@AliceMarshall @antares

This is a common misconception, but no, Congress only appropriates money, giving permission for it to be spent.

The actual spending takes place throughout the year as the Executive Branch pays bills and buys things.

The US Government has plenty of ongoing income to pay its debts. It cannot legally default as it is legally required to service debts first.

@athousandcateaus Yes, I see from the comments that I should have added a choice for Monitizing the Debt and the resulting hyperinflation to the list. I just didn't think anyone would seriously think the US would pull a Zimbabwe. I have clearly underestimated the internet.

@athousandcateaus There is a big difference between having a higher deficit and monetizing debt. You don't hear anyone in economic circles worrying about the US debt to GDP ratio if congress fixes the statutory borrowing limit we are fine (choices 1 or 2).

On the other hand fixing a legal fiction with real dollars will absolutely have economic consequences. Perhaps not 10,000% inflation, but certainly double digit inflation, especially if market participants start to believe that it will be the standard solution to a debt limit impasse.

Now as your first video points out we could raise taxes to the point that income = spending, which is another way governments can handle unpaid debt. I think new taxation is particularly unlikely in the current political climate. There is also the slight problem of popular revolution. I would remind you what happened when the government of King George III tried to raise taxes to pay off the debt of the French and Indian war.

@athousandcateaus MMT is a fun little theory, but there are some glaring flaws in it's narrative.

MMT proposes an all-powerful government that can spend money and raise taxes at will without political pressure from the people. It sees a government in isolation where wealth transfer to other nations is not a factor. It further proposes that "the government" will be a rational economic actor with an abiding interest in in stable currency an the ability to make complex economic corrections in a timely and intelligent manner. Now to quote @kairyssdal , "Have you met the Congress of the United States?"

Most of the worlds advanced economies have carefully separated the function of maintain a stable currency from the operations of government. * In the sense of MMT the Federal Reserve is the agent most like "the Government" in the narrative. Congress could take direct control of the US Central Bank but it won't and for very good reasons.

So long as the regulation of the money supply is left to a politically independent FOMC congress does not have the power to spend without borrowing** and the MMT idea that the US Treasury cannot run out of money does not hold, and it is a good thing it doesn't, because were we to depend on the US congress to maintain economic stability directly the US would be in deep s**t.

In terms of raising the debt limit, you can argue that congress and the president might come up with a completely revamped economic system for the US, but I think the probability that it happens in the 118th congress are quite remote.

* China is the one glaring exception and they themselves would probably debate whether they are and advances or developing economy. At least in WTO terms China still uses the rules for developing economies.

** The hypotheticall trillion dollar coin ploy not withstanding

@antares @athousandcateaus

> "Now as your first video points out we could raise taxes to the point that income = spending"

This is so key when addressing MMT. We see that, for all practical purposes, we can't actually do that :)

MMT seems to rely on that being true, but it isn't practically true now, and won't be any time soon.

Maybe when that world arrives we can consider the MMT form of fiscal governance, but until then, we need to clearly say that MMT cannot work because it misses this key piece.