Now that we have a totally fiat currency, a pure paper money whose value is set by public opinion, it is possible for the government to pay its bills by simply printing fresh new greenbacks. On one hand, most of us believe that printing more money reduces the value of existing money, our savings. On the other hand some of us believe that we ought to increase the money supply as the economy grows.
Question, just how much new money is healthy growth? Who knows??
Every year Congress is faced with a gap between obligations and tax revenue. We spend more than we take in. The only ways to fixing this are to spend less or hike taxes. Congresscritters hate doing either. Spending cuts cause howling from who ever gets cut off from the gravy train. Pigs hate being pushed away from the trough. Tax hikes provoke howls from taxpayers. Congresscritters fear the howling means they will loose the next election.
Lately we have been able to keep things going by running a sizable federal deficit each year. This year is going to be a scorcher. In simply terms, the US government has been covering the deficit by simply printing more paper money. So far, nothing too bad has happened. Perhaps the healthy growth of the money supply, what ever that may be, is enough to pay off the deficit. I don't really believe that, but it might be true. Or, far worse, we are printing enough money to crash the currency, sometime in the future. Maybe next year. May be five years from now. Who knows? But a crash would be bad for us. Foreigners would stop accepting greenbacks in payment for imports. Stores would stop accepting dollar bills. The economy would grind to a halt. This happened in Germany 100 years ago. The pain was so intense that the Germans still remember it.
So, I fear that Congresscritters will continue to follow the path of least resistance and keep right on running big deficits until something really bad happens.
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