WASHINGTON — Another week in Washington, D.C. brings another week of debate over another potential round of stimulus checks. But have you ever wondered where the money actually comes from?
The power of borrowing
For the most part, the federal government isn't taxing people enough to cover the bills — or in this instance, the stimulus checks.
Instead, when Congress passes a trillion-dollar bill, the Treasury Department is tasked with borrowing the money. The Treasury Department has the power to borrow from private investors, foreign entities, and other governments.
In exchange for the money, the Treasury Department issues a bond or a note that is really an "IOU" promising to pay back the money later with a little bit of interest.
Most popular borrower
For the most part, the Treasury Department is coming up with the money by working with the Federal Reserve — the entity has the unique power to create money. But they aren't firing up the machines to print a billion or a trillion dollars.
Instead, the Federal Reserve simply adjusts their books and delivers a form of computer currency to the Treasury Department.
The Treasury Department then has the authority to order the IRS to start depositing those stimulus checks into bank accounts.
The word that scares many economists is "inflation" and that occurs when there is too much currency in circulation and not enough goods.
When that occurs, as it has in many third world countries over the years, a currency becomes worthless.
Most economists believe the United States is not at risk as long as the country keeps producing goods and the Gross Domestic Product remains high.
Essentially, economists are banking on the United States continuing to grow.