The government has to pay more interest on its debts if inflation increases, which makes the government debt rise further. You keep saying the government can keep paying for things and that it won't run out of money. This may be true but then why do they want to take more money in tax from people if they have an inexhaustable supply of money?
First let me make a general statement as to private sector debt. On a personal level, when dealing with debt, it's helpful to think in terms of buying power borrowed versus buying power paid back. When you do that, it will be clear that in the private sector, with fixed interest debt, inflation is always a potential advantage to the borrower. I have to include the word "potential" here, because if one's income does no keep pace with inflation, then the advantage obtained by inflation as to one's debt is lost in proportion to the extent that one's income does not keep pace. If you are paying higher prices not fully offset by higher income, then, to the extent these higher prices are not offset, you will not be advantaged by inflation as to your debt. But here you are concerned not with private, but with public "debt". On the subject of government debt of the Great Nations there is unfortunately great and widespread misunderstanding. It arises because countries that issue debt in their own sovereign currency, whether it be inflation indexed or not, do not really have "debt" in anything like the conventional sense of the word. That's because the governments of these countries are the source of their currency. They can create debt to any extent they believe advisable because they issue it in their own currency of which they themselves are the source! Nevertheless there are practical constraints limiting the amount of money any nation can create and spend into its economy without unacceptable adverse effect. A chief constraint is a nation's productivity. If money is created recklessly in the face too few desired goods and services being purchasable with that same money, and excess circulatable money can not be "mopped up" via sovereign bond issuance, hyperinflation can result, see for example Zimbabwe. In addition, productivity must be sufficient that ready buyers can be found in foreign nations to generate as much foreign currency reserves as are need. The sovereign debt of such countries as the U.S., the UK, Canada, Australia, Japan, China, etc., serves an entirely different purpose than what is generally supposed. In these nations, debt is issued in direct proportion, usually one to one, to the new money created. Invariably money is created first followed by followed by debt issuance. This allows Central Banks to freely exchange money they create (temporarily as it were)* for previously issued debt sold into the private sector, and vice versa. In so doing, Central Banks control the ratio of readily spendable money to money temporarily sidetracked in the form of sovereign bonds. They, of course, have a much more difficult time controlling the demand for money. You raised a very interesting question, which I paraphrase: If a nation can create as much money as i wants why bother to tax? This has been answered by economists and to do it properly would require writing a small book. I can refer you to specific sources where you can find answers to this question -- the answers may not be the same.. But these answers won't be found in a sentence or two. I will simply point out a few of the features of taxation. Taxation is fiscal tool wielded by legislatures, whereas issuance of debt provides a monetary tool used by Central Banks. Taxation removes base, or "outside money", directly from an economy. Taxes help create value for money, and can also be used to alter the distribution of money in a society. Under certain circumstances, taxation can be a quick way to reduce inflation, Taxes may also be useful in regulating the amount of money available for savings and private sector investment. Taxes remove money permanently from an economy and reduce the Treasury's liability by reducing both the amount of new money that must be created and the issuance of new debt. Besides a few of the the practical uses I have mention for taxation and debt, both taxes and sovereign debt lend themselves to political uses too, either directly or indirectly. Randall Wray's Chapter 7, "The Logic of Taxes-Drive-Money View," in "Understanding Modern Money" (Edgar Elgar, 1998) provides a classic, often challenged, view regarding taxes that is foundational to what has become known as MMT, or Modern Money Theory. It would be worth your while to read it. ___________________ *To explain the actual plumbing here would take us on a long sidetrack. Suffice it to say there is only one fundamental money creation step, and that is when the Central bank covers a net Treasury overdraft, i.e., Congress has ordered the Treasury to create a deficit which adds to the so-called "national debt" once corresponding Treasury debt instruments are issued. I don' know the accounting details, but one possibility is the Treasury showing the amount covered as a liability, and the Central Bank booking he same transaction as a negative liability.
Sorry. I ran out of time in my post above. So it is not well edited. It's unnecessarily repetitive and wordy. May still be readable.
I can't really see the situation being resolved without consequences if the government debt increases too much. If inflation or the interest rate increase then the interest on government debt increases and the overall government debt increases further. The government may well be able to get into more debt but it will come at the consequence of reduced foreign investment and currency weakness, plus more inflation is likely too. Even if the government can operate with the high government debt, it will not operate as efficiently as it would with low government debt or none at all. It also indicates that the economy is weak to require governmental fiscal stimulus. In my book Euro Crisis I developed a new technique called the Morganist National Investment Analysis that evaluated the government debt levels and deficits of the European nations. The analysis of this data enabled me to accurately predict which nations in the EU would enter recession. I wrote an article about the research and then a follow up article. The research showed evidence in the evaluation of government debt that the high government debt nations with high deficits would default. The research I have produced proves that high government debt and high deficits lead to economic crisis. You can read the articles and research below. The article below was originally published at the Adam Smith Institute, it shows that the technique accurately predicted specific countries in the EU would enter crisis which the book Euro Crisis predicted. https://morganisteconomics.blogspot...nvestment-analysis.html?q=national+investment There is a Scribd document at the bottom of the linked page that shows the data used to predict the countries that would enter economic crisis in Europe. The countries with high government debt and high deficits entered economic crisis and needed sovereign debt restructuring programmes. https://morganisteconomics.blogspot.com/p/euro-crisis.html?q=national+investment The evidence demonstrates that high government debt and high government deficits lead to sovereign debt crisis and economic crisis. When government debt is linked to inflation or the interest rate, if either inflation or the interest rate increase the interest on the debt increases making the government debt spiral out of control. By not controlling inflation and the interest rate the linked government debt products will increase the government debt to the point that sovereign debt crisis will occur or economic crisis will happen.
First let me apologize for the sloppy editing in my earlier response to you. I ran out of time and the software would not let me finish editing. I'm not suggesting that there is no limit to how much debt a nation like the U.S., the UK, Canada, Australia, or Japan, etc. can issue. Nor am I suggesting there is a limit. But if there is a limit no one has defined it. We are as if on different planets. You are like the majority of people. You believe sovereign nation must manage their finances the way individuals must. If you spend more than your income you must borrow the difference and pay back your creditor over time from your future income. Sovereign finances of the great nations are nothing like that. And until that can sink in I don't think we can discuss anything on this subject profitably. If you want to know why I think as I do, then read the sources I have given you. And come back in about 10 years after you have read and studied all of them. I will mention these basics which will not make any sense to you. Keep them in mind as you do your reading. a. deficit spending into the economy is how new base money gets into the economy. b. deficits are essential to the creation of new base money c. Base money is created, in the U.S. anyway, when the C.B. covers a net treasury overdraft. This could be booked as a liability on the Treasury side and as a negative liability, i.e., an asset, on the C.B. side. d. Base money is the same as "outside money" , it is money that is permanent in the economy, in one of two forms, until it is taxed back out. It is separate and apart from credit money which is created when a private sector loan is made and disappears when the loan is paid off. e. The Treasury sells bonds in amounts matching the newly created base money. This removes new base money from the economy and replaces it with a bond (think of the bond as an interest paying substitute for money. It does not represent real debt in the way.) f. Government issued bonds, when they are denominated in the government's own fiat money, are NOT DEBT instruments, they just appear to be debt instruments. The Central Bank can buy them back at any time they want to, and do. Th C.B. of Japan just recently retired ~ 50% of JGBs by buying them back. Q.E. buys them back, but the Fed bought back only a small fraction of the bonds issued in recent Q.E.. g. The purpose of bonds is not to raise money from the private sector. The purpose is to provide a tool to the Central Bank for temporarily removing base money from the economy, and to put base money back into the economy as needed. h. There is no national debt! Everyone calls the total of new base money created and spent into the economy the "national debt" because it looks like that from the outside. The National Debt = net total of new base money created = net total of the deficits!!!!!!!!!!!!!!!!!!! i.The only question governments must answer is how much new total base money is needed in the economy at any particular time. j. Taxes permanently remove base money from the economy. They are a powerful tool of legislative bodies, not of the Central Back. k. Taxes are mainly a tool for regulating the distribution of money in the economy and providing economic and social incentives. Though this is rapidly changing, practically no politicians, nor bankers, nor economists, nor people on the street understand any of this. But thankfully this is changing. Please spend few years reading Minsky, Wray, Mitchell Kelton, Mosler, Galbraith and many many others. Then come back. THERE IS NO NATIONAL DEBT in the sense that say Senator Manchin or you think there is. When we say "National Debt" we are referring to the net amount of base money created. Net Base Money Creation= Net Spending - Net taxes. Obviously net taxes can not exceed net spending. (There would be no money to pay taxes! ) When net spending equals net taxes there is zero base money in the economy. DEFICIT SPENDING IS ESSENTIAL TO A GROWING ECONOMY!!! the only question is how much deficit is appropriate at any given time and what should be the rate of growth in base money. This must be kept in line with PRODUCTIVITY. OUR MODERN FIAT MONEY IS BACKED BY PRODUCTIVITY. Your statement: "The evidence demonstrates that high government debt and high government deficits lead to sovereign debt crisis and economic crisis. " is absolutely false for countries that issue debt in their own currency. There are plenty of economic crises, but they are not caused by non-existent high debt. If you examine the instances you have in mind you will see that they are often caused by a collapse in productivity, government corruption, etc. High "debt" is just ancillary. It is not the root cause if the country issues its debt in its own currency.
It does not seem to matter how you view sovereign debt if it becomes to high the governments ability to pay the maturity payments dwindles and they have to borrow from the IMF, which is a sovereign debt crisis. As soon as government debt reaches certain levels economic crisis starts to occur. This is demonostrated with the research I conducted in the Euro Zone during the Euro Crisis, it was possible to accurately predict which nations would enter sovereign debt or economic crisis due to their government debt levels and annual deficits. The book is called Euro Crisis Aggregate Demand Control is European Single Currency Weakness.
But why would you increase government spending, assuming you are using it as a stimulus technique, when there are other methods to stimulate an economy? Increased government spending has to be paid back with interest and can cause taxation to rise in the future, which will limit long term growth. There are other techniques to create growth they could use without these consequences.
Government debt doesn’t have to be paid back, it has to be outgrown. Inflation: the cure for high prices is high prices.
In the words of Wolfgang Ernst Pauli (translated idiomatically of course) "This is not only wrong, it's preposterous!