SOGEI website background

On Federal Deficits and Debt, Monetary and Fiscal Policy

President Biden signed a $1.9 trillion COVID relief package (the American Rescue Plan) on March 11, 2021. Without a corresponding increase in taxes, this plan has set off alarm bells for those concerned about the expansion of government deficits and debt. Mainstream economists have raised issues of excessive inflation, crowding out of private sector investment, and an unacceptable repayment burden on the young and future generations. The purpose of this paper is to demonstrate that these concerns are based on a misunderstanding of the role played by the deficit, debt, and taxes in the U.S. economy, even a misunderstanding of how certain parts of the U.S. financial system actually work. […]