Recently, members of Congress, part of the Blue Dog caucus, published an op-ed in The Hill, asking readers: Our constituents have to balance their budgets every month—why can’t the federal government do the same?
It seems like a simple enough question, but oversimplifies the role of the United States government in creating US dollars. All US dollars in existence are created by the US government (which includes the Federal Reserve System).
Put another way: if the federal government budget was exactly in balance at all times, there would be no dollars in existence. Every dollar in your checking account is a dollar that some bank owes you, and that bank gets dollars from some other bank, and ultimately from the Federal Reserve.
The debt of the federal government is essentially equal to the total net savings of all of the people and businesses in the United States. While some people have foreign bank accounts, and foreign people have some investments in US dollars, that is all relatively minor in the grand scheme of things.
If you have a thousand dollars in your checking account, or a thousand dollars of US treasury debt, or ten one-hundred dollar bills with Benjamin Franklin’s picture on them, you are entitled to buy a thousand dollars’ worth of stuff. While these may vary in their liquidity, they are all essentially the same exact thing, though one might be more convenient than another. If you want to get a ride in an Uber car, or buy something from Amazon, money in the bank is a lot more useful than physical cash in your pocket. If you want to invest in the stock market, that US Treasury debt in your brokerage account is more useful, and if you are planning to go on vacation in Cancun, those hundred dollar bills might come in handy.
But the point is that in each case, the money itself is not intrinsically valuable, it is valuable because it represents that you are entitled to something. That is another way of saying that someone, ultimately the US government, owes you something.
This is all to say that zero is not the correct size for the federal budget deficit. At some point, too much growth in the national debt, or too many dollars in existence the “money supply” will cause problems—particularly too much inflation.
The total number of dollars in existence needs to go up over time, as the population rises, or as the total income of everyone rises, and maybe a little more than that. The Blue Dogs caucus correctly determined that it should be going up far less than is presumably going to happen if the Big Beautiful Bill Act is passed.
The Republicans’ plan will not avoid getting money from rich people—rather, it will get money from rich people by issuing interest bearing notes, instead of by taxes. That means it will be making the gap between the rich and the poor grow instead of shrink as money is being sent from the US Treasury to the rich investors every month.