> If the US Federal government were prevented from running a budget deficit, we'd likely see a lot more solvency issues and financial failures of many sub-organizations within government.
No, there's just be a lot more pressure to monetize government finances. We have some safeguards against that (e.g., the Fed being separated from Congress and outside of it's direct control), but the biggest constraint on that is that the government, so long as Congress is free to set fiscal policy within it's own preferences, has very little reason to choose the path of monetization.
I completely agree that our leaders would exploit loopholes. My point was meant mainly to describe the scenario if the Federal government were effectively constrained.
Would the public have supported a tax increase in 2004 when the cost of the Iraq war began to drastically exceed estimates? Likely not, we'd have brought everyone back home and saved Trillions and prevented a significant amount of loss of life.
No, there's just be a lot more pressure to monetize government finances. We have some safeguards against that (e.g., the Fed being separated from Congress and outside of it's direct control), but the biggest constraint on that is that the government, so long as Congress is free to set fiscal policy within it's own preferences, has very little reason to choose the path of monetization.