>> A huge share of the US debt is held by the government itself, in vehicles like the trust funds of Social Security and Medicare. Still more was purchased by the Federal Reserve as part of its “quantitative easing” programs to fight the Great Recession and the Covid downturn.
>> Thus, it’s money that the federal government owes to itself. That makes it fairly unimportant, economically; it doesn’t actually limit the resources available to the government.
These are very common misunderstandings. The money borrowed from the trust funds are real debt that needs to be repaid. In particular when the boomers retire and the net flow of money is OUT of the funds rather than IN. Up until now, congress has happily spent that net inflow and now they owe it back which makes them hate social security. One politician was claiming its not "real" debt in some way and was corrected by someone at the Federal Reserve who insisted it's as real as any debt purchased by anyone else. Which brings us to the Fed - that's not the government borrowing from itself as the author says. The Fed might be OK with lending at lower rates than the treasury can get otherwise, but they aren't offering an infinite trough for congress to spend - only an emergency bandage.
>> Thus, it’s money that the federal government owes to itself. That makes it fairly unimportant, economically; it doesn’t actually limit the resources available to the government.
These are very common misunderstandings. The money borrowed from the trust funds are real debt that needs to be repaid. In particular when the boomers retire and the net flow of money is OUT of the funds rather than IN. Up until now, congress has happily spent that net inflow and now they owe it back which makes them hate social security. One politician was claiming its not "real" debt in some way and was corrected by someone at the Federal Reserve who insisted it's as real as any debt purchased by anyone else. Which brings us to the Fed - that's not the government borrowing from itself as the author says. The Fed might be OK with lending at lower rates than the treasury can get otherwise, but they aren't offering an infinite trough for congress to spend - only an emergency bandage.