This post discusses the reality of the national debt by addressing a common misconception: that if the national debt grows too large, it will be catastrophic at some point in the future. For a general take on these concepts, see this post instead: The reality of the national “debt” (that isn’t)
|Related post: National debt scaremongering: A century-long historical walkthrough.|
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This post was last updated September 13, 2020.
Disclaimer: I am a layperson who has studied MMT since February of 2018. I’m not an economist or academic and I don’t speak for the MMT project. The information in this post is my best understanding but I don’t assert it to be perfectly accurate. In order to ensure accuracy, you should rely on the expert sources linked throughout. If you have feedback to improve this post, please get in touch.
Addressing incorrect fears about the national debt
What’s right-wing is the very concept that “lots of national debt means we’re in serious trouble.” In and of itself, the raw size of the national debt (also called public debt) is never – and can never be – a problem. (Not for fully-financially-sovereign currency issuers, it’s not. This includes the central governments of the United States, the U.K., Canada, Australia, Japan, and etc.)
The inequality of the national debt, however, is always a problem: the elite have almost all of it and the rest of us – who are desperate for some of it – have almost none.
Sure, the elite use their fantastic wealth (as given to them by the federal representatives they bribe) to create bubbles that only they benefit from and only we pay for.
Public debt (its raw size) is never a problem but private debt is always a problem. That’s the debt held by the private sector, meaning actual human beings (such as you and me) that can’t issue the dollar.
Importantly, “debt held by the public” does not mean private citizens. (This is where they try to trick you!) It means the public sector, which is the government only.(Related post: The MMT view of sectoral balances.)
The debt of the public sector is by definition the surplus of the non-government sector – us! To say “We must pay down the national debt!” Is exactly the same as saying “We must take money from the non-government sector.” Why would you do that? I mean, you could, but…
Yes, we need to take (a lot of) money away from the obscenly rich, but not because we “need their money” – we just need them to not have it. We don’t, however, need to take money from “the private sector”. Who always gets the short end of the stick when we talk like that?