It’s phony debt panic time, again

It’s that time again, when the economists, media, and politicians start spreading false information. Some do it out of ignorance. Some do it out of malevolence. Either way, they have been doing it for eighty-six years, and will keep doing it so long as you, the public, buy the BS.  

Here are excerpts from an article I read in today’s newspaper:

US Debt now stands at $40 trillion
By Fatima Hussein
Associated Press
WASHINGTON — The national debt surpassed a record $40 trillion on Wednesday, a staggering milestone as defense costs, social programs like Social Security and Medicare and interest on the burgeoning deficit to make up an enormous share of federal spending.

Yes, it’s a nice, big, round number. And it would be “staggering” if it really were “debt.” But it’s not. The so-called “debt” is the total of Treasury Securities: T-bills, T-notes and T-bonds. It’s deposits.

What actually happens when you buy a T‑security

Here is the sequence:

1. Your bank debits your checking account.
2. The Federal Reserve credits your Treasury securities account with a T‑bill. The dollars you “paid” are now simply reserve balances sitting in the Treasury General Account (TGA).

No spending occurs. No programs are funded. No bridges are built. No salaries are paid. Your dollars simply change form from a bank deposit to a Treasury deposit (T‑security). They still are your dollars.

There is no loan. There is no borrowing. There is no debt. The federal government does not borrow dollars. It creates all the dollars it needs simply by pressing computer keys.

Where your dollars do not go

They do not go to Congress, or to federal agencies, or to fund Social Security, or to fund Medicare or to fund anything. The government does not spend your dollars.

It spends by creating new dollars (crediting bank accounts). T‑bill issuance simply transforms dollars, not fund spending.

You still own the dollars. They just are stored in a different bank.

Visualize transferring dollars from your savings account to your checking account. Is your checking account now in “debt” to your savings account? The whole concept is ridiculous.

Why does the government sell Treasury Securities?

Not to acquire spending money. It creates all it needs by simply pressing computer keys. The purposes of T-securities are:

1. To help the Fed control interest rates by creating a “floor rate.”
2. To provide a safe, interest-paying place for you to store unused dollars.

That’s it. It’s not debt any more than you bank savings account is “debt.”

The milestone figure was recorded just five months after the U.S. hit a record $39 trillion debt in March. It reached $38 trillion five months before that, in October.

The unprecedented $40 trillion figure highlights competing administration priorities, from boosting the defense spending that the U.S. relies on to carry out President Donald Trump’s almost-6-month-old Iran war to lowering the cost of gas and groceries.

The main administration priority is to enrich Donald Trump, but you already knew that didn’t you?

Kush Desai, a White House spokesman, said the Trump administration “has been focused on slashing waste, fraud, and abuse in federal spending while accelerating economic growth to get America’s debt-to-GDP ratio trending in the right direction.”

The debt/GDP ratio is absolutely meaningless. It does not measure anything. It does not tell you anything about the federal government’s ability to pay its debts or its need for taxes or its solvency or anything else. It has zero meaning for a Monetarily Sovereign government.

It is quoted by people who either don’t know, or who don’t want you to know, the facts about federal financing.

However, experts say the exploding debt and the latest record milestone is already affecting Americans’ pocketbooks by raising borrowing costs for things like mortgages and cars, lowering wages from businesses that have less money available to invest and creating more expensive goods and services.

The “experts” who say that are not experts. The misnamed “debt” has no effect on mortgages, or on wages or on the cost of goods and services. When you buy a T-bill, you merely are changing the bank where you have money stored. That’s it. It doesn’t cause mortgage rates to change.

Advocates for a balanced budget also warn that the long-term trend of borrowing more and paying more in interest will force Americans to face tougher fiscal tradeoffs ahead.

“The federal debt is already raising the cost of living and choking out other spending and investment, threatening our economy and Americans’ long-term prosperity,” said Margaret Spellings, president and CEO of the Bipartisan Policy Center.

Poor Margaret Spellings has no concept of the facts — or she is trying to make sure you don’t understand the facts. Buying T-bills, i.e. adding to the federal “debt,” merely moves dollars from one bank to another. This does not raise the cost of living. It does not choke out other spending or investing. It does not threaten our economy. It’s not debt.

“Our current fiscal trajectory is plainly unsustainable, and that’s the best-case scenario. a recession, global war, or any number of other events could quickly push us over the edge from a challenge into a full-blown crisis,” Spellings said in a statement.

Ag, yes. “Unsustainable.” The favorite word of the debt liars. They have been telling you the federal debt is “unsustainable” since 1940, when it was $40 billion, and every year since. Somehow, we still are sustaining, with our biggest economy in history.

The U.S. is subject to a statutory debt limit, or a limit to federal borrowing, which Congress has the authority to set, adjust or abolish.

If there is anything less meaningful than the debt/GDP ratio, it’s the statutory debt limit. Why? Because as the article admits, “Congress has the authority to set, adjust or abolish it.”

The Bipartisan Policy Center estimates that the U.S. will most likely reach the debt limit of $41.1 trillion sometime between late winter and mid-summer of 2027, requiring Congress to again vote on whether to raise or suspend the debt limit.

For an organization that does a lot of stupid things, Congress has outdone itself with the debt limit, the only purpose of which is to give whichever party is in the minority some talking power over the other party. It’s like you going to the store with $1,000 and saying to yourself, “I plan to spend $10.” But you wind up spending $11.

So??

The U.S.’ fiscal position stands at the worst among other developed countries, according to recent data analysis from the Organization for Economic Co-operation and Development.

If by “worst” they mean “best” that would be an accurate statement regarding the most powerful economy in the world. Clearly, these people have zero knowledge of federal financing, which that puts them in the same league as the people who always think there is a monster hiding under their bed.

As always, I urge you to contact your favorite media (who probably are promulgating the same lies), and straighten them out. Eighty-six years of this idiocy is enough.

Rodger Malcolm Mitchell

Source: https://mythfighter.com/2026/08/20/its-phony-debt-panic-time-again/