The Debt Ceiling Is a Charade — and So Is the Crisis It Pretends to Solve

Year after year, Americans are subjected to the same political drama: partisan bickering over the debt ceiling, late-night votes to keep the government running, and panicked headlines warning of imminent default. These recurring standoffs are not the product of economic necessity—they are political theater, scripted and staged by the Duopoly. The result is not only political paralysis, but a dangerous erosion of national strength and public confidence.

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This routine isn’t governance—it’s dysfunction. Worse, it’s based on obsolete ideas about money that no longer apply in our current fiscal system.

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The truth is this: the United States is a sovereign fiat currency issuer. The Federal Government does not need to tax before it spends. It does not need to borrow before it invests. It is not revenue-constrained like state governments and households. The debt ceiling is not an economic necessity. It is a relic of a bygone monetary era—an outmoded narrative preserved by a professional class of budget analysts, academic traditionalists, and Washington insiders who remain tethered to outdated frameworks.

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We are no longer on the gold standard. Since 1971, when President Nixon formally ended the Bretton Woods system, our currency has floated freely. The U.S. government now issues dollars at will. It cannot run out of money, default on debt denominated in its own currency, or go “broke” in any conventional sense.

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Since World War II, Congress has modified the debt ceiling 103 times—either by raising it or suspending it entirely. No other advanced nation imposes such a crude, self-imposed constraint on its own fiscal operations. Yet the political establishment continues to exploit it, weaponizing fear and economic illiteracy to mask its own dysfunction.

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From 2008 to today, the so-called national debt has more than tripled—from $10 trillion to over $31 trillion—without triggering hyperinflation, mass unemployment, or economic collapse. In fact, the period from 2009 to 2019 marked the longest uninterrupted economic expansion in U.S. history. Unemployment fell by 55% (from 7.8% to 3.5%) while inflation held steady near 2%, defying decades of conventional macroeconomic wisdom.

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The debt isn’t the crisis. Our misunderstanding of it is.

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Nevertheless, both Republicans and Democrats continue to promote the fiction that the federal budget must “balance,” that the national debt is a looming catastrophe, and that every dollar of government spending must be matched by taxes or borrowing. This antiquated thinking fuels unnecessary crises, delays funding for essential services, and deepens public cynicism. Worse, the duopoly routinely weaponizes this myth to serve partisan agendas. The result is a broken system—driven by fear, sustained by misinformation, and cloaked in economic illiteracy disguised as fiscal prudence.

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Outgrowing the Gold Standard—and the Myths It Left Behind

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Understanding how we got here is essential. The convertible currency system also known as the gold standard was effectively suspended during World War I and again during World War II, when the U.S. and other nations needed the policy space to run large deficits to fund wartime spending. During the interwar period, efforts to return to the gold standard created immense economic stress, particularly during the Great Depression.

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Eventually, the Bretton Woods framework emerged after WWII, pegging currencies to the U.S. dollar, which was itself pegged to gold at $35 per ounce. But even this system proved too rigid. In 1971, the U.S. abandoned the gold convertibility of the dollar, marking the beginning of a true fiat currency regime.

 

In today’s monetary environment, the U.S. government no longer “borrows” in any meaningful sense. Treasury securities are issued not to fund spending, but to manage interest rates and provide a safe investment vehicle for markets. The government spends first and issues bonds later. Taxes are not collected to fund programs—they have evolved over time into a system for managing inflation and influencing economic behavior.

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These changes should have radically transformed how we think about fiscal policy. Instead, outdated beliefs continue to dominate our discourse, hamstringing the public’s ability to demand better and more responsive governance.

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Rethinking Taxes: Not a Funding Tool, but a Stabilization Mechanism

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Federal taxes do not fund federal spending. The prevailing narrative assumes federal taxes are collected to “pay for” government spending. But this framework collapses once we understand that the federal government creates dollars when it spends. Taxes do not fund spending; they constrain it.

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That’s a difficult truth for many to accept because it fundamentally challenges the typical understanding of macroeconomics viewed as an extension of our resource-constrained household budget. In a fiat monetary system, taxes primarily function to remove money from the economy, keeping inflation in check and limiting excess demand.

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The conventional narrative—that taxes are collected to fund roads, schools, Social Security, or defense—is false. The government creates the currency it spends. Taxes serve other critical functions: managing inflation by reducing aggregate demand, incentivizing or discouraging certain behaviors (e.g., sin taxes on cigarettes or speculation), and, in theory, redistributing wealth. But the effectiveness of that redistribution has sharply eroded. Today, three families own more wealth than the bottom half of America, and the top 1% captures roughly half of all new income.

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The Phillips Curve Is Broken

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Macroeconomic orthodoxy long relied on the Phillips Curve, which assumes a stable, inverse relationship between inflation and unemployment. Yet from 2011 to 2019, unemployment dropped by 55% while inflation remained steady around 2%. The assumed tradeoff simply didn’t happen.

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Instead, inflation in the 2020s has been driven by global supply shocks—COVID-19, Russia-Ukraine war, climate impacts on agriculture, Panama Canal restrictions, and trade instability. These disruptions limited the supply of globally sourced goods just as just as federal stimulus checks increased household liquidity. That’s why inflation rose.

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A clear example is the COVID-era car market. New vehicle production was disrupted just as Americans received $814 billion in stimulus checks and cut back on service-sector spending. Demand for used cars soared, driving prices nearly 30% above pre-pandemic levels. Inflation occurred as a confluence of effects—supply crunch combined with higher disposable income.

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The result? Too much money chasing too few goods—not because of runaway spending, but because of simultaneous economic shocks and constrained production.

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When inflation does rise, the Federal Reserve raises interest rates to discourage borrowing. This affects large purchases—homes, cars, appliances—but not everyday essentials like groceries, where people often spend from wages or savings. In this context, interest rates are a blunt instrument, and taxes become more effective at managing aggregate demand.

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Today, the average worker takes home just 75% to 86% of gross wages after taxes. Imagine the boost in purchasing power if workers kept 100%. Of course, unleashing that much capital into the economy could fuel inflation elsewhere. That’s the tradeoff.

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The question before us is not whether taxes are a “necessary evil” for funding government—they’re not—but whether they’re still serving the public good. Should we continue taxing income to stabilize the economy and influence behavior, or explore alternative systems that better address inequality and inflation without punishing productivity?

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Treasury Securities: A Policy Tool, Not a Debt Burden

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Likewise, U.S. Treasury securities are are frequently mischaracterized as burdensome debt the federal government must eventually “pay back.” In truth, they serve as instruments of monetary policy, used primarily to manage bank reserves and target interest rates.

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Viewing Treasury securities as a financial mechanism to “finance” the federal deficit reflects outdated thinking—a holdover from the Gold Standard era, when government spending was constrained by finite reserves. This framework took root with the First Liberty Loan Act of 1917, enacted while the U.S. monetary system was still tied to gold. Yet despite the U.S. abandoning gold convertibility in 1971, the fiscal narrative surrounding Treasuries has remained largely frozen in time.

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The modern national debt is, at its core, an accounting record of the dollars the federal government has spent into the economy to support public services, national infrastructure, and economic security.

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Treasury securities serve as a tool to absorb excess reserves in the banking system, thereby limiting inflation and providing a risk-free, interest-bearing asset for savers and foreign governments.

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Interest payments on Treasury securities do not threaten fiscal solvency—the federal government can always meet these obligations. The real concern is whether large interest payments might function as a secondary fiscal stimulus, potentially adding to inflation if the Fed maintains elevated rates. Even then, these payments are simply income transfers to bondholders—not an existential risk to the economy.

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Foreign holdings of Treasuries—especially by China—are often cited as a national security risk. But China holds less than 9% of all foreign-held Treasuries, down significantly from its peak holdings of 26.3% in 2010. Nations invest in Treasuries because they are safe and backed by the full faith and credit of the U.S. Government. That strengthens—not weakens—the global position of the dollar.

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Furthermore, the belief that government borrowing “crowds out” private investment—on the premise that both compete for a limited pool of savings—is another relic of pre-fiat monetary thinking.

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In a sovereign fiat system, the government issues its own currency and does not rely on private savings to fund spending. As such, the crowding-out theory does not apply in its traditional form. However, because the government can spend at scale, there is a legitimate concern that excessive public sector demand could bid up prices or divert real resources—labor, materials, and services—away from the private sector, potentially dampening private investment and economic growth.

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The Real Crisis: Political Paralysis and Public Misunderstanding

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We are not facing an economic crisis. We are confronting a failure to understand how our monetary system actually works—and a political establishment that exploits that misunderstanding for its own gain.

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The Duopoly thrives on economic myths. It uses the debt ceiling, taxes, and deficit fearmongering to stir division, enforce austerity, and preserve a power structure that serves special interests. Like the Wizard of Oz, they hide behind a curtain of manufactured crisis while refusing to engage with economic reality.

If we want to reclaim our future, we must pull that curtain back. That means electing true Independent candidates—not those who merely wear the label but ultimately caucus with one wing of the Duopoly—who understand these issues and have the courage to disrupt the 51% majority both parties depend on to preserve the status quo.

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We have the tools, the knowledge, and the capacity to build a more prosperous and equitable society. What we lack—so far—is the political courage.

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Let’s end the charade. Let’s stop pretending the debt ceiling is anything more than a dangerous distraction. Let’s insist on honest, informed leadership—and finally give Americans the government they deserve.