1. Money is created and enters the economy when the federal government spends.
2. Money leaves the economy and is extinguished forever when the federal government collects taxes.
3. The federal government does not need or spend our tax money. To think it does is like thinking a theater needs to take back and reuse its tickets in order to have tickets. Or like saying the Post Office needs to take back and reuse its stamps in order to have stamps. The federal government creates money - it is not going to go broke or have to borrow if it does not tax it back.
4. If the federal government were to tax back all the money it spends, then (much to the relief of too many of us) the federal government would have (big deal) its much sought-after "balanced budget". But if the federal government had a "balanced budget", then the economy would end up with no money. We the people, in aggregate, would have no money. The economy would tank.
5. When the federal government spends more than it taxes back, the government ends up with a "deficit" (so what, it can always create money), but the private sector ends up with a surplus of money enabling us to spend and save. A deficit simply means that the government has created more money than it has destroyed. Is that a bad thing for us in the private sector?
So I ask you - why the political rush, especially among presidential candidates, to cut the deficit and eliminate the (mis-named) debt? What is the matter with all those politicians who want to cut the deficit and "balance" the budget? Do you get it?
With thanks to petermartin2001.wordpress.com
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