[Steve_American]

This came up in another thread and I want you-all to be aware of this.

Some undeniable facts:
1] The US always has a trade deficit, aka a positive current account balance.
2] The US almost always has a deficit and so almost every year it borrows by selling Bonds and T-Bills.
3] Every year old Bonds come due and all or many of them are rolled over by selling new Bonds.
4] The US also has tax revenues every year.
5] Recently the Repud Party passed and signed a big tax cut that will add to the deficit over the next [IIRC] 10 years $1.5T to $1.9T.

Now the question ---
So, almost every year [every year since 2001] the US has borrowed money and it has tax revenues. These 2 revenue sources are both deposited into the same account at the Fed. Res. Bk. --- Then some money in that account is used to pay the interest on the national debt and most of it is used to pay the normal bills the Gov.needs to pay. Normal bills for to pay Gov. workers, to buy weapons from def. contractors, to pay service men, to pay Soc. Sec. recipients, etc.

Is it possible to say for certain which source of revenue was used to pay for each different purpose?

I say it is not possible. That either we have all sources paid from the mixed money pool according to the % that was borrowed and the % that was taxes or we have to decide based on evidence which sort of money was used.

By evidence I mean like for instance a state may sell a bond issue to build a road and a bridge. And it collects tolls to drive on them. And this money is used to retire the bonds and pay the interest. So, the state had a special tax and it used it to pay the interest. Does the US Gov. do this? No, it does not.
What other evidence might we use? We might ask, are taxes raised each year as the total interest being paid rises. Does the US Gov. do this? No, it does not.
We might ask, are the tax payers harmed in any way at all proportional to their tax bill as more interest is paid each year? I claim that --- No, they are not.
We might ask, are the citizens and residents harmed in anyway as more is paid each year? Here we have a problem. There is inflation most years. Is some of it the result of more dollars in the economy from borrowing and the interest being paid? Maybe, but how much is pretty much impossible to know even approximately [bias would be hard to judge].

So, why not assume that all rolling over of the old Bonds into new Bonds is done with new money from the new Bonds;and this includes the interest also? It was suggested that having the taxpayers think they are paying for this is a brake on more borrowing and borrowing is bad. This seems to me to imply that it was a choice. That economists could choose to take the interest payments [in their minds] from either source depending on which seems to be best for the American people.

OK, which is best for the American people? MMT says that the deficit is good because it stimulates demand when there is not true full employment. And that until full employment is reached it will cause little if any inflation [= general rise in prices]. They have a lot of reasons for this conclusion. We can talk about them lower in the thread.
. . . OTOH, MSE or Neo-liberal economics says that borrowing crowds out private lending and so drives up interest rates. This is *not true* because it is a fact that right now and for years there is (and has been) a lot of Gov. borrowing and interest rates are very low. Also, because banks [as everyone should know] create new dollars when the make loans. That banks don't lend just the money deposited in them. That the act of making the loan is finalized by adding to the borrowers account at that bank. This act *always, by definition* has the effect of adding to the total money supply in the US banking system, which gives it the cash to cover the reserve requirements that the Fed. Re. Bk. puts on it (the banking system). So, there is no legal limit on how much the banking system can loan out and no other limit either. These 2 facts disprove the MSE assertion that Gov. borrowing crowds out (or sucks up) private banks' lending ability.
. . . BTW --- MMTres assert that the MSE theory just ignores the banking system completely. The MSE theory assumes banks don't matter, so they are not included in their model. This looks like a/the reason that right up until the crash of 2008 every MS-Economist thought everything was going fine. They didn't see the "cliff" coming because they didn't include the banking system's operations in their macroeconomic model.