How Government Money Really Works — And What Most People Get Wrong About Taxes and the Budget
The Big Misunderstanding About Money
At some point in our lives, most of us absorb a simple, commonsense idea: money is limited. You earn it, you spend it, you try to save some. If you spend more than you bring in, you go into debt — and if that debt piles up, there are consequences. That’s how households work, how businesses work, and how most state and local governments work too.
So it seems logical to assume the federal government must play by the same rules. If there’s a budget deficit, it must mean the government is spending beyond its means. If we want better schools, safer roads, or stronger healthcare, then we either need to raise taxes or cut spending somewhere else. That’s just basic math, right?
Well — not exactly.
This familiar story about government money is tidy, intuitive, and deeply wrong.
The truth is that the federal government doesn’t operate like a household or a business. It’s not just one more player in the economy — it’s the referee, the scoreboard, and the person printing the tickets at the front gate. Unlike the rest of us, the U.S. government creates the money it spends. It doesn’t need to “raise revenue” before it can afford something. It spends first, and taxes later.
That idea might sound a little out there at first. If the government can just create money, why doesn’t it solve everything? Why are there still potholes, overcrowded classrooms, understaffed hospitals, and families living paycheck to paycheck? Why is there always talk of deficits and debt ceilings if those things don’t really constrain us?
This post is here to pull back the curtain.
We’re going to explore how government money actually works in a modern economy — how it enters the system, how it flows, and most importantly, how it sometimes gets stuck. We’ll dig into the real purpose of taxation, and why the most dangerous kind of money in our economy isn’t money that’s being spent — it’s the money that isn’t going anywhere at all.
This isn’t about party politics or economic theory. It’s about understanding the machine we all live inside — and why it so often feels like it’s broken, even when there’s more wealth in circulation than ever before.
If you’ve ever wondered:
Why we always seem to “run out of money” for public goods…
Why billionaires can accumulate fortunes beyond imagination while others struggle to afford insulin…
Or why inflation rises even when wages don’t…
…then this post is for you.
By the end, you’ll see money — and taxes — in a very different light.
The Government Isn’t Like a Household Budget
The idea that governments need to “live within their means” is one of the most persistent beliefs in public life. You’ll hear it from politicians on both sides of the aisle, in news segments, campaign speeches, and budget debates: We can’t spend what we don’t have. We need to tighten our belts. Just like families do.
It sounds responsible. Humble, even. And it gives the impression that government finances are just a scaled-up version of our own — a bigger checking account, a more complicated spreadsheet, but ultimately the same rules.
But here’s the thing: that’s not how a currency-issuing government works. Not even close.
The federal government of the United States is not a household. It doesn’t need to earn money in order to spend it. It doesn’t need to borrow dollars before it can invest in a new bridge, fund research, or pay a soldier. Why? Because it creates the money to begin with.
Think about that for a second. The U.S. dollar doesn’t fall from the sky, and it doesn’t originate in taxpayer wallets. It’s created by the federal government, usually through the Federal Reserve and the U.S. Treasury, when Congress authorizes spending. That money enters the economy when the government pays for goods, services, salaries, or benefits — and only after that do taxes start pulling some of it back out.
It’s a bit like the way a casino works. The house creates the chips. It doesn’t need to “earn” them first. The chips flow out onto the floor when people buy in, and the house collects them back as games are played. The casino’s ability to issue more chips is not constrained by how many it collected from players yesterday — it’s constrained only by what the system can handle before things get out of balance.
In the same way, the federal government’s real constraint is not money, but resources. The number of people available to work. The amount of steel, concrete, bandwidth, energy. The capacity of factories and farms and freight trains. If the government spends too much money into an economy that doesn’t have the capacity to absorb it — meaning, too much money chasing too few goods — then you get inflation. That’s the real limit. Not a bank balance.
This is where a lot of confusion starts to clear. Because when you realize the government doesn’t need to collect taxes before it can spend, you start to ask new questions — like why the government still cuts back during times of need, or why it borrows money it doesn’t technically require. You also start to see why taxation matters, even if it’s not “funding” spending directly. We’ll get into all of that shortly.
But for now, the key point is this: the U.S. government is the source of the dollar. It can never run out. It can never go bankrupt in its own currency. It can’t default unless it chooses to. That doesn’t mean it can or should spend without limits. But it does mean we need to stop pretending that government budgeting is just a bigger version of our own household finances.
How Banks Create Money — and Why Debt Isn’t Just Borrowing From the Future
When most of us think of money, we picture something finite — like coins in a jar or bills in a register. It’s easy to imagine there’s a set amount out there in the world, being passed from person to person. But in reality, most money isn’t printed by the government or minted by the Treasury. It’s created by banks — and it’s created out of debt.
Here’s how it works: when you take out a mortgage, a car loan, or swipe your credit card, the bank doesn’t hand you someone else’s deposited money. It simply creates the money by typing it into your account. That loan becomes new money in the economy. And when you pay it back — with interest — the bank removes that money from circulation.
This process happens millions of times a day across the economy. A business borrows to buy new equipment. A student takes out a loan for tuition. A family finances a new roof. All of these actions create money in the short term. In fact, somewhere around 90–95% of the money supply exists not as cash or coins, but as digital entries born from private bank loans.
In this way, debt isn’t just a tool for consumers and companies — it’s the engine that drives most of the money creation in a modern capitalist economy.
But there’s a catch.
Debt-based money always comes with strings attached. It has to be repaid — with interest. And if too much borrowing happens at once, it can fuel bubbles, inflate prices, and saddle people with repayments that siphon off future income. On the other hand, when borrowing slows down — during recessions or periods of uncertainty — the amount of money being created also shrinks, and the economy can stall.
This is where the Federal Reserve comes in.
The Fed doesn’t create money the way Congress does — it doesn’t spend into the economy like the Treasury does. But it plays a crucial role in managing the flow of money by setting interest rates. When the Fed raises rates, borrowing becomes more expensive, which slows down new lending and cools the economy. When it lowers rates, loans get cheaper, encouraging people and businesses to borrow, invest, and spend.
What About Quantitative Easing (QE)?
You might’ve heard that during financial crises, the Federal Reserve “pumps money into the economy” through something called quantitative easing. That’s partly true — but not in the way most people think.
In QE, the Fed creates money to buy government bonds or other assets from large banks. This adds reserves to the banking system — kind of like topping off the fuel tank. But it doesn’t directly put money in your pocket or build a new school.
QE makes borrowing cheaper and asset prices higher, which can boost economic activity — but mostly by encouraging banks and investors to keep lending. It’s an indirect tool, and its effects tend to benefit Wall Street more than Main Street.
So yes, QE creates money — but it’s not the same kind of money creation you get from direct government spending or new loans to consumers and businesses. And like interest rates, QE can change the speed of money, but not its final destination.
Quantitative Tightening (QT) is the opposite.
In QT, the Fed sells assets (usually government bonds) or lets them expire without replacing them. This slowly pulls reserves out of the banking system. It’s not the same as taxing or deleting money directly, but it does tighten credit. Banks become more cautious, loans become more expensive, and money moves more slowly.
QT is one of the tools the Fed uses to fight inflation.
It works by making borrowing more expensive and reducing the money supply available for lending and speculation.
But here’s the catch:
QT mostly affects banks and investors. It doesn’t do much to remove stagnant wealth sitting in tax shelters or luxury assets. That’s why taxation is still necessary — it targets money that’s already stuck, not just money flowing through the pipes.
In essence, the Fed acts like a thermostat, adjusting the “temperature” of the economy by nudging the speed of money creation up or down. But here’s the important part: the Fed doesn’t actually remove money from the system. It doesn’t pull dollars out of circulation — it just influences how fast those dollars are created or destroyed by the banking sector.
Only taxation does that.
Taxes are the one tool that reliably drains money out of the economy. That’s why, even in a world where banks create money and the Fed adjusts interest rates, taxation remains essential. It’s how we prevent the financial system from overheating with too much credit — or from concentrating too much wealth in places where it stops moving altogether.
So while government spending and private borrowing both create money, they do it in different ways, with different tradeoffs. And when the private sector slows down — when people are maxed out on debt or reluctant to spend — it’s often the public sector that has to step in and keep the economy from grinding to a halt.
What Taxes Really Do
If the government can create its own money, and most new money comes from loans, that raises a natural question: why do we still need taxes at all?
This is where the story starts to shift.
Most people assume that we pay taxes so the government can afford to do things — fix roads, fund the military, send out Social Security checks. And at the local and state level, that’s largely true. Those governments are currency users. They have to balance their books just like households or businesses. But the federal government — the one that issues the U.S. dollar — doesn’t need your tax dollars before it can spend. It spends first, and taxes later.
So what’s the point of taxation if it’s not to “raise revenue”?
It turns out, taxes play a completely different — and much more important — role in keeping the economy healthy.
Taxes Control Inflation
When the government spends money into the economy, that money becomes part of the pool we all use to buy things. But if too much money builds up in that pool — especially when the economy can’t produce enough goods and services to meet demand — prices start to rise. That’s inflation.
Taxes act like a drain. They pull money out of the pool, reducing the total amount in circulation. This helps cool things down when demand starts to outpace supply. In this sense, taxation is a form of economic climate control — a way to maintain balance and avoid overheating.
Taxes Create Demand for the Currency
There’s a reason we all accept dollars, even though they’re just pieces of paper or entries in a database. It’s because we need dollars to pay our taxes.
The government doesn’t just create money — it also creates demand for that money. It does this by requiring that taxes be paid in U.S. dollars. That’s what gives the dollar value and ensures that people, businesses, and banks are all willing to accept it in exchange.
In this way, taxation isn’t just a money sink — it’s part of what gives money its usefulness.
Taxes Shape the Economy
Beyond managing supply and demand, taxes can guide behavior and shape society’s priorities. That’s why we tax cigarettes and give deductions for donations. Taxes can discourage pollution, support struggling communities, or promote investment in clean energy.
And perhaps most importantly, taxes can help address inequality. When wealth concentrates too much at the top, it tends to stagnate — we’ll get to that soon — and taxes can help redistribute it in ways that keep the economy moving.
So while taxes don’t “fund” spending the way we were taught, they’re still essential. They’re how we make room in the economy for public goods. They’re how we keep inflation in check. They’re how we make the dollar worth something in the first place. And they’re how we ensure the economy works for more than just the people who already have everything they need.
Without taxation, even a money-creating government would eventually hit a wall — not because it ran out of dollars, but because it overheated the engine.
The Problem with Stagnant Wealth
If you’ve made it this far, you now know something that turns conventional wisdom upside down: the government doesn’t need our money to spend, and taxes aren’t about “paying the bills.” Instead, taxes help manage inflation, create demand for currency, and keep the economy balanced and moving.
So that brings us to a deeper, more uncomfortable question:
If too much money in the system causes inflation, where exactly is that money piling up?
The short answer? At the top.
Over the last few decades, a staggering share of new wealth has gone not into public goods or productive investment, but into private fortunes — massive concentrations of money that sit relatively idle in financial portfolios, luxury real estate, stock buybacks, and offshore accounts. This isn’t money being spent on groceries or home repairs or small business expansion. It’s money that’s parked. Money that’s been extracted from the real economy and now lives almost entirely on spreadsheets.
This kind of money is what economists often call stagnant wealth. And it poses a growing threat to the health of the entire economy.
Stock Buybacks: Corporate Profits in a Holding Pattern
One of the clearest examples of stagnant wealth in action is the rise of stock buybacks — a financial maneuver that’s become almost routine among large corporations.
Here’s what happens: instead of using profits to raise wages, expand operations, or invest in research and development, many companies use their cash to buy back their own shares on the stock market. This reduces the number of shares in circulation, which usually boosts the stock price. Shareholders — especially major ones like executives and investment firms — see a windfall. And because so much executive compensation is tied to stock performance, buybacks often function as an indirect bonus system for top leadership.
But while stock prices go up, the real economy doesn’t necessarily benefit. No new jobs are created. No new products or services are introduced. No infrastructure is built. It’s a maneuver that moves money around without creating new value — and that’s the definition of stagnation.
Why This Matters:
Stock buybacks concentrate wealth at the top, not by making the economy more productive, but by manipulating financial optics. They redirect money that could be used to invest in workers, innovation, or communities — and instead lock it away in private portfolios where it rarely recirculates.
And this isn’t happening on the margins — it’s become central to how big business operates. In some years, companies in the S&P 500 have spent more on buybacks than on capital investment. That means the dominant use of corporate profits is not to build or grow — but to enrich those who already own the most.
Buybacks are just one example of how money can appear active but still contribute little to the broader economy. When paired with low taxes on capital, deregulation, and financial incentives that reward short-term stock performance over long-term growth, they create a system where money constantly floats upward — and then gets stuck.
Money That Moves vs. Money That Sits
In a healthy economy, money moves. It flows from paycheck to store to supplier to payroll to rent and back again. Every time money changes hands, it supports jobs, goods, services, and the taxes that fund public life.
But when money gets trapped — especially in large amounts — it stops doing its job. It doesn’t buy anything. It doesn’t build anything. It just sits.
And the more money gets stuck in those upper layers of the economy, the harder it becomes for that money to “trickle down” in any meaningful way. Because it doesn’t trickle. It pools.
Stagnation Is a Drain — Not a Sign of Success
One of the biggest myths we’ve been sold is that extreme wealth accumulation is a sign of merit or efficiency. But in reality, it’s often a sign of dysfunction — of a system that allows money to be siphoned upward faster than it can circulate outward.
Imagine if a town’s entire water supply started collecting in a single mansion’s pool, leaving the rest of the neighborhood with dry taps. That’s not prosperity. That’s hoarding.
And hoarding doesn’t just happen in corporate boardrooms or stock portfolios. Trillions of dollars in personal and corporate wealth are now parked in offshore tax shelters — hidden from taxation, untouched by commerce, and invisible to the real economy. This is money that could be funding schools, public transit, or clean energy — but instead, it’s legally shielded behind walls of secrecy, compounding interest for people who already have more than they could spend in a hundred lifetimes.
Then there’s real estate — not homes for living in, but high-end properties bought purely as investment vehicles. In many major cities, entire luxury apartment towers sit mostly empty, owned by global investors as safe places to park cash. These buildings don’t house families, create jobs, or generate much economic activity. They’re just vaults made of glass and steel.
In a money system like ours, where circulation matters more than accumulation, this kind of stagnation isn’t just inefficient — it’s a slow bleed. It keeps the economy running below its potential. It makes inequality worse. And it leaves more and more people wondering why — if there’s so much wealth in the world — everything still feels so hard.
Next, we’ll look at how taxation can play a powerful role — not as punishment, but as a way to restore balance. Because the problem isn’t that some people have too much money — it’s that too much money has stopped moving.
Why Taxing the Rich Helps Everyone
When people hear the phrase “tax the rich,” it often stirs up a mix of emotions — support, suspicion, even resentment. Some hear it as a call for fairness. Others hear it as punishment for success. And many, understandably, wonder how taking money from one group will make life better for everyone else.
So let’s set the record straight: taxing the wealthy isn’t about jealousy or revenge. It’s about function.
In an economy where too much money gets stuck at the top, taxation is how we get that money moving again — out of vaults and spreadsheets and back into the real world, where it can fund schools, rebuild roads, launch new businesses, and pay people to do useful, meaningful work. Taxing the rich doesn’t weaken the economy. It strengthens its foundation.
The Rich Are Different — Financially and Systemically
Let’s be clear: we’re not talking about someone making $200,000 a year and saving up for their kid’s college. We’re talking about the wealthiest 0.1% — people whose fortunes stretch into the hundreds of millions or billions of dollars. People whose wealth grows not from wages or productivity, but from investments, inheritance, and financial instruments most of us will never see.
And here’s the kicker: the ultra-wealthy often pay lower effective tax rates than teachers, nurses, and construction workers. That’s because most of their income comes from capital gains — the increase in value of stocks or assets — which is taxed at a lower rate than wages. Often, it’s not taxed at all until the asset is sold. In some cases, it’s never taxed, due to loopholes and tax shelters.
This isn’t about breaking the law — it’s about exploiting a system that was designed to reward accumulation over circulation.
A Dollar Hoarded vs. a Dollar Spent
A dollar parked in a Cayman Islands trust or sitting in a third vacation home does very little for the economy. A dollar spent on childcare, public transit, or small business loans creates multiple rounds of activity: wages paid, goods bought, taxes collected. It circulates. It builds.
That’s why taxing wealth at the top is so powerful. It doesn’t destroy value — it reactivates it.
It takes idle dollars and puts them to work.
Counterpoint: “But They Already Paid Taxes on That Money”
This is a common objection — and a fair-sounding one. But in reality, much of the wealth at the top has never been taxed. That includes:
Unrealized capital gains (wealth increase without selling assets)
Inherited assets that bypass taxes entirely due to “step-up in basis” rules
Money shielded in trusts, shell companies, and offshore entities
And even when income is taxed, it’s often at far lower rates than regular wages. The average billionaire pays an estimated 8% effective tax rate. Many working families pay double that.
So no — this wealth isn’t being double-taxed. In many cases, it hasn’t been taxed once.
Counterpoint: “But They Give to Charity!”
It’s true: many wealthy people make large charitable donations. And that’s commendable. But charity is not a substitute for a functioning public system. Donations depend on the donor’s whims, not on public need. You can’t run a national infrastructure plan or universal preschool on the hope that a billionaire feels generous this year.
Taxes are how we make democratic, accountable decisions about what we build together — not what we’re gifted from above.
Taxing the Rich Helps… Everyone
When wealthy people pay more in taxes, it:
Frees up money for infrastructure, healthcare, education, and climate resilience
Reduces the burden on working- and middle-class families
Helps stabilize the economy by discouraging dangerous speculation
Restores trust that the system isn’t rigged for the top
And most importantly, it gives the economy the oxygen it needs to grow from the middle out — not just from the top down.
Next, we’ll explore how we can use tax policy not just to patch holes, but to actively improve the economy for everyone. Because once you understand that money is not the constraint — but stagnant wealth is — the path forward becomes clearer.
A Healthier Economy Through Smarter Taxation
So far, we’ve seen how money really works: how it’s created, how it flows, how it gets stuck — and how taxation isn’t about punishing success, but keeping the system moving. That brings us to the real challenge: what should we do about it?
Because if too much wealth is stagnating in unproductive places, then the goal isn’t to tear down prosperity — it’s to make sure prosperity works. Not just for the ultra-wealthy, but for the people who grow food, teach children, drive trucks, code software, build homes, and care for aging parents.
The good news? We already have the tools to fix this. The better news? They’re not radical. They’re rooted in common sense.
Tax Wealth, Not Just Work
Right now, most of our tax system falls on people who earn a paycheck — not people whose money makes money. That’s backwards.
If you go to work every day and get paid $60,000 a year, you might pay 20–30% in taxes. But if you make $10 million on the stock market and never sell your shares, you might pay nothing for years — or ever. That creates an economy where passive wealth is rewarded more than productive effort.
We can fix this by:
Taxing large unrealized capital gains on billionaires
Closing loopholes that let assets be inherited tax-free
Implementing modest annual wealth taxes on ultra-high net worth individuals
These policies don’t hurt the middle class. They don’t touch retirement accounts. They simply ensure that the very top isn’t forever insulated from contributing.
Close the Escape Hatches
It’s no secret that many wealthy individuals and corporations go to extraordinary lengths to avoid taxes — setting up offshore shell companies, exploiting vague trust laws, or using high-priced accountants to manipulate taxable income.
The solution isn’t complicated. It’s enforcement.
Fully funding the IRS, modernizing its systems, and enforcing existing laws would generate hundreds of billions in recovered taxes — without raising rates a single point. In fact, the Congressional Budget Office estimates that every $1 spent on tax enforcement brings in up to $6 in revenue.
Tax fairness doesn’t require new laws so much as the political will to apply the ones we already have.
Invest Where the Market Won’t
There are some things the private sector simply won’t do on its own — even when they’re urgently needed. Affordable housing. Public health infrastructure. Clean energy grids. Universal broadband. These aren’t luxuries; they’re the foundation for a stable and competitive economy.
Smart taxation gives the government the room it needs to invest directly in these public goods — especially during downturns when private investment dries up. And when done well, these investments create jobs, lower costs, and raise living standards for everyone.
Build an Economy That Works for More People
Ultimately, the goal of tax policy — and economic policy as a whole — shouldn’t just be “growth.” It should be broadly shared prosperity. We need to stop asking whether the stock market is up, and start asking whether people are housed, healthy, educated, and hopeful.
A smarter tax system can:
Fund universal childcare and paid family leave
Rebuild decaying infrastructure and climate-proof cities
Lower costs for healthcare and education
Support small businesses and local economies
Ensure that essential workers aren’t living in poverty while billionaires fund their fourth space launch
None of this is about envy. It’s about value. It’s about making sure the people who create value in society — not just those who accumulate assets — can thrive.
Next, we’ll bring it all together. Because once you understand how money works, how taxes work, and how wealth gets stuck, a very different picture of the economy emerges — one that points not toward scarcity, but toward possibility.
How National Debt Fits Into the Picture
At this point, you might be wondering: if the government doesn’t need tax revenue to spend, why does it bother borrowing at all? What’s the deal with the national debt?
Here’s the key: when the federal government spends more than it taxes — what we call a deficit — it creates money in the economy. That deficit becomes part of the national debt, which isn’t a pile of unpaid bills, but rather a ledger of dollars the government has spent and not yet removed via taxation.
Those dollars don’t disappear. They show up as Treasury bonds — safe, interest-bearing assets held by banks, pension funds, individuals, even foreign governments. In fact, much of the national debt is simply money the private sector saves. From this perspective, the debt isn’t a burden. It’s a financial asset.
What happens if the government tries to reduce the debt? It would need to run surpluses — taxing more than it spends — which effectively pulls money out of the economy. This can be appropriate in times of overheating or inflation, but harmful during slow growth or rising inequality.
In other words, debt and taxes are both tools. Debt injects money into the system. Taxes remove it. The goal isn’t to balance the federal checkbook like a household — it’s to balance the economy: fight inflation, reduce inequality, and make sure public resources are serving the public good.
Money Is a Tool, Not a Trophy
For most of us, money feels like the finish line — the reward for hard work, saving, and sacrifice. And that’s not wrong. But when we zoom out and look at the economy as a whole, we start to see money differently.
Money isn’t just a prize. It’s a tool. A shared resource. A current that flows through our lives, connecting what we do with what we need. And like water or electricity, it has to keep moving to be useful. When it stops flowing — when it pools in the hands of a few or gets locked away in untaxed assets and empty condos — the rest of the system dries up.
That’s what we’re living through now.
We’ve built an economy that’s awash in wealth, yet constantly running short on what matters: affordable housing, good jobs, healthy communities, and resilient infrastructure. Not because we lack the money — but because too much of it is stuck. Idle. Hoarded. Trapped in a game of high-stakes accumulation that adds little and destabilizes much.
And yet, we continue to treat money like it’s scarce. We cut school budgets while billionaires fund private space races. We hesitate to fix our bridges or expand healthcare because someone insists we can’t “afford it” — as if the only money that counts is the money we can squeeze out of working people.
But now we know better.
The government is not like a household. It creates money. It spends first and taxes later. Taxes don’t fund spending — they manage the flow. And the biggest problem we face today isn’t too much spending — it’s too much wealth sitting still.
The national debt fits into this framework too. It’s not a threat looming over future generations — it’s a reflection of past investment, and a source of private sector savings. When used wisely, deficits and debt expand the economy. When reined in too harshly, they can choke off recovery and growth.
Taxation isn’t theft. It’s maintenance. It’s how we drain excess, reroute resources, and keep the engine of the economy from stalling out under its own weight. When done right, taxation doesn’t slow the economy down — it unclogs it. It frees money to move again. It turns passive wealth into active progress.
So when we talk about taxes — especially taxes on the wealthy — we’re not talking about punishing success. We’re talking about protecting the system that made that success possible in the first place. We’re talking about pulling money off the sidelines and putting it back to work — building homes, hiring teachers, funding science, raising kids, and solving problems that markets alone will never fix.
In the end, the question isn’t can we afford to tax the rich.
It’s can we afford not to?
Addendum: The “Big Beautiful Bill” — A Deficit That Deepens Inequality
Some readers might ask: if deficits can be useful, does that mean any deficit is good?
Not quite. Like any tool, it depends on how you use it.
The recently passed “Big Beautiful Bill” — a sweeping tax and spending package — dramatically increases the federal deficit. But unlike investments in infrastructure, education, or healthcare that broadly benefit society, this bill directs a significant portion of its benefits to the wealthiest Americans.
According to analyses by the Tax Policy Center, while more than 80% of households would receive a tax cut in 2026 under the bill, 60% of the tax cuts would go to the top 20% of households, and more than one-third would go to those making $460,000 or more.
In dollar terms, the average middle-class household earning between $51,000 and $92,999 could receive a projected tax cut of $815, whereas top 1% earners stand to gain significantly more—an estimated $44,190 in after-tax income.
This approach not only increases the national debt but also exacerbates wealth inequality by concentrating financial gains among the already affluent.
Deficits that fund broad-based investments—like schools, healthcare, and infrastructure—keep money moving.They create jobs, strengthen communities, and lay the foundation for long-term prosperity. These types of deficits tend to pay for themselves indirectly by boosting the productive capacity of the economy.
But deficits that primarily benefit the wealthy? They often lead to increased savings among the rich, reduced consumer spending, and greater economic disparity.
So while deficits aren’t inherently bad, deficits that deepen inequality are problematic. They not only strain public finances but also undermine the very purpose of taxation: to manage the economy’s flow of money and ensure a fair distribution of resources.
If we’re going to incur deficits, let’s ensure they’re used to lift people up—not to further enrich those already at the top.