollars, whose debt is denominated in dollars, the U.S. government can never become insolvent, i.e., unable to pay its bills. In this sense, the government is not dependent on credit markets to remain operational.”
Press Conference: Mario Draghi, President of the Monetarily Sovereign ECB, January 9, 2014. Question: Can the ECB ever run out of money? Mario Draghi: Technically, no. We cannot run out of money.
Fed Chairman Jerome Powell stated, “As a central bank, we have the ability to create money digitally.”
Paul Krugman (Nobel Prize–winning economist): “The U.S. government is not like a household. It literally prints money, and it can’t run out.” — Numerous op-eds/blog posts
Hyman Minsky (Economist, key influence on MMT) “The government can always finance its spending by creating money.”
Eric Tymoigne (Economist) “A sovereign government does not need to collect taxes or issue bonds to finance spending. It finances directly through money creation.”
Because the U.S. federal government has the infinite ability to create its sovereign currency, the U.S. dollar, it never borrows dollars.
Contrary to popular wisdom, T-bills, T-notes, and T-bonds do not represent borrowing. They are deposits, the purpose of which is to provide a safe place to store unused dollars and to help the Fed control interest rates.
The government never touches those dollars, which remain the property of the depositors. Not only can our Monetarily Sovereign government not run short of dollars, but federal deficits are necessary to grow the economy, as evidenced by the formula: Gross Domestic Product = Federal Spending + Nonfederal Spending + Net Exports.
The formula shows that economic growth requires federal deficit spending growth.
The record highs of federal debt (red) match the record highs of Gross Domestic Product (blue).
The next graph shows that reduced deficit growth (red) is associated with recessions (vertical gray bars), and increased deficit growth cures recessions.
When we don’t have sufficient federal deficits, we have depressions and recessions:
1804-1812: U. S. Federal Debt reduced 48%. Depression began 1807.
1817-1821: U. S. Federal Debt reduced 29%. Depression began 1819.
1823-1836: U. S. Federal Debt reduced 99%. Depression began 1837.
1852-1857: U. S. Federal Debt reduced 59%. Depression began 1857.
1867-1873: U. S. Federal Debt reduced 27%. Depression began 1873.
1880-1893: U. S. Federal Debt reduced 57%. Depression began 1893.
1920-1930: U. S. Federal Debt reduced 36%. Depression began 1929.
1997-2001: U. S. Federal Debt reduced 15%. Recession began 2001.
Periodically, we publish yet another shrieking claim that the U.S. federal debt is “unsustainable”and a “ticking time bomb.”
This lie has been told to you every year (really, almost every day) since 1940, and that bomb has never exploded, nor will it.
Rather than repeat the entire list of the thousands of lies to which you have been subject, I will list samples here as a reference and add periodically, at the end, new “federal debt is a ticking time bomb“BULLSHIT claims as I encounter them.
Read these and see that even respected economists replace facts with BULLSHIT:
(Yes, the record of bad predictions goes all the way back to 1940. It probably goes back longer, but I don’t have the examples.)
September 26, 1940, New York Times: The federal budget was a “ticking time-bomb which can eventually destroy the American system,” said Robert M. Hanes, president of the American Bankers Association.
By 1960, the debt was “threatening the country’s fiscal future,” said Secretary of Commerce Frederick H. Mueller. (“The enormous cost of various Federal programs is a time-bomb threatening the country’s fiscal future, Secretary of Commerce Frederick H. Mueller warned here yesterday.”)BULLSHIT
In 1984: AFL-CIO President Lane Kirkland said. “It’s a time bomb ticking away.”BULLSHIT
In 1985: “The federal deficit is a ticking time bomb, and it’s about to blow up,” U.S. Sen. Mitch McConnell. (Remember him?)BULLSHIT
Later in 1985: Los Angeles Times: “We labeled the deficit a ‘ticking time bomb‘ that threatens to permanently undermine the strength and vitality of the American economy.”BULLSHIT
In 1987: Richmond Times-Dispatch – Richmond, VA: “100TH CONGRESS FACING U.S. DEFICIT’ TIME BOMB‘”BULLSHIT
Later in 1987: The Dallas Morning News: “A fiscal time bomb is slowly ticking that, if not defused, could explode into a financial crisis within the next few years for the federal government.”BULLSHIT
In 1989: FORTUNE Magazine: “A TIME BOMB FOR U.S. TAXPAYERS“BULLSHIT
In 1992: The Pantagraph – Bloomington, Illinois: “I have seen where politicians in Washington have expressed little or no concern about this ticking time bomb they have helped to create, that being the enormous federal budget deficit, approaching $4 trillion.“BULLSHIT
Later in 1992, Ross Perot said, “Our great nation is sitting right on top of a ticking time bomb. We have a national debt of $4 trillion.”BULLSHIT
In 1995: Kansas City Star: “Concerned citizens. . . regard the national debt as a ticking time bomb poised to explode with devastating consequences at some future date.”BULLSHIT
In 2004: Bradenton Herald: “A NATION AT RISK: TWIN DEFICIT A TICKING TIME BOMB” BULLSHIT
In 2005: Providence Journal: “Some lawmakers see the Medicare drug benefit for what it is: a ticking time bomb.” BULLSHIT
In 2006: NewsMax.com, “We have to worry about the deficit . . . when we combine it with the trade deficit, we have a real ticking time bomb in our economy,” said Mrs. Clinton. BULLSHIT
In 2007: USA Today: “Like a ticking time bomb, the national debt is an explosion waiting to happen.” BULLSHIT
In 2010: Heritage Foundation: “Why the National Debt is a Ticking Time Bomb. Interest rates on government bonds are virtually guaranteed to jump over the next few years. BULLSHIT
In 2010: Reason Alert: “. . . the time bomb that’s ticking under the federal budget like a Guy Fawkes’ powder keg.” BULLSHIT
In 2011: Washington Post, Lori Montgomery:”. . . defuse the biggest budgetary time bombs that are set to explode.” BULLSHIT
June 19, 2013: Chamber of Commerce: Safety net spending is a ‘time bomb’, by Jim Tankersley: The U.S. Chamber of Commerce is worried that not enough Americans are worried about social safety net spending.The nation’s largest business lobbying group launched a renewed effort Wednesday to reduce projected federal spending on safety-net programs, labeling them a “ticking time bomb” that, left unchanged, “will bankrupt this nation.” BULLSHIT
On June 15, 2014: CBN News: “The United States of Debt: A Ticking Time Bomb” BULLSHIT
On January 27, 2017: America’s “debt bomb is going to explode.” That’s according to financial strategist Peter Schiff. Schiff said that while low interest rates had helped keep a lid on U.S. debt, it couldn’t be contained for much longer. Interest rates and inflation are rising, creditors will demand higher premiums, and the country is headed “off the edge of a cliff.” BULLSHIT
February 16, 2018 America’s Debt Bomb By Andrew Soergel, Senior Reporter: Conservatives and deficit hawks are hurling criticism at Washington for deepening America’s debt hole. BULLSHIT
April 10, 2019,The National Debt: America’s Ticking Time Bomb. TIL Journal. Entire nations can go bankrupt. One prominent example was the *nation of Greece which was threatened with insolvency a decade ago. Greece survived the economic crisis because the European Union and the IMF bailed the nation out. BULLSHIT
SEP 12, 2019, Our national ticking time bomb, By BILL YEARGIN SPECIAL TO THE SUN SENTINEL | At some point, investors will become concerned about lending to a debt-riddled U.S., which will result in having to offer higher interest rates to attract the money. Even with rates low today, interest expense is the federal government’s third-highest expenditure following the elderly and military. The U.S. already borrows all the money it uses to pay its interest expense, sort of like a Ponzi scheme. Lack of investor confidence will only make this problem worse. BULLSHIT
JANUARY 06, 2020, National debt is a time bomb, BY MARK MANSPERGER, Tri City Herald | The increase in the U.S. deficit last year was about $1.1 trillion, bringing our total national debt to more than $23 trillion! This fiscal year, the deficit is forecasted to be even higher, and when the economy eventually slows down, our annual deficits could be pushing $2 trillion a year! This is financial madness. there’s not going to be a drastic cut in federal expenditures — that is, until we go broke — nor are we going to “grow our way” out of this predicament. Therefore, to gain control of this looming debt, we’re going to have to raise taxes. BULLSHIT
February 14, 2020, OMG! It’s February 14, 2020, and the national debt is still a ticking time bomb! The national debt: A ticking time bomb?America is “headed toward a crisis,” said Tiana Lowe in WashingonExaminer.com. The Treasury Department reported last week that the federal deficit swelled to more than $1 trillion in 2019 for the first time since 2012. Even more alarming was the report from the bipartisan Congressional Budget Office (CBO) predicting that $1 trillion deficits will continue for the next 10 years, eventually reaching $1.7 trillion in 2030 BULLSHIT
August 29, 2020, LOS ANGELES, California: America’s mountain of debt is a ticking time bomb. The United States not only looks ill, but also dead broke. To offset the pandemic-induced “Great Cessation,” the U.S. Federal Reserve and Congress have marshalled staggering sums of stimulus spending out of fear that the economy would otherwise plunge to 1930s soup kitchen levels. Assuming that America eventually defeats COVID-19 and does not devolve into a Terminator-like dystopia, how will it avoid the approaching fiscal cliff and national bankruptcy? BULLSHIT
April 16, 2021, NATIONAL POLICY: ECONOMY AND TAXES / MARK ALEXANDER / The National Debt Clock: A Ticking Time Bomb: At the moment, our national debt exceeds $28 TRILLION — about 80% held as public debt and the rest as intragovernmental debt. That is $225,000 per taxpayer. Federal annual spending this year is almost $8 trillion, and more than half of that is deficit spending — piling on the national debt. BULLSHIT
Now, the national debt is approaching $31 trillion,which is $12 trillion more than when Donald Trump took office in 2017, and more than half of that debt was tacked on in his final year. Then we’ve had the disastrous year and a half of Joe Biden. Now, the Fed is hiking its rates, and that spells even more trouble for the national debt and the economy at large. BULLSHIT
December 4, 2022 America’s ticking time bomb: $66 trillion in debt that could crash the economy By Stephen Moore, The national debt is $31 trillion when including Social Security’s and Medicare’s unfunded liabilities. Wake up, America. BULLSHIT
That ticking sound you’re hearing is the American debt time bomb that, with each passing day, is getting precariously close to detonating and crashing the US economy.BULLSHIT
April 22, 2023The Debt Ceiling Debate Is About More Than Debt, Jim Tankersley, WASHINGTON — Speaker Kevin McCarthy of California has repeatedly said that he and his fellow House Republicans are refusing to raise the nation’s borrowing limit,and risking economic catastrophe, to force a reckoning on America’s $31 trillion national debt. “Without exaggeration, America’s debt is a ticking time bomb that will detonate unless we take serious, responsible action,” he said this week. BULLSHIT
November 3, 2023 The Fuse on America’s Debt Bomb Just Got Shorter,J Antoni Heritage Organization. The Treasury is now on track to borrow almost as much in just six months as it did in the previous 12 months. That’s nearly a doubling of the deficit. Because the federal debt is $33.7 trillion, just a 1 percent increase in yields adds $337 billion to the annual cost of servicing the debt over time. Absent spending reform, eventually no one will be willing to hold the bomb anymore, and the yields on U.S. debt will begin to resemble those in Argentina. BULLSHIT
February 2, 2024How Florida can help defuse the nation’s debt bomb By BARRY W. POULSON,professor emeritus of economics at the University of Colorado Boulder and DAVID M. WALKER,former comptroller general of the United States. Washington’s out-of-control spending, combined with fiscal and monetary policies have resulted in trillion-dollar-plus annual deficits, over $34 trillion in federal debt, over $125 trillion in total federal liabilities and unfunded obligations, and excess inflation. Excessive spending and loose monetary policy increase inflation in the short term, and mounting debt burdens serve to reduce future economic growth and shift the economic burden and consequences of mounting debt burdens to future generations. BULLSHIT
February 8, 2024Legendary investor Paul Tudor Jones says a ‘debt bomb’ is about to go off in the U.S.: ‘We’re fast-pouring consumption like crazy’. The U.S. economy may seem like it’s firing on all cylinders, but underneath the surface, a “debt bomb” could be on the verge of exploding, according to billionaire hedge fund manager Paul Tudor Jones. The esteemed investor said in an interview with CNBC that he couldn’t deny the economy was strong, but that it was actually “on steroids” due to massive government spending and borrowing. BULLSHIT
Jones is not the only one to call attention to the growing deficit issue in the U.S. On Sunday, Federal Reserve Chairman Jerome Powell took a rare dive into politics, telling CBS’s 60 Minutes that the national debt was “growing faster than the economy,” and calling for lawmakers to get the federal government “back on a sustainable fiscal path.” Meanwhile, U.S. Treasury Secretary Janet Yellen has said she is not yet worried about the increasing national debt as long as the government keeps in check the net payments it makes on its debt relative to GDP. BULLSHIT
Those payments are projected to rise from 2.5% last year to 2.9% next year, according to the Office of Management and Budget, below their level in the early 1990s. Jones told CNBC that the strong economy could postpone the effects of the government’s deficit spending, but only for a little while. “The only question is … when does that manifest itself in markets?” he added. BULLSHIT
“It could be this year, it could be next year. Productivity may mask, and it might be three or four years from now. But clearly, clearly we’re on an unsustainable path.” BULLSHIT
June 21, 2024 My Weekly Column: Our debt crisis is a ticking time bomb by Randy Feenstra: On June 18, the nonpartisan Congressional Budget Office (CBO) – the government agency tasked with monitoring our nation’s fiscal health – confirmed my serious concerns with President Biden’s reckless spending agenda. BULLSHIT
His administration’s fiscal policies have not only caused cumulative inflation to skyrocket by over 20% since he took office, but they have also accelerated our accumulation of debt to levels that are beyond unsustainable. Instead of changing course, he recently released his budget for Fiscal Year 2025, which has a $ 7.3 trillion price tag and looks to raise taxes on our families, farmers, and businesses to the tune of $5.5 trillion. BULLSHIT
The CBO estimates that his debt “cancellation” policies will cost taxpayers nearly $400 billion over the next ten years. I strongly oppose these bailouts. Iowans who never attended college, entered the workforce early, or helped put their kids through school should not be forced to pick up the tab for President Biden’s costly and unfair executive orders. BULLSHIT
July 22, 2024Federal debt is the ticking bomb in your wallet By E.J. Antoni a public finance economist and the Richard F. Aster fellow at the Heritage Foundation, and a senior fellow at Unleash. The federal government is already running $2 trillion annual deficits, driving up interest on the debt exponentially. The time bomb of federal finance has already started ticking down. BULLSHIT
October 10, 2024, U.S. Debt Bomb is ticking louder by Nick Beams, World Socialist Website. The immediate economic question is: when will the rise in US government debt give rise to a crisis for the US dollar, a major meltdown in the market for debt, the Treasury bond market, or some other area of the financial system? Government debt is now heading towards $36 trillion and increasing at a pace that is regarded as “unsustainable” by Federal Reserve chair Jerome Powell, along with many others. BULLSHIT
May 30, 2025 DEFICIT DANGER. BOJ governor warns US debt time bomb outweighs trade war risks. By Dashan Hendricks. BANK of Jamaica (BOJ) governor Richard Byles has issued a stark warning that America’s spiralling budget deficits now present a more severe danger to the global economy than ongoing trade conflicts, as the world’s largest economy grapples with its third credit rating downgrade since 2011. His comments follow Moody’s recent decision to cut the US government’s credit rating from its top-tier Aaa to Aa1, citing concerns over its US$36-trillion debt burden, which now exceeds the nation’s US$30 trillion GDP. BULLSHIT
August 12, 2025 Rep. Nancy Mace (R-S.C.) Nancy Mace’s Debt Alarm Tweet was hit with a fact-check after warning on social media that the U.S. national debt had reached $37 trillion, calling it “a bill our kids can’t afford to pay.” The post, shared on Twitter, received over 2 million views and framed the soaring debt as a dire generational crisis.
(No kids will pay the national debt.) It’s not debt, and it’s paid by returning the dollars already in storage.
———————–//———————–
The above articles contain the same old BULLSHIT(“unsustainable,” “cost taxpayers,” “our kids will pay”) that they’ve been telling us since 1940. To buttress their lies, they make false comparisons to family finances or the finances of other monetarily non-sovereign entities like businesses or euro nations.
They have been wrong, repeatedly wrong, for all those years. If we wait long enough, perhaps something might happen to prove them right, perhaps in a thousand years? Today, this makes “only” 85 years of the debt nuts’ BULLSHIT.
The federal deficit yields economic growth year after year. When deficits are insufficient, we have had recessions, which were cured by increased deficits.
If respected economists keep predicting something terrible is imminent year after year, yet exactly the opposite happens, at what point do they reexamine their beliefs?
At what point does the public say, “Fool me once; shame on you. Fool me repeatedly for 85 years; shame on me. This is just a steaming pile of BULLSHIT“?
Whew, I feel a little better, now — but just a little.
Debt is an obligation that requires one party, the debtor, to pay money or otherwise withheld from another party, the creditor. Debt may be owed by a sovereign state , country, local government, company, or individual.
Loans, bonds, notes, and mortgages are all types of debt.
Here is what an AI (Artificial Intelligence) says about federal debt. Read it, keeping in mind that the Monetarily Sovereign U.S. government has the infinite ability to create its own sovereign currency.
As we will discuss, the so-called federal debt isn’t debt and it isn’t federal.
The U.S. government never, unintentionally, can run short of U.S. dollars:
The federal debt of the United States is the total national debt owed by the federal government to Treasury security holders.
It encompasses the accumulated borrowing and the associated interest owed to investors who purchased these securities.
Federal debt is the same as national debt?? Immediately we arrive at confusion because “national” debt can include the debt of the non-federal (private) sector, i.e., the total of mortgages, car loans, business loans, etc., and state/county/city debt.
Because the federal government is Monetarily Sovereign and the other entities are monetarily non-sovereign, one rightly should assume that federal debt should be treated differently.
Let’s break it down further:
Federal Deficits:
Federal deficits occur when the government spends more money than it collects in revenue during a fiscal year. To cover these deficits, the government borrows money by issuing Treasury bonds, bills, and other securities.
These deficits contribute to the overall national debt because they represent the accumulated borrowing over time.
Treasury Securities:
Treasury securities are financial instruments issued by the U.S. Department of the Treasury to raise funds for government operations.
These securities are issued to the public and other entities, including individuals, corporations, state or local governments, foreign governments, and other non-federal entities.
Federal Debt Held by the Public:
The federal debt held by the public consists of securities held outside the government. It includes:
Interest-bearing marketable securities: These are marketable Treasury securities (bills, notes, bonds, TIPS, and FRN) held by various entities.
Interest-bearing nonmarketable securities: These include Government Account Series held by fiduciary and certain deposit funds, foreign series, state and local government series, domestic series, and savings bonds.
Non-interest-bearing marketable and nonmarketable securities: These include matured and other types of securities.
The total federal debt held by the public is calculated based on face value less net unamortized premiums and discounts, including accrued interest.
The federal debt represents the total outstanding obligationsowed by the U.S. government, including both deficits and the issuance of Treasury securities. It reflects the financial position of the government and its ability to meet its obligations.
That is generally what most people believe. It is wrong on several counts.
First, the federal debt does not “reflect the financial position of the government and its ability to meet its obligations.The federal government has the infinite ability to meet its obligations.
Deficit reductions (red line) result in recessions (vertical gray bars), which are cured by deficit increases.Even the COVID recession of 2020 was cured by the increase in federal spending — the so-called “debt” — that year.
Read it again while again keeping in mind the Monetarily Sovereign U.S. government has the infinite ability to create its own sovereign currency. It never, unintentionally, can run short of U.S. dollars.
Now ask yourself: Why would the federal government borrow dollars? The answer: It doesn’t.
Notice the definitions of federal debt encompass two completely different things:
The total of federal deficits, i.e. the net total difference between what the government has spent and what it has received in taxes.
The total of Treasury Security accounts.
1. Total Federal of Deficits: In most years, the federal government spends more than it receives in taxes. This is called a “deficit.” Over the years these deficits total to what is called the “federal debt.”
All forms of debt require at least one debtor and at least one creditor. But with regard to federal deficits, who is the debtor and who is the creditor, and what is owed?
A quick response might be that the government is the debtor, and those supplying the government with goods and services would be the creditors. But that quick response would be wrong.
Although the federal “debt” is upwards of $30 trillion, the federal government does not owe its suppliers $30 trillion. They all have been paid.
Clearly, the total of deficits is not federal debt. There are no creditors, no debtor, and nothing is owed.
2. The Total of Treasury Security Accounts: Are they “federal debt”? If so, how and why did the “debt” occur.
Look back at the definitions: The Treasury Securities are bills, notes, and bonds, issued by the federal government to raise funds for government operations.
A “bill” is a request for payment of money owed, or the piece of paper on which it is written. In the private sector, a bill is created by a creditor and sent to a debtor as a demand for payment. The way most people understand it.
But federal terminology is diametrically different. Here, the “debtor” (the government) creates and issues the T-bill and the creditor buys it, as though it were a bond.
Consider a dollar bill. It is not a request for payment by a creditor, but rather a document created by the debtor — the federal government, which owes the holder one dollar. The dollar bill itself is not the dollar. It is an IOU for a dollar.
The dollar is just a number in the federal government’s financial books.
You cannot see, feel, smell, or taste a dollar. It has no form or substance. If someone asked you what does the number “five” look like would your answer be: “5,” or “V,” or “(2+3);” or the binary “101,” or “√25.”
Although you can describe a five dollar bill, you cannot say what five dollars look like. Dollars result from laws, and again, no one can say what a law looks like. Like dollars, laws are just concepts, not physical entities.
That fact that dollars are not physical gives the federal government the infinite ability to create them just by pressing computer keys.
But that’s a minor, though confusing, semantic issue. The major, and even more confusing, semantic question: Why does a Monetarily Sovereign entity, having the infinite ability to create dollars, ever borrow dollars?
As two former Chairmen of the Federal Reserve have said:
Alan Greenspan:“A government cannot become insolvent with respect to obligations in its own currency. There is nothing to prevent the federal government from creating as much money as it wants and paying it to somebody. The United States can pay any debt it has because we can always print the money to do that.”
Ben Bernanke: “The U.S. government has a technology, called a printing press (or, today, its electronic equivalent), that allows it to produce as many U.S. dollars as it wishes at essentially no cost.”
Question: If the U.S. government cannot become insolvent, can create as much money as it wants, and can pay any debt, why does it borrow dollars? Why does it pay interest when it can produce as many dollars as it wishes at essentially no cost?
Answer: It doesn’t borrow, and the interest is produced at no cost.
Because of words like “bill,” “note.” and “bond,” many people, including even economists, believe these represent federal borrowing and debt.
They do not. The federal government never borrows dollars.It creates all the dollars it needs by spending dollars. Spending is how the government creates new dollars. The process is:
When an agency of the federal government pays an invoice (a bill) from a creditor, it sends instructions (not dollars) to the creditor’s bank. The instructions may be in the form of a check or a wire (“Pay to the order of ____”)
The bank obeys the instructions by increasing the balance in the creditor’s checking account. At that instant, new dollars are created and added to the M2 money supply measure.
The bank balances its books by informing the Federal Reserve of the instructions, which debits the government’s account.
At no time are any physical dollars exchanged because there are no physical dollars. It’s all numbers in bookkeeping accounts.
But what is the purpose of those T-security accounts? They have two purposes, neither of which is to provide spending money for the government:
A. To provide a safe place to store unused dollars, which stabilizes the dollar. Because dollars have no physical existence, they can’t be stored in a box and watched. So, it is especially important that large, unused sums be kept on trusted books
No books are more trusted with dollars than the U.S. government’s.
B. To help the Fed control interest rates. Because T-securities are known to be safe, the interest paid by federal storage sets a floor for all private sector interest rates.
T-security accounts resemble bank safe deposit boxes in that the contents are not owed to the depositors and not used by the bank. They are not federal in that the contents of the accounts are wholly owned by the depostors. The federal government never touches those dollars.
Just as they are not debts, they also are not federal. To close an account, the bank and the government simply return the contents to their owners, the depositors. The government does not owe the money because it never takes ownership of the money.
Why then, does the federal government need to lend rather than give money (for instance, student loans) or need to collect taxes.
It doesn’t.
The federal government could forgive all student loans and continue spending forever, all without collecting a single penny in taxes. It could accomplish this simply by creating dollars.
Some claim that “excessive” federal deficit spending would cause inflation. That claim is false; the reasons are described here. While a government response to inflation may be to print currency, the cause of all inflations has been shortages of critical goods and services.
The most recent inflation was caused not by federal spending, which had been go on for many years, but by new, COVID-relaed shortages of oil, food, computer chips, lumber, paper, shipping, steel, and many other products, and labor.
While state/local taxes and borrowing help monetarily non-sovereign government pay for things, the purpose of federal taxes is not to pay for things but rather:
To control the economy by taxing what the government wishes to discourage and by giving tax breaks to what the government wishes to reward.
To support demand for the U.S. dollar by requiring taxes be paid in dollars.
But the biggest, unofficial reason for taxes is to support the myth that federal debt is paid by taxes, and that taxes are necessary to fund spending. It’s a myth promulgated by the people who really run America, the rich.
They are rich because of the income/wealth/power Gap between the rich and the rest. The wider the Gap, the richer they are.
The debt/taxation myth limits the federal spending that supports the middle- and the lower-income groups, but allows for the federal tax breaks that are given to the rich. Contrary to popular belief, federal taxation widens the Gap between the rich and the rest, making the rich richer.
Without the debt/taxation myth we could fund free, comprehensive, no-deductible Medicare for every man, woman, and child in America, no-FICA Social Security for everyone, an end to poverty in America, free college for everyone who wants it, and many other benefits (free public transportation, housing support, local infrastructure improvements, lower local taxes, etc.) all of which are of no interest to the rich.
Donald Trump didn’t pay less taxes than you paid the past ten years, not just because he cheated, but also because, being rich, he took advantage of the tax breaks that you can’t.
Tax breaks are financially the same to the federal government as such benefits as Social Security and Medicare, the difference being there is no financial limit put on tax breaks while the benefits are limited by tax collections.
SUMMARY
Unlike state/local governments, businesses, you and me, the federal government is Monetarily Sovereign. It cannot unintentionally run short of dollars. It can pay any financial obligation immediately.
The federal government and its taxpayers are not burdened by federal debt. The federal government does not borrow dollars. It creates dollars ad hoc, by spending.
People have complained about the fictional “federal debt” since 1940, calling it a “ticking time bomb.”yet after all these years the ticking time bomb hasn’t exploded. In that time, the “federal debt” rose from $40 billion to $30 trillion, the economy is healthy, the government is paying its bills, and all the scare stories have proved to be false.
The federal debt, whether it be the total of deficits or the total of T-securities, neither is federal nor debt. It is not a burden on taxpayers nor on the federal government. It doesn’t cause inflation or recession.
Deficit spending is necessary to grow the economy and attempts to reduce deficit spending have caused causes recessions and depressions.
Accepting deposits into T-bill, note, and bond accounts does not constitute borrowing or debt, for a Monetarily Sovereign entity never borrows its own sovereign currency.
It’s not debt if there is nothing owed, nothing borrowed, no creditors, no debtors, an no payment burden.
The following will give you a treasured opportunity to read the words of 11 experts, each demonstrating his lack of knowledge or lack of honesty about federal finances and economics.
Their hope or effect is to make you ignorant about the economy, during this time of crisis.
If your hope is to become ignorant about federal finances or economic, then do believe what they say. You will be able to cross that item off your bucket list.
But if you wish to understand the facts, and perhaps even be able to contact your political leaders with the facts, read on.
As you read, please remember that federal finances are nothing at all like your personal finances, nothing like business finances, and nothing like state/local government finances.
The federal government uniquely is Monetarily Sovereign. It never, NEVER can run short of its own sovereign currency, the U.S. dollar.
And the government, being sovereign over the dollar, has absolute control over its value.
When it comes to the U.S. dollar, the federal government is God. So don’t use your own personal financial experience as a template about federal finances.
Here are excerpts from an article written by Mike Bebernes, of Yahoo News, followed by my comments.
Negotiations in Congress about the next stimulus bill aimed at countering the economic effect of the coronavirus have ground to a crawl amid debate over how big the rescue package should be.
Not only is there the expected sparring between Democrats and Republicans, the issue is also reportedly causing a rift within the GOP itself.
A vocal group of Republicans have begun to raise concerns about adding how much the next stimulus will add to the federal deficit, “We have to be careful about not piling on enormous amounts of debt,” Treasury Secretary Steve Mnuchin said.
Kentucky Sen. Rand Paul said some of his GOP colleagues are “no different than socialist Democrats when it comes to debt.”
Right off the bat, you see Mnuchin’s ignorance. The economic effect of the coronavirus is quite simple: Businesses are running short of paying customers and people are running short of income with which to pay businesses.
The effect is that businesses and people are running short of money. This lack of money causes a recession.
The solution to a recession also is quite simple: Give businesses and people money.
As for Rand Paul’s concern, deficit spending is not “socialist.” Socialism is government ownership and control of businesses. Handing out money and/or providing benefits (healthcare, education, etc.) is not socialism.
Fakers love to toss around the word “socialist,” because they know Americans will react negatively to it. Any time you hear someone accuse some federal spending as “socialist,” know you are being conned.
House Democrats passed a $3.4 trillion stimulus bill in May. The proposal under consideration by Senate Republicans carries a $1.1 trillion price tag.
Even if a significantly smaller package ends up being passed, the national debt will still be at historic levels.
The $2.2 trillion CARES Act passed in March pushed the deficit over $26 trillion and has the country on pace for the largest annual ratio of debt as a share of the economy since World War II.
Although it commonly is termed, “debt,” it isn’t the same thing as personal debt or business debt. That thing called “debt” actually is the total of deposits into Treasury Security accounts (T-Bills, T-Notes, T-Bonds) held at the Federal Reserve (The Fed).
These deposits are not a burden on anyone — not on the government, not on taxpayers, and not on future generations. If the government wished, it could pay off the deposits today, merely by returning the dollars currently residing in those T-Security accounts.
If you own a T-bill, and that T-bill matures, the government will send back to you your dollarsthat reside in your T-bill account.
It would just be a transfer of your dollars similar to a transfer from your savings account to your checking account.
No tax dollars involved in the repayment of federal “debt.”.
The coronavirus isn’t the only reason the U.S. has so much debt. After running a surplus in the late 1990s, the deficit has ballooned over the past two decades.
Despite promising to eliminate the federal debt — which stood at $19 trillion when he took office — President Trump is on pace to have the largest deficit of any president.
The virus is taking dollars from the private sector, which has caused a recession.
Eliminating the so-called “debt” (deposits into T-Security Accounts) would take even more dollars from the economy, causing the deepest depression in U.S. history (and world history).
For example:
1804-1812: U. S. Federal Debt reduced 48%. Depression began 1807.
1817-1821: U. S. Federal Debt reduced 29%. Depression began 1819.
1823-1836: U. S. Federal Debt reduced 99%. Depression began 1837.
1852-1857: U. S. Federal Debt reduced 59%. Depression began 1857.
1867-1873: U. S. Federal Debt reduced 27%. Depression began 1873.
1880-1893: U. S. Federal Debt reduced 57%. Depression began 1893.
1920-1930: U. S. Federal Debt reduced 36%. Depression began 1929.
1997-2001: U. S. Federal Debt reduced 15%. Recession began 2001.
You can thank your god that Trump didn’t live up to his promise, for had he somehow managed to eliminate U.S. debt, you would be living naked in a cave, eating cave bats.
To many fiscal conservatives, large deficits pose a major risk to the economic stability of the country.
Taking on debt may be a quick way to solve problems in the short term, but it only pushes the burden onto future generations, they argue.
The weight of trillions of dollars in debt, plus the interest accrued, will stifle the country’s ability to recover from the recession and hinder growth once the economy improves.
Federal deficit spending adds growth dollars to the economy, which is exactly why they “solve problems in the short term.” Deficit spending also solves problems in the mid-term and the long term.
Think of all the things for which the federal government spends money. Then ask yourself, “Which of these, if eliminated, would grow the economy?”
Being Monetarily Sovereign, the federal government creates new dollars by spending. That is the government’s method of dollar-creation.
To pay a creditor, the federal government sends instructions (not dollars) to the creditor’s bank, instructing the bank to increase the balance in the creditor’s checking account.
The instant the creditor’s bank does as instructed, new dollars are created and added to the nation’s M1 money supply.
Deficit spending is no burden whatsoever on future generations. In fact, federal deficit spending benefits future generationsby providing them not only with dollars, but also with roads, bridges, health care, education, military protection, safe food, legal protections, and the myriad other things the government pays for.
As for “interest accrued,” those dollars go into the private sector, stimulating economic growth. Interest is no burden on the federal government, which being Monetarily Sovereign has infinite dollars.
(That is why there is no way to answer the question, “How much money does the federal government have?” The real answer is, “Infinite.”)
America’s ability to keep borrowing enormous amounts of money, at least in theory, could run out if oversized deficits reduce confidence in the U.S. economy.
If that happens sometime in the future, it could cause a major spike in interest rates, severe inflation or even an economic collapse that dwarfs the impact of the pandemic, deficit hawks fear.
The U.S. federal government does not borrow. Being Monetarily Sovereign, it never can run short of U.S. dollars. It has no need to borrow.
Truth from the Chairman
What wrongly is termed “borrowing” actually is the acceptance of deposits into T-security accounts.
The purpose of T-security accounts (“debt”) is not to provide spending money for the U.S. government, the one entity that has infinite dollars.
The primary purposes of T-security accounts are:
to provide a safe parking place for unused dollars, which stabilizes the dollar and
to assist the Fed in setting interest rates.
The federal government could stop accepting deposits into T-security accounts today if it wished. And in the event that people stopped depositing into T-security accounts, the U.S. Federal Reserve has the unlimited ability to make those deposits.
As for a “major spike in interest rates,” the Fed, not depositors, controls interest rates. The rates are exactly what the Fed wants them to be. Only if the Fed wants a “major spike,” will there be one. Otherwise, no major spike.
Truth from another Chairman
As for “severe inflation,” it never is caused by federal debt or by federal deficit spending. In fact, deficit spending can cure inflations.
Inflations are cured when the government deficit-spends to obtain the scarce goods and/or services and then distributes them to the private sector.
Consider the infamous Zimbabwe hyperinflation. The Zimbabwe government took farmland from farmers and gave it to people who didn’t know how to farm.
The predictable result: A massive food shortage that led to inflation. The Zimbabwe government could have ended the inflation by importing and distributing food (or better, by not stealing the farmland in the first place).
Instead, it merely devalued its currency, again, again, and again.
By contrast, Germany cured its infamous hyperinflation by employing businesses and peopleto build the greatest war machine the world had ever known. That allowed people and businesses to thrive, and eliminated shortages. (War preparation was not the best use for German money, but it did cure the hyperinflation.)
Others argue that these potential future issues pale in comparison to the very real catastrophe that will happen without a large rescue package.
Research suggests that the $600 weekly bonus added to unemployment has kept the economy from collapsing even further over the past few months.
Now that it’s expired, millions of Americans are at risk of losing their homes and countless businesses could close permanently.
True. The $3 trillion rescue package helped avoid the catastrophe that is certain unless at least $7 trillion is pumped into the private sector.
Oh, that won’t happen? Congress won’t do it? Then assume we will have an economic catastrophe with massive unemployment, starvation, and more death — all unnecessarily.
The only way to truly save the economy, some argue, is to get the pandemic under control.
Spending money to improve testing, help people stay home and prop up struggling state budgets in the short term could prevent the need for an even bigger stimulus down the road.
Some Democrats believe that concerns about debt are insincere and motivated by politics, since the GOP enthusiastically supported tax cuts in 2017 that are expected to add trillions to the deficit.
Getting the pandemic “under control” is not the only way to save the economy, though it’s a good thing to do.
The faster way is to pump trillions of dollars into the private sector so that businesses can do business and consumers can consume.
And now what you nervously have been waiting to see: More truly ignorant comments by a few of America’s opinion leaders:
The stimulus should be limited to the most essential remedies “Senate Republicans are right to be worried about rising federal debt. But they are wrong to artificially limit the level of spending in the latest coronavirus relief package.” — Henry Olsen, Washington Post
There are zero reasons to limit the stimulus. Note how Olsen takes both sides of the issue. That way, in retrospect, he always can lay claim to having been right. That is how one gets to be an “expert.”
At a certain point, U.S. credit may run out “America’s borrowing capacity is large, but we may discover that it is not unlimited.” — Brian Riedel, National Review
The U.S. doesn’t borrow, so it doesn’t need “credit” and doesn’t have a “borrowing capacity. Being Monetarily Sovereign, it has absolute control over the value of its money and its credit, and never can run short.
Spend money now, but aggressively tackle the deficit once the pandemic ends “When the pandemic passes, authorities need to shift out of rescue mode and start weaning capitalism off easy money and bailouts.” — Ruchir Sharma, Wall Street Journal
Sharma’s formula is to “spend money now ” to feed our starving economy, but when the pandemic ends, begin to starve the economy? Wow! Great idea, Ruchir: Starve future generations.
Better to spend money now, and spend money later, to continue to grow the economy.
The previous stimulus proved you can’t spend your way out of a crisis “Having wasted the opportunity to cool off the spending binge and put the country in a better position to deal with a crisis, Congress now appears ready to do the only thing it knows how: spend even more.” — Eric Boehm, Reason
Remember that Boehm is a Libertarian for whom any amount of federal spending is too much.
Let me correct Boehm’s comment: “The previous stimulus proved that when the economy is in full starvation mode, insufficient stimulus will help some, but way, way more is needed.”
Of course, it wasn’t enough, so we now are in a serious recession. Yet, Boehm wants to cut back on all spending.
Future generations will suffer from reckless spending today “Long after an effective vaccination has been discovered, the events of 2020 could figure in another disaster: a forced reduction in Medicare and Social Security benefits, as well as unprecedented tax hikes, to deal with massive national debt.” — Chris Reed, San Diego Union-Tribune
Apparently, Reed is clueless about Monetary Sovereignty. The federal government cannot ever run short of dollars.
So why would there have to be “a forced reduction in Medicare and Social Security benefits, as well as unprecedented tax hikes”? There is nothing that could force the federal government to do anything it doesn’t want to do.
And again, taxes do not fund the federal “debt.” The government could pay for Medicare and Social Security, and pay off the entire debt, without collecting a single penny in taxes.
Don’t worry about the deficit Risk of large deficits pales in comparison to the harm insufficient stimulus will cause “Deficits do matter in a sense, but not in the apocalyptic, over-the-cliff and straight-to-hell manner Republicans like to invoke when they’re feeling stingy.
‘A high-enough deficit under the right circumstances could theoretically bring about inflation. But inflation is not some mystical, unsolvable force.
The government has all kinds of tools at its disposal to deal with inflation.” — Zach Carter, HuffPost
Close, Zach, but no cigar. Deficits do matter because they are absolutely necessary for economic growth. A growing economy requires a growing supply of money, and deficits increase the supply of money.
But you are correct when you wrote this: “The government has all kinds of tools at its disposal to deal with inflation.”
More accurately, the federal government has absolute control over inflation.
Republican concerns about debt are purely political “If there’s one thing we’ve learned over the past decade, it is that there are no Republican deficit hawks — only poseurs who claim to care about deficits in order to block spending they don’t like.” — New York Times columnist Paul Krugman
Right you are, Paul. Now if only you could unequivocally state: “The Federal Government is Monetarily Sovereign. It never can run short of dollars. No one should worry about deficits or “debt.”
Just do it, Paul.
A large rescue package can jump-start the economy’s recovery “Congress should use this opportunity to support the American people and the American economy. If we get the economy growing, we will be able to pay off the debt.” — Minneapolis Federal Reserve Bank president Neel Kashkari to “Face the Nation”
Neel, you’re a Fed bank president, so you, of all people, should know that getting the economy “going” has absolutely nothing to do with the government’s ability to pay off the debt.
C’mon, man.
It’s better to overspend now and avoid a collapse “We should be trying different things: stimulus payments, unemployment benefits, aid to state and local governments, aid to small businesses. Some of these things will be more effective than others, but it’s much better to err on the side of excess.” — Economist Gus Faucher to the Washington Post
Of all the “expert” comments, the comment by Gus Faucher comes closest to the truth.
My only quibble is with his use of the word, “excess.” We are so far from “excess” (whatever “excess” success may be), that even to mention it is misleading.
Historically low interest rates make borrowing money a smart strategy “Interest rates on federal debt are currently lower than the expected rate of inflation, so there’s no good reason for restraint in the total size of the package.” — Vox correspondent Matthew Yglesias
Oh, Matthew, you know full well that interest rates are set by the government. The government has the unlimited power to pay as much or as little interest as it wishes.
You are correct that “there’s no good reason for restraint in the total size of the package,” but not because of interest rates. It’s because there never is a good reason to restrain federal deficit spending. Never.
So there it is folks, all those experts giving you contradictory advice, and not one of them demonstrates any understanding of federal financing.
Foodbank line. Broke in America.
Feel free to contact them, tell them to learn Monetary Sovereignty, and say I said so.
Meanwhile, be ready for more poverty, starvation, homelessness, sickness, and death, thanks to Congress, the President, and the people who preach The Big Lie.
Gap Psychology describes the common desire to distance oneself from those “below” in any socio-economic ranking, and to come nearer those “above.” The socio-economic distance is referred to as “The Gap.”
Wide Gaps negatively affect poverty, health and longevity, education, housing, law and crime, war, leadership, ownership, bigotry, supply and demand, taxation, GDP, international relations, scientific advancement, the environment, human motivation and well-being, and virtually every other issue in economics.Implementation of Monetary Sovereignty and The Ten Steps To Prosperity can grow the economy and narrow the Gaps:
#Monetary Sovereignty - Mitchell 