The single most discussed issue involves the manner in which our country should handle our deficit. Despite the popularity of such a topic, the conversation hasn’t evolved beyond the following claim, “China is going to screw us, we owe them and we should pay up, and therefore we should stop borrowing from them”. Not only does this claim lack basic economic insight, but it also neglects the fundamental inclusion of what the process of government borrowing actually is. Therefore the concept of Treasury auctions will be explained, because it is one of the mechanisms used by our government to fund the deficit. Henceforth, Treasury Auctions pertain to the sale and consumption of Treasury notes. Furthermore, the proceeds of these sales go towards the payment of programs in the federal budget, but at the same time the issuance of these bonds create a future debt obligation. This is because countries such as China, or the general public buy these bonds premised upon the idea that the United States treasury will pay their future value once these bonds mature. In brief the process by itself helps to pay down the deficit, while at the same time it also creates a future debt obligation as well.
Treasury Auctions occur on a routine basis and therefore as long as our T-bills bond ratings continue to maintain top tier status, both governments and the public will continue to invest in them. In short as long as our treasury notes continue to maintain a triple A rating our deficit is not a problem. In conclusion the deficit should not be measured by its size, but instead by the strength of our financial instruments.