The American Debt Clock shows in real time the ever-growing indebtedness of the United States, with an amount expected to exceed $ 25 trillion as the government deploys $ 2.2 trillion in economic stimulus measures.
The Coronavirus Aid, Relief, and Economic Security Act provides $ 1,200 checks to taxpayers and small business forgivable loans and other industry loans to help prevent a national economic collapse.
How to pay off the debt isn’t causing much concern or discussion in Washington these days, with politicians and government officials claiming it’s a worry for another day – that doing nothing now would be much more damaging to the government. the economy.
Yet “the first thing to remember about funding government spending is that there is no free lunch,” said John Scott, professor of economics at the University of North Georgia. “When the government spends, we will have to pay for those expenses. “
The Poynter Institute, a journalist’s resource organization, reported that the US government “will borrow money it sends you to stimulate the economy by issuing treasury bills.”
Because Congress suspended the “debt ceiling” or the debt limit it could incur, for two years in 2019, the government can take on as much debt as it wants, Poynter said.
Bonds are sold to banks, and if banks don’t have enough money to buy them, the Federal Reserve will lend them as much as they need, Poynter said, citing national news site Axios.
“The banks then turn around and sell the bonds, at a small profit, to investors around the world,” says Axios.
Bonds are generally attractive to investors in uncertain times, so there is always a market for them.
The Federal Reserve spends money on bonds “with newly created money,” Scott said.
More dollars in the economy seems like a good thing, but it can lead to inflation, he said.
And that’s of heightened concern because the Fed “buys a lot,” said Georgian economist Jeff Humphreys, director of the Simon S. Selig Jr. Center for Economic Growth at the University of Georgia.
Another, perhaps more obvious, way to pay off the stimulus and the national debt in general, economists say, is to raise taxes.
Higher taxes hurt family finances, but they also “depress the economic activity of the economy,” Scott said. “Government is getting bigger, people and businesses are getting smaller. “
“I think we will see an increase in inflation over the next 10 years,” Humphreys said, adding that taxes and interest rates could go up as well.
While some in government may think extreme measures must be taken at unprecedented times, economists are still concerned.
Steve Forbes of Forbes magazine said that inflation can produce new economic crises.
“What we should do is issue bonds… where we use the existing money to fund these programs,” he said.
More debt is on the way as Congress approved more economic stimulus on Thursday, April 23, including $ 250 billion more for a small business payday loan program that ran out of money last week.