When the US government uses emergency funding in the billions or even trillions, where is it getting the money from?
In: Economics
The government spends money into existence and taxes it out of existence. It doesn’t come from anywhere. It’s been this way functionally since the us went off the gold standard. In terms of the accounting, the federal reserve has basically an infinite account, and can create money “ex nihilo” which means “from nothing.” Now, there are laws in place that require the treasury to “get” the money from somewhere (eg taxes or bonds issuing) but this is just a political choice, not a necessary way of doing things. There’s no functional reason why Congress couldn’t pass a law requiring the federal reserve to credit treasury’s account in whatever amount is equal to the approved budget. There is an economic reason not to do that, though, which is that completely eliminating taxes could very well cause unacceptably high inflation.
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