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Illustration: Sarah Grillo/Axios

The best way to avoid a W-shaped double-dip recession is to ensure that fiscal stimulus continues past July. Many members of Congress, however, worry about the effect of multi-trillion-dollar deficits on the national debt.

What they're saying: The solution, per Stony Brook economics professor Stephanie Kelton: Run deficits without issuing any debt at all. Kelton suggests we should just monetize the deficit instead — fund it by printing dollars rather than issuing Treasury bonds.

Between the lines: Economically speaking, there's not a lot of difference between paying for the deficit with money or paying for it with bonds carrying a near-zero interest rate. As former IMF chief economist Olivier Blanchard writes, "it just replaces a zero interest rate asset, called debt, by another one, called money."

  • Printing money does not cause inflation — quite the opposite. If you issue debt instead of money, then any interest on the debt is excess money entering the financial system. Take away the interest, and you take away inflationary pressure.

The big picture: There's still enormous demand for risk-free assets, and Treasury bonds serve a very important role in the financial system. No one's suggesting that we stop issuing them entirely. But insofar as rhetoric around the national debt is acting as a brake on necessary economic stimulus, it might make sense to have deficits without debt.

My thought bubble: There's a paradox here. The people who want to print money to avoid adding to the national debt are also the people who say that the size of the national debt doesn't matter. The hope is that monetization would placate the deficit hawks, but that seems unlikely.

Go deeper: Kelton was a guest on my podcast last week, and went into detail on how Modern Monetary Theory views sovereign finance.

Go deeper

The national security risks hiding in Trump's debts

Illustration: Aïda Amer/Axios

The blockbuster New York Times report on President Trump’s taxes reveals that the president is $421 million in debt, with more than $300 million coming due during Trump’s potential second term — and the identities of the president’s creditors remain unknown.

Why it matters: If some, or all, of this debt is held by foreign actors, it raises serious national security implications.

3 hours ago - Politics & Policy

Inhofe loudly sets Trump straight on defense bill

Sen. Jim Inhofe speaks with reporters in the Capitol last month. Photo: Samuel Corum/Getty Images

Senator Jim Inhofe told President Trump today he'll likely fail to get two big wishes in pending defense spending legislation, bellowing into his cellphone: "This is the only chance to get our bill passed," a source who overheard part of their conversation tells Axios.

Why it matters: Republicans are ready to test whether Trump's threats of vetoing the bill, which has passed every year for more than half a century, are empty.

Conspiracy theories blow back on Trump's White House

Sidney Powell. Photo: Tom Williams/CQ-Roll Call, Inc via Getty Images

President Trump has rarely met a conspiracy theory he doesn't like, but he and other Republicans now worry the wild tales told by lawyers Sidney Powell and Lin Wood may cost them in Georgia's Senate special elections.

Why it matters: The two are telling Georgians not to vote for Republicans David Perdue and Kelly Loeffler because of a bizarre, baseless and potentially self-defeating theory: It's not worth voting because the Chinese Communist Party has rigged the voting machines.

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