As of June 23, 2022, the U.S. government’s total debt was $30.4 trillion. But as everyday citizens do we really know what that debt means or how it breaks down? The national debt is an accumulation of federal budget deficits.


The question that came up was “ If the U.S. collected what was owed by other countries to us compared to how much we owe to them, what would be the difference?”. When it comes to foreign debt, they owe us approximately $9 trillion and we owe them (Whoever that may be) $7 trillion. Iraq and Afghanistan alone owe us $6.5 trillion. In other words if everybody settled up their debts we would be roughly $2 trillion ahead.


Three quarters of our national debt is internal. We borrow against our own entities. Entities like Social Security and Medicare. Everyone pays into these funds on the premiss they will need these benefits in the future. So these funds pile up for expected payouts in the future.


We ,the U.S. government, incur debt when it issues “Treasury Securities” to fund the deficit between the amount of money that it receives in taxes and other revenues versus the amount of money that it spends. (National defense, war, welfare, interest and other social programs).


The last time the federal government had a surplus was 2001 ($127 billion). A surplus occurs when the government collects more than it spends. The only time in history the U.S was debt free was in 1835 when Andrew Jackson shrank our debt to zero. Now consider this. Our entire national debt didn’t hit $7 trillion until 2004. In other words, the U.S. has accumulated as much debt and more in the past two years as it did in its first 228 years.


This has to do with party philosophies. The Republican party leans more towards individual freedoms, less government involvement, rights and responsibilities. In contrast, Democrats attach greater importance to bigger government, equality and social/ community responsibility. These differences in philosophy also permeate in fiscal policies.


There is something called Modern Monetary Theory (MMT). MMT suggests that a country that can issue its own currency, borrowing capacity, is limited mainly by the rate of inflation it’s willing to tolerate. In this model, taxes are raised to cool inflation rather than to offset government spending. The mentality is if people have less to spend it will ease supply and demand. Supply will increase as demand subsides. That’s why the Fed increases interest rates. It makes getting money harder so people quit borrowing and supply catches up with demand. Remember inflation is when there isn’t enough goods for the demand so they fetch higher prices for the goods and services. MMT is the go-to philosophy of the current administration.


The Republican party believes more in cutting government spending, deregulating, and cutting taxes. Cutting spending reduces the amount needed to run the government. Deregulating reduces the cost of goods. Cutting taxes adds to the deficit because it reduces the amount of revenue the government takes in. But cutting taxes puts more money in the hands of the public to buy more of the goods. Thereby increasing tax revenue due to more buying. Thereby stimulating economic growth.


Both work. But MMT chokes the public and causes a period of struggle for most and hinders economic growth “on purpose”. The other way thinks to raise the supply of goods to meet the demand as opposed to cutting the supply of goods to ease the demand.


You have to ask yourself what makes more sense.   DJ