<P> Smaller jurisdictions, such as cities, are usually guaranteed by their regional or national levels of government . When New York City declined into what would have been a bankrupt status during the 1970s (had it been a private entity), by the mid-1970s a "bailout" was required from New York State and the United States . In general, such measures amount to merging the smaller entity's debt into that of the larger entity and thereby giving it access to the lower interest rates the larger entity enjoys . The larger entity may then assume some agreed - upon oversight in order to prevent recurrence of the problem . </P> <P> According to Modern Monetary Theory, public debt is seen as private wealth and interest payments on the debt as private income . The outstanding public debt is an expression of the accumulated previous budget deficits which have added financial assets to the private sector, providing demand for goods and services . Adherents of this school of economic thought argue that the scale of the problem is much less severe than is popularly supposed . </P> <P> Wolfgang Stützel showed with his Saldenmechanik (Balances Mechanics) how a comprehensive debt redemption would compulsorily force a corresponding indebtedness of the private sector, due to a negative Keynes - multiplier leading to crisis and deflation . </P> <P> In the dominant economic policy generally ascribed to theories of John Maynard Keynes, sometimes called Keynesian economics, there is tolerance for fairly high levels of public debt to pay for public investment in lean times, which, if boom times follow, can then be paid back from rising tax revenues . Empirically, however, sovereign borrowing in developing countries is procyclical, since developing countries have more difficulty accessing capital markets in lean times . </P>

The government’s methods of raising and spending money is called