Unfortunately, the animated clock doesn’t mean what most people thinks it does.
The U.S. national debt is nothing more than a savings account at the Fed.
When the U.S government sells bonds, funds are simply moved from the Fed’s checking account (used to purchase bonds) into the Fed’s savings account (called Treasury securities).
As bonds mature, the “debt” is paid as the Fed shifts the dollar balances from the savings account at the Fed (Treasury securities) back into the checking account (reserve account).
This means that the so-called “National Debt Clock” is just the sum total of all the outstanding bonds that the Dept. of Treasury has issued.
A more accurate name for the “National Debt Clock” would be the “National World Dollar Savings Account”.
All it does is keep a record of the total amount of that’s invested in savings as opposed to checking at the Fed.
What is referred to as the “national debt” is actually the national savings. It’s cash invested in Treasury securities (bills, notes, bonds), not loans to the government.
If there is a USD government deficit, it equals the total net increase in the holdings USD financial assets of the rest of us: households and businesses, residents and foreigners. This is what’s called the “non government” sector.
For example, if the government deficit was $3 trillion last year, it means the net increase in savings for everyone else combined was exactly $3 trillion.
It’s an accounting identity. The CBO would confirm this is how it works.
Since the Fed is the sole issuer of the U.S. dollar, this means that the Fed never (technically) needs to borrow. They can create more dollars at any time. Congress must authorize the spending though.
Of course, the risk is inflation where if goods are services are scarce and money is abundant, that money chases the goods/services and tends to drive up prices.
But the U.S. government can’t go “bankrupt” or “run out of money” to pay for stuff.
There is a common misconception that the government must acquire money through taxes or borrowing in order to spend.
You may hear a politician say:
“The government, has to either tax or borrow to get funds to spend, just like any household has to figure out how get the money it needs to spend.”
But that’s false. Government spending is NOT operationally constrained in any way by taxing or borrowing.
That’s how Americans were able to get their direct deposits of $1200 from the $2.2 trillion CARES Act stimulus bill without the need to raise taxes to pay for it.
Historically, the U.S. government is usually in a state of deficit spending (regardless of political parties).
Higher “deficit” spending coincides with better times for the private economy since it puts more money in the hands of consumers and businesses and stimulates the economy.
Reducing the deficit actually causes economic contraction. For example, when Clinton ran surpluses, a recession followed.
Politicians either 1) don’t know this which means they aren’t aware of how actual monetary operations work or 2) do know this but pretend to not know and create political theater and use it to their advantage.
