Federal revenues in November rose $23 billion to $275 billion, a 9% increase from a year earlier.
Outlays jumped $88 billion to $589 billion, 18% higher than a year earlier. Interest payments on U.S. government debt accounted for $25 billion of the increase.
The outlay for interest on the debt in November, at
$80 billion, surpassed the$66 billionoutlay for national defense, which was up $8 billion from a year earlier. The outlay for the government-run Medicare health insurance program also rose by $8 billion, to$93 billion, while the outlay for the government-run Medicaid program for the poor and disabled climbed $2 billion to$50 billion.
TFW your interest payments approach medicare spending
The weighted average interest rate on the $26 trillion of outstanding Treasury securities rose to 3.10% last month from 2.22% in November of last year.
Seems nice in 
sense, if fed won’t drop interest rates in the next year, libertarian bugbear about deficits will come closer to fruition
Sorry this is just neoliberal nonsense. The Federal Reserves creates money out of thin air, it will never not be able to service its debt.
Deficit simply means the money that the government has spent out and hasn’t collected back in taxes yet. Which is good because you want the money to stay in circulation to stimulate the economy. The Clinton administration had a record budget surplus (government taxes more money than they spend, meaning less money in circulation) in the 1990s which then what paved the way towards recession.
The problem with the US is how much of those deficit is spent disproportionately into the rich people’s hands (military industrial complex, interest payments to bondholders etc.) rather than investing into the real sector of the economy.
Fmr. Fed. Chm. Alan Greenspan: The United States can pay any debt it has because we can always print money to do that.
If we paid off the deficit then there would be no dollars left*, because every dollar was created out of thin air by the government.
*Except for the dollars created by private banks, but those dollars are cancelled 1:1 by the loan debts they were created for.
but the dollars created by the lower banks are leveraged on the existence of dollars they have? fractional reserve right?
I’m sure it’s true that if the debts were paid in full, banks would cease to function along with the rest of the economy. But fractional reserve is a myth.
I found a YouTube link in your comment. Here are links to the same video on alternative frontends that protect your privacy:
I found a YouTube link in your comment. Here are links to the same video on alternative frontends that protect your privacy:
Why would the government need to tax the money back if the Federal Reserve can create money out of thin air?
I think the answer is to control the amount of inflation. This explains why we saw high inflation after they turned the printer on overdrive. And they can’t just tax half of all money created back so they use other methods like increasing the interest rate. Higher interest rates means more incentive to save and fewer new loans therefore less new money being created.
But I’m no expert so please correct me if I’m wrong
The government needs taxation because it is drives the value of the (fiat) currency.
Think about it this way: why people would want to use your country’s currency in the first place? Why don’t every country simply use US dollar? Why don’t every country use gold? Why don’t everyone use the Hexcoin that I just minted billions of them digitally?
The reason is simple: to be a resident of that country, you have to pay taxes in the currency that the state demands. This means everyone will have to earn that currency in some way. The state will print that currency to purchase whatever it needs. The companies that sell stuff to the government will now earn that currency that state printed out of thin air. They will then pay wages and their suppliers in the same currency that they just earned from the state, which was created out of thin air. Keep propagating and now everyone in the country has some means to earn the state-issued currency, which they then use to pay taxes (returning some of your money to the state).
If you fail to pay your taxes, you get punished, and having your assets confiscated etc. This is what drives the value and demand of the currency.
So, a bunch of junk papers suddenly become a valuable item simply because you have to pay taxes with them. Simply because the state coerces you to.
Now, a VERY important concept to keep in mind: taxation and taxes are two separate things! The very act of taxation infuses the currency with value (makes them valuable), but the government doesn’t need taxes (the amount of money you pay back the government every year when you file your tax return) to fund their spending.
In other words, the power of taxation by the state drives the value of the currency. But, when you pay your taxes, that money simply get deleted. The state doesn’t need to earn your taxes to pay for itself. The state is the authority that created the money in the first place.
However, neoclassical school of economics teach that the state needs to earn revenues from taxes in order to fund their spending, which if you have understood the concepts above, is obviously wrong. Neoliberalism doesn’t want government to spend too much because the deficit (extra money created) will inevitably increase the income of the working class, and this is bad for neoliberalism because it means people need to take on less debt, and thus bad business for the financial sector. Unfortunately most governments in the world still adhere to this faulty thinking and they are all acting, consciously or not, in the interest of the bourgeoisie and the Western imperialists.
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Now, let’s go back to your original question, and assume that some governments are ready to abandon neoclassical austerity. In this case, why would the government want to tax the money back? Again, once you have understood the concepts above, the answers become clear.
First, to take out excess currency in circulation because if you have too much money relative to the availability of labor, resource and technology of your country (i.e. productive capacity), then everything simply becomes more expensive (inflation) because the people have more money to spend but not enough productive capacity to satisfy those demand.
Second, to reduce wealth inequality. Rich people who disproportionately benefit from the system should pay a disproportionate amount of taxes - not because the government needs billionaires to fund their spending, but because the government can do that and they want to do that and they don’t want the billionaires to have excessive influence over the people.
Third, to shape behavior. For example, let’s say the state doesn’t want people to smoke, you can tag on extra tax on cigarettes to discourage smoking. Another example, let’s say the state wants to encourage green energy transition, so they can exempt EVs and green technology from additional taxes they can impose on to the fossil fuel sector.
As you can see, taxation is a tool that can be used to achieve specific socio-economic policies the government wants, but it is not needed to fund government spending as neoliberals would like you to believe.
Thanks for the detailed response! I didn’t think of the demand creation aspect. So inflation does play a part as well as incentivizing behaviors. And under capitalism, one way of limiting workers spending power to force them to work harder
uhh what bourgeois dictatorship gives a shit about that?
Obviously this wouldn’t work in a bourgeois society, but that is still how fiat money works and when used properly, it is a very powerful tool to shape the specific socio-economic policies the government wants.
I’d add that, especially on a local level, there is indeed a need for money to be shuffled around. The lower levels of government can’t print their own money, so the funding has to come from somewhere because, like you mentioned, the people doing the labor to get things done need to pay taxes and buy food. I think of it like if I were to play a chess master. In the same way that entitlements will inevitably be funded by the government, I will lose to the chess master. That doesn’t mean we can just not play the game and skip to the inevitable part. The pieces need to be shuffled around because those are the rules of the game. They’re human-created rules and could be changed, but the chances of a local municipality making sweeping changes to how food stamps are funded is only slightly less likely than me changing the formally agreed upon rules of chess.
Not only that, the federal/central government that creates the money can always pay off whatever financial hole the local government is in. Let’s say you have a state government that hasn’t been able to keep up with its finances (maybe because it is underdeveloped, or maybe there had been a natural disaster that wrecked the local economy), the federal government can always plug that deficit without having to take away from the richer states.
A better analogy is like two friends playing poker. If you are a better player than me, you will probably win more games against me throughout the night, and at some point I’m going to lose all my chips. But, we are not playing for money. We are playing because it is fun. You can always give me back the chips and we resume playing into the night. There is nothing that says we have to stop playing because I have already lost all my money.
Taxing the money back out of the economy is standard Keynesian methodology for how to fight inflation but it’s literally never been successfully implemented because it’s too politically unpopular for anyone to actually do it
You’re wrong overall but right currently. The reserve can poof magic money into existence because of US dollar hegemony but that’s not guaranteed forever. Other nations couldn’t operate like the US currently does. It’s why modern monetary theory is a joke the second you look internationally. It only operates in a closed, autarkic system
This is not correct. You are confusing two separate things: monetary sovereignty and dollar hegemony.
The dollar hegemony simply allows the US to get “free lunches” all over the world because everyone wants dollar and the Fed can always print the money needed to get those free lunches. The treasury bonds serve to absorb the dollar surplus the US spent overseas and recycle them back to the US.
This is very different from monetary sovereignty, in which a country’s currency is not tied to any form of metal/resource or pegged to another currency, in other words, fiat currency. Here, the state in charge of money creation can always print as much money as is needed to drive economic growth so long as they are not limited by the availability of labor, resources and technology. For example, if you already have 100% employment rate, of course you cannot create more jobs (more money), and this will lead to inflation because there is not enough productive capacity to fulfill the excess demand.
The reason most other countries cannot do this is because they lack energy and food sovereignty. This is part of the post-war US imperialism in which through the creation of IMF, World Bank, IMF and various global financial institutions had severed the ability of most developing countries to grow their own food, nationalize their own natural resources including energy, and are forced to orientate their economies toward export crops to serve first world consumerism, while allowing foreign corporations to enter and destroy their domestic industries.
People always get confused by these two concepts. Hope this clears them up.