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Narayana Kocherlakota

The Federal Debt Is Nothing to Lose Sleep Over

The government can borrow as much from taxpayers as it wants. 

This should bother no one.

This should bother no one.

Photographer: Callaghan O'Hare/Bloomberg

Policy makers and voters often express concern about the level of the federal deficit, which topped $1 trillion last year, and the national debt, now more than $23 trillion. But, unlike a household that owes money to a bank, the U.S. government has the ability to tax its creditors. This power means that the federal government can afford any level of debt that is owed to American taxpayers.

Here’s an example of what I mean.