What are the real limits on government spending?

The real limits on government spending are not financial but are found in real resources and inflation. This is a fundamental shift from how most people think about government budgets.

The key constraints include: (1) Available labor - are there unemployed workers who can be put to work? (2) Physical resources - are the materials, factories, and infrastructure available? (3) Technical capacity - do we have the knowledge and skills needed? (4) Inflation - is spending pushing demand beyond the economy's ability to produce?

When the government spends on something, it's really mobilizing real resources - hiring workers, purchasing materials, using productive capacity. If those resources are sitting idle (like during a recession with high unemployment), government spending puts them to work without causing inflation.

But if the government tries to spend when the economy is already at full capacity - every worker employed, every factory running - then more spending just causes inflation. There's nothing more to buy; the extra money just bids up prices.

This is why MMT economists emphasize asking 'do we have the real resources?' rather than 'where will the money come from?' Money is never the constraint for a currency issuer; real resources and inflation are.