So here we are, in late September, being told that the government might shut down next week and then default on its debt in mid-October. And it’s all some Republicans’ fault.
Let’s make sure I understand this. Starting with the basics:
Unlike our state and local budget years that begin on July 1 (with mandated balanced budgets, by the way), the federal government budget year begins on Oct. 1. The House has the constitutionally mandated responsibility to initiate all spending bills, including budgets. The Senate then agrees or disagrees; the president gets to sign or veto. This last step is supposed to be done by Oct. 1.
There is no requirement that the federal budget be balanced: If expenditures exceed revenues, the federal government can borrow the difference and add it to the national debt – which, as of last weekend, was $16,745,555,054, of which my twin grandchildren owe $105,746.
Sometimes the federal government borrows from other countries, like Japan and China; sometimes it borrows from itself, or a form of itself called the Federal Reserve, which buys government bonds. Where does the Federal Reserve get the money to buy the bonds? Thank you for asking, but it’s not your job to question where the money comes from.
It’s your job to spend it, perhaps by taking out loans to start a business even if you don’t have any particular interest in starting a business, which the market may or may not want. Or you should borrow money to buy a house you can’t really afford even with Fed-determined low interest rates, so you can default someday like over-extended homeowners in the last decade. Spend — so that jobs are created to provide what you are spending on, even if most of the money involved in this process is borrowed/printed/made up or taken in taxes from people who then can’t spend their own money or save it in accounts from which it can be borrowed for genuine economic activity.