I didn't fully understand why the national debt was completely irrelevant until I listened to Harry Shearer's October 28, 2012 podcast (transcript). He interviews Dr. Stephanie Kelton, who is an Associate Professor at the University of Missouri Kansas City and a Research Associate at the Levy Institute of New York City. The short of it is that, having gone off the gold standard, the U.S. Government can print the money it needs to pay off the debt or to pay off the interest on the debt. The only things we need to worry about are unemployment and inflation.
The Republicans (and many Democrats) talk about the debt like we are talking about a household's debt, a company's debt or a state's debt. But the U.S. government issues the currency that the debt is paid in. An analogy would be that if your family owned a million dollars you would probably be in deep trouble. You would have the incredibly hard, if not impossible, task of paying the interest and keeping yourself from going bankrupt. But now imagine if I gave you a box that made real money. This box will make as much money as you need. Would you worry about your debt? No. How much you put on credit cards or how many loans you took out would not really matter. The United States has the magic box. We MAKE the money that the interest on our loans is paid in. Of course there is a danger of inflation, but right now the biggest danger to our country is unemployment and underinvestment in education, research and infrastructure. More below the line.
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