Guest post: And here's how the debt gets paid off!

Guest post by MNE reader, Ben Strubel.

“Perhaps the issue that causes the most confusion is the mechanism by which deficit spending now is “paid for” in the future.

Most people assume you “pay for” deficit spending the same way you do in your personal life. For instance when I go to the gas station and fill up my vehicle I always pay by credit card. The bank that issues the credit card effectively loans me money which I then use to pay the owner of the gas station.
So I just deficit spent $60. When the end of the month comes around I always pay off my bill in full so I’ll need to pay back the $60 the bank loaned to me via the credit card. If I go in debt now by $60 I will eventually need to pay it off and I will be using either money I have saved up or taking money from my future income.