Aug 24, 2026 What’s Behind the U.S. Treasury’s Latest Attempt to Lower Interest Rates The Treasury Department said it could begin to buy back more of its debt, and bond market investors are assessing the potential effects on borrowing costs.

This page is UNDER CONSTRUCTION but you can explore the images and links to answer the Questions below.

There is currently, within Political Economy, a dust-up concerning the role of Debt . These controversies are nothing new (see the US Debt History, below), but there is a new element. Modern Monetary Theory (MMT) has helped boils the arguments down to two contradictory positions: (1) The Government is just like any other household organization and must control its debt and (2) Because the US Government can print it's own money (unlike a household or a firm), Debt should never be a problem.

In this post, I use Systems Theory and State Space Models to test these two positions. Because the models are behavioral rather than theoretical, they show that debt is a powerful controller of the political system, the same as in a household or firm.

One of the first questions, before getting to the question of "Control," is how should we represent the Political System in terms of inputs and outputs. In a typical Economic model, the Political systems is Exogenous and produces inputs for the Economic System. There is no feedback between the Economic and the Political System. This is a simplification. Clearly, a Financial Crisis generates demands for Political activity. However, the economic model wants to be able to manipulate the Exogenous Input variables to suggest policy actions.

The other simplification in Economic Models is to assume that the inputs from the political system involve government expenditure (Keynesian Economics), and control of the Money Supply or Monetary Economics. Government Expenditure (G) and the Money Supply (M). The indicators G and M are certainly important variables but it is hardly the entire picture.

From David Easton's Political System we would conclude that the outputs of Government are "Any and All Authoritative Decisions". For me, Easton's output description is too broad but is still useful. However, operationalizing "Authoritative Decisions" has always been a struggle. Maybe it can't be operationalized, but here is my current attempt which is surely incomplete (see Shefner et. al, 2015).

Notes

Shefner et. al. (2015) Austerity and Anti-Systemic Protest: Bringing Hardship Back In.

Questions

Thinking of the Political System "as a system," how would you specify the Inputs and Outputs (see David Easton's Political System)?
Does Voting control a Democratic Political System? If not, what do you think controls the Political System?
Do you agree with the arguments being made by Modern Monetary Theory?

Links

David Easton's Political System The major application of Systems Theory to Politics.
Systems Theory the transdisciplinary study of systems, i.e., cohesive groups of interrelated, interdependent components that can be natural or artificial.
State-Space Representations In control engineering and system identification, a state-space representation is a mathematical model of a physical system that uses state variables to track how inputs shape system behavior over time through first-order differential equations or difference equations.
Debt an obligation that requires one party, the debtor, to pay money borrowed or otherwise withheld from another party, the creditor. Debt may be owed by a sovereign state or country, local government, company, or an individual.
Health System a set of organizations, institutions and resources whose primary goal is to produce actions for the promotion, restoration or maintenance of health.

History of US Debt

From ChatGPT, I've divided the history into the Pre- and Post-War periods.

Pre-WAR

Post-WAR

Wikipedia Links

Modern Monetary Theory a heterodox macroeconomic theory concerning the role of fiscal and monetary policy in sovereign governments that borrow and issue government debt in their own currency.
Monetary Economics the branch of economics that studies the nature, role, and impact of money and monetary institutions. It provides a framework for analyzing money and its core functions—as a medium of exchange, a store of value, and a unit of account—and examines how money can achieve widespread acceptance, including through its role as a public good.
Money Supply In macroeconomics, money supply (or money stock) refers to the total volume of money held by the public at a particular point in time. There are several ways to define "money", but standard measures usually include currency in circulation (i.e. physical cash) and demand deposits (depositors' easily accessed assets on the books of financial institutions).
Political Economy an interdisciplinary field in political science and economics that studies the relationship between political and economic systems, including how they influence each other.
The Political System he form of political organization that can be observed, recognized or otherwise declared by a society or state.
David Easton (June 24, 1917 – July 19, 2014) was a Canadian-born American political scientist. From 1947 to 1997, he served as a professor of political science at the University of Chicago.
Keynesian Economics named after British economist John Maynard Keynes) are the various macroeconomic theories and models of how aggregate demand (total spending in the economy) strongly influences economic output and inflation.
Government Spending all government consumption, investment, and transfer payments.
Austerity a set of political-economic policies that aim to reduce government budget deficits through spending cuts, tax increases, or a combination of both.
Financialization a term sometimes used to describe the development of financial capitalism during the period from 1980 to the present, in which debt-to-equity ratios increased and financial services accounted for an increasing share of national income relative to other sectors.
Debt Crisis a situation in which a government (nation, state/province, county, or city etc.) loses the ability of paying back its governmental debt.