$4 trillion federal deficit isn't the problem, it's how we're spending - Business Insider

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A top economist says the $4 trillion federal deficit isn't the problem — it's how we're spending the money (by paulconstant)

, Professor Stephanie Kelton discussed Modern Monetary Theory, which rethinks the concept of government debt.

The current deficit could be put towards directly helping Americans, unlike stimulus money that's been directed to big business.When the United States went off the gold standard in 1971, our monetary system changed dramatically. Rather than fixing each dollar's worth to an established amount of gold, we adopted a floating exchange rate, and the nature of economics changed.

"We've been indoctrinated by the constant refrain that the government should put its fiscal house in order," Kelton explains. When they rage against the deficit, Kelton says trickle-downers who want to keep government as small as possible use "our understanding of our own personal finances" to convince us that government spending and the accrual of debt is "reckless and irresponsible.

"When the government's budget is in deficit, it simply means that the government is spending more dollars into the economy than it is subtracting back out, mostly through taxation," Kelton says. "So if the government spends a hundred dollars into the US economy, but it only taxes 90 of those dollars back out, we say the government's budget is in deficit."

 

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