When fiction parades as expert commentary – the US has run out of money again!

It didn’t take long before the elites started predicting that the US government would become bankrupt as a result of the Democrats taking control of the Congress and allegedly planning to go on a spending spree. Even the UK Guardian is propagating this line. In an article (November 11, 2026) – Democrats’ US election sweep brings the price of their promised social contract into focus – we are told that “The post-election wish list is about to run into harsh fiscal reality: there is no money”. Repeat after me: there is no money. And once more just to make sure I got it right: there is no money. And I expect that line to be repeated ad nauseum as the campaign to preserve the interests of capital revs up in what is allegedly a hostile political environment for the elites now.

First, we might question whether the shift to Democrat control of the Congress will actually be progressive.

It will certainly reduce the erratic nature of politics in the US somewhat.

But last time I checked there were a lot of fiscal conservatives on the Blue side of the aisle and I didn’t get the impression that a spending spree was likely.

But then even a dollar towards the most disadvantaged Americans and a dollar less for the Tech bros and coterie is a spending spree I guess in the circles I am examining here.

Second, the author notes that:

As the Reagan revolution four decades ago launched US society down the path to low taxes and meager solidarity, perhaps the Republican bloodbath last week could turn US politics toward building a new social contract anchored on an aspiration to equitable prosperity.

The reality on Reagan is a little more nuanced that this.

Certainly, the so-called – The Economic Recovery Tax Act of 1981 – introduced significant tax cuts (one of “the largest in history”) which benefitted high income recipients more than low income earners.

It also favoured large capital-intensive corporations.

As it turned, the lasting feature of the Act was the indexing arrangements which were designed to reduce bracket creep.

But the tax cuts soon were partially reversed, for example in the – Tax Equity and Fiscal Responsibility Act of 1982 – which rescinded many of the features of the 1981 Act, as well as other modifications over time in other tax measures.

Reagan became spooked by the rising fiscal deficit as the 1981 Act had led to a significant drop in federal tax revenue.

The net result was that by 1989 the total federal tax revenue as a proportion of GDP has declined to 18.3 per cent from its 1981 proportion of 19.6 per cent.

But the clawbacks, starting 1982, were detrimental mostly to low wage earners (the payroll tax changes) and consumers (as a result of the excise increases on tobacco, communications etc).

The Guardian author’s main objective however is to disabuse us of the notion that electoral outcomes aside there is still a cold reality that will prevent the new Democratic-controlled Congress from spending too much – and in particular from introducing Medicare for All, and, even “rolling back Donald Trump’s cuts to Medicaid and food stamps, and restoring subsidies for health insurance under the Affordable Care Act that Republicans allowed to expire.”

But the author’s claim is that a progressive agenda is impossible because, as I noted in the introduction:

… the post-election wish list is about to run into harsh fiscal reality: there is no money.

What evidence is provided to justify such an statement?

1. The “federal deficit is now running at about 6.2 per cent of GDP”.

Okay, so what?

It just means that other segments of the economy are net saving.

We know that state and local governments in the US are, taken together, running a fiscal surplus of close to 0.2 per cent of GDP.

So the non-government sector must be running a surplus close to 6 per cent at present and with the external sector in deficit by around 4 per cent of GDP, it means that private domestic sector (households and firms) were running small surpluses.

What does that tell us about ‘how much money’ the currency-issuing US government have now and forever?

Nothing.

2. We read:

The federal debt hit $40tn, more than 120% of the nation’s gross domestic product. Paying interest on that debt costs some 3.2% of GDP. That’s about $1tn, more than is spent on national defense.

Again, what does that tell us?

It means there is substantial federal income support to the non-government sector.

The main issue is not that there are income flows from the public to the private sector but who the flows are going to.

The US government can always create those flows by instructing the central bank to adjust some numbers in bank accounts.

But the interest payments on outstanding government debt are in large proportion welfare to the rich, given that low-income Americans do not usually invest in Treasury Bonds.

The issue is not that the US government is unable to meet all its liabilities that are denominated in US dollars, which is the currency that it alone issues.

It can always and forever meet those liabilities, even if the liabilities are held by foreigners.

From a progressive perspective, I would rather those flows be going to low-income families rather than the top-end-of-town.

But having said that do not get the impression that there is a zero sum game operating here.

The government could both service all interest liabilities and provide fiscal support for low-income families.

But whether such spending support would be wise without some offsets depends on the availability of real resources not whether the US government has enough dollars.

It has infinity minus a cent in dollars.

But the US does not have infinite productive resources.

3. The UK Guardian readers are next told that the:

The trust fund that pays for social security benefits is scheduled to run out of money in less than six years …

This sort of scaremongering repeats itself with regularity.

I wrote about it in this blog post among others – The time has come to tell the American people the truth (June 10, 2011).

The reality is this.

The current arrangements that deliver US dollars in the social security trust fund are just ‘taxes’ that the US government levies.

They don’t actually fund anything.

They drain disposable income and result in net financial assets held by the private citizens being destroyed forever.

The fact that they are recorded against the Social Security Trust Fund for accounting purposes is irrelevant.

The fund is just an accounting record of the payments.

There is no store of dollars sitting somewhere as a result of the taxation flows.

The fact that the fund might hold financial assets which seem to be bought with the excess receipts over outgoings is another source of illusion (and confusion).

The financial assets it holds are purchased with US government spending, which of-course, is not revenue-constrained.

Additionally, the social security payments are just another type of US government spending.

The spending comes from political decisions to provide a certain level of social welfare in the US and involves the Government crediting bank accounts of recipients on a regular basis in US dollars.

How much a national government devotes to social security and health care reflects political choices rather than government financial capacity.

Real resources are involved and if the government is allocating X real resources to a pensioner then that may reduce the real resources available for another age cohort when those resources are finite.

The government can always ‘afford’ to provide that many X real resources and transfer them (via pensions) but it may not have a political mandate to do so.

What the attacks on social security are about is a demand for less real resources to be made available to the elderly and more to the younger generations.

That choice is about politics.

At present, there is an elaborate accounting structure that would lead to benefit reductions is the pensions grew and the tax payments fell.

But these arrangements are legislative and a progressive Congress could change them whenever it had the numbers on the floor.

The UK Guardian article claims:

Fixing that will require more money.

No, it would require the same amount of spending as before – it would just be that the accounting for taxes and spending outlays would change.

There is nothing important going on there.

4. Apparently, “new taxes” are needed to ensure the social security system doesn’t go under and to “fill the holes Trump and his Republican enablers bored into the bugdet” and more.

But the writer claims that it will be difficult to raise enough.

He compares the tax take as a per cent of GDP in the US (26 per cent) to the UK (35 per cent), Canada (35.5 per cent) and Germany (42 per cent) as if that is valid.

Clearly including Germany in this group tells me that the author has little understanding of monetary systems.

The US, UK and Canada issue and use their own currency.

Germany uses a foreign currency and must raise taxes and issue debt in order to run fiscal deficits.

But the substantive point is different.

Comparing countries like without analysing the financial position of the private domestic sectors and the external sectors in the currency-issuing nations is meaningless.

Conclusion

I expect these sorts of Op Ed pieces to proliferate.

The should be ignored by the readership, who should, alternatively, spend the time writing to the Op Ed editors at the UK Guardian requesting they stop publishing fiction parading as expert commentary.

That is enough for today!

(c) Copyright 2026 William Mitchell. All Rights Reserved.