Kelton challenges the common belief that federal government spending operates like household budgeting. She argues that this widespread misconception prevents effective economic policies and limits social progress.

In his 2010 State of the Union address, US President Obama compared federal budgeting to family belt-tightening. Kelton identifies this as “Myth #1”—the incorrect notion that the federal government should manage its budget like a household. This comparison, she explains, fundamentally misunderstands how government finance functions.

To illustrate the difference between government and household finance, Kelton introduces the concept of monetary sovereignty. The federal government, unlike households, states, or businesses, creates its own currency. Kelton distinguishes between currency issuers (governments with monetary sovereignty that create and control their money supply) and currency users (everyone else who must obtain the currency to participate in the economy). This power grants the government unique financial capabilities that other economic entities lack. She points to examples such as the US, Japan, the UK, and Canada as nations with monetary sovereignty, contrasting them with countries like Greece or Panama that lack this authority.

Kelton first encountered these ideas in 1997 through Warren Mosler’s book Soft Currency Economics. Initially skeptical, she conducted extensive research into government financial operations, leading her to accept Mosler’s

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